Attorney fails to have gift to wife ratified
By:0 commentsDecember 4, 2017
I’ll begin this post by stating the obvious: an attorney for a person who is incapable of managing their affairs is in a very special position. They are entrusted with looking after the interests of another person. As such, of course, they must at all times whilst acting as an attorney put the interests of that person first. In particular, they must not allow their own interests to come before those of the incapacitated person (the ‘donor’). Unfortunately, as we have seen here on this blog on a number of occasions, attorneys sometimes fail to do this. Such failures can, as in a case I wrote about in 2015, be quite obvious. Others, as we will see, may not be quite so clear.
In this post I will be referring to lasting powers of attorney (LPAs). Those readers who are unaware of what these are are referred to this explanatory post by Stowe Family Law Senior Solicitor Jane Gray. As Jane explained, there are two types of LPA: a ‘property and financial affairs’ LPA, which provides the attorney with the authority to deal with the donor’s finances and property, and a ‘health and welfare’ LPA, which allows the attorney to make health and welfare care decisions on behalf of the donor, when the donor lacks capacity to make those decisions themselves. The type of LPA that this post is principally about is the first of those, the ‘property and financial affairs’ LPA.
In the 2015 case Re PP (which has only just been published, at least on Bailii) the son-in-law of the donor was appointed, along with a solicitor, to be her attorney, both for property and affairs and for health and welfare. The donor was, at the time of the case, 78 years old. In January 2011 she had been diagnosed with dementia. In July 2011 she made a will leaving her residuary estate to be divided as to 50 per cent to her daughter and the other 50 per cent to her grandchildren. In April 2012 her dementia was diagnosed as being Alzheimer’s dementia, and in October 2012 she signed the LPAs.
The events critical to the case occurred between 23 March and 18 April 2013. During that time the son-in-law transferred £324,000 to his wife, the donor’s daughter, out of the donor’s bank accounts, in 12 tranches of £25,000 and one tranche of £24,000. In November 2014 the son-in-law and his wife used £160,000 from the money to purchase a property for themselves. The balance of £164,000 remained in a bank account.
The donor was told about the transfers a few months after they were made. She appeared to be unaware of them, and upset at the news. The matter came to the attention of the Public Guardian, who investigated and required the son-in-law to apply to the Court of Protection for retrospective authorisation, or ratification, of the gift to the daughter.
The son-in-law duly made the application arguing, amongst other matters, that the gift was in the donor’s best interest, as it was a potentially exempt transfer by for the purposes of inheritance tax, and could therefore save her estate a considerable amount of inheritance tax.
The application went before District Judge Batten, in February 2015. He did not accept that the gift was in the donor’s best interests. Saving inheritance tax was not automatically in the donor’s best interests – it depended upon the circumstances of the case. Here, the donor may have needed the money, which amounted to about a quarter of her total estate, to meet future expenditure, such as care home fees. Further, the donor’s will indicated that she did not wish to privilege her daughter over her grandchildren by giving her a lifetime gift of almost one quarter of her estate.
Accordingly, DJ Batten ordered that the gift should not be ratified. The £164,000 in the bank account should be repaid to the donor, and the other £160,000 should form part of the daughter’s 50 per cent share of the donor’s estate. Further to that, the two lasting powers of attorney were revoked.
The judgment relating to the application for retrospective ratification of the gift can be found here, the judgment relating to the application for revocation of the Lasting Powers of Attorney is here, and a judgment relating to the costs of that application is here.
Photo by Hades2k via Flickr under a Creative Commons licence.
December 4, 2017
Categories: Family Life