The making of gifts to loved ones is a long standing tradition in most cultures and Attorneys can continue to do this after the Donor has lost capacity, however there are rules that must be followed.
Attorneys acting under a Registered Property and Financial Lasting Power of Attorney for a Donor who has lost capacity can make gifts on behalf of the person. However, there are rules governing gift giving, which are set out in the Mental Capacity Act 2005.
They state that if the LPA has not put any restrictions on the Attorneys power to make gifts they may make gifts on customary occasions to persons who are related to or connected with the donor or to any charity to whom the donor made or might have been expected to make gifts.
However the Attorneys may only make gifts if the value of each such gift is not unreasonable having regard to all the circumstances and, in particular, the size of the donor's estate.
What is a Customary Occasion?
It is defined in the Act as the occasion or anniversary of a birth, a marriage or the formation of a civil partnership, or any other occasion on which presents are customarily given within families or among friends or associates.
The wording 'any other occasion on which presents are customarily given within families or among friends or associates' does mean that there is some room for discussion on what constitutes a customary occasion. Cases such as Re Treadwell [2013] EWHC 2409 (COP) found that gifts made as housewarming and graduation presents were accepted as being made on ‘customary occasions’.
What is an unreasonable gift?
This is much more complicated as case law indicates that what constitutes unreasonable is unique to the facts in each case. If a gift comprising of a large percentage of someones total assets was given to one person then some may argue it to be unreasonable, but what if there is only one person who could benefit from such a gift and the remaining assets were more than enough for the donor? There is not a standard definition available given all the varying circumstances.
Why are you writing this article now?
The Land Registry's Practice Guide on Powers of attorney and registered land (which gives advice on the evidence that HM Land Registry needs when an attorney has executed documents lodged for registration) has been amended to reflect the recent case of Chandler v Lombardi [2022] EWHC 22 which establishes that a transfer by an attorney on behalf of the donor under an LPA that breaches the rules will be void.
What happened in Chandler v Lombardi [2022] EWHC 22
This case involved a dispute among the children regarding their mothers home.
The Facts
Mrs Chandler owned a home solely in her name. In 2016, unbeknownst to her other children she put in place LPAs appointing her daughter, Ms Lombardi, as her sole attorney. In 2017 she was admitted to hospital where she was deemed to be suffering with mental illness, including dementia, and was later discharged to a care home. In June 2018, acting as Attorney Ms Lombardi transferred her mothers property into her mothers name and hers as tenants in common in equal shares. The transfer deed was signed by Ms Lombardi as the Transferee and again by Ms Lombardi as the Transferor in her capacity as her mothers Attorney. No consideration was given for the transfer.
In October 2018 Mrs Chandlers son, Mr Chandler, learned of the transfer and he issued a claim against his sister acting as his mothers Litigation Friend. In January 2019 Mrs Chandler sadly passed away and her son was substituted as the claimant in the proceedings as the executor of his late mother’s estate.
The claim
Mr Chandler asked the court to declare that the transfer of the property was void and to order the rectification of the title register. He argued that his mother lacked capacity at the time of the transfer and that his sister, as her attorney, did not have the power to make such gift. His sister argued that her mother did have capacity and that she made the gift in accordance with her own wishes.
The Judgement
The Judge decided to focus on the issue of whether or not Ms Lombardi had the power to make such a transfer as an Attorney and ignore the issue of capacity based on the fact the mother had not signed the transfer deed personally.
He concluded that the transfer constituted a gift and therefore had to consider whether it was permitted under Section 12 of The Mental Capacity Act 2005. The judge ruled the gift of half the property was not made on a customary occasion, nor to a charity and would have been of unreasonable value, it therefore was not permitted under the Section. Furthermore Ms Lombardi should have applied to the Court of Protection to obtain permission in order to make this gift and for failing to do so the gift was rendered void. Consequently, the Judge ordered that the title register be rectified, showing Mrs Chandler as the sole owner of the property.
Why is this important to know?
During the case it was accepted that Miss Lombardi was unaware of her duty to seek permission from the Court of protection but in his decision, the Judge emphasised that a lack of knowledge of the procedures was not a defence. He went on to confirm that when appointed under an LPA, all attorneys have a responsibility to familiarise themselves with the powers they have and duties they owe. This includes the restrictions on gift giving and where permission is not sought prior to a gift which requires it, the gift will be void and the attorney in question may be removed from their position.