Continued Gifting: How can I ensure that gifting continues if I lose capacity?
The Office of the Public Gurdian have recently updated their ‘Giving Gifts Guidance’ for attorney’s, reaffirming the position laid down in the Mental Capacity Act 2005:
“The general rule for deputies and attorneys about giving gifts is simple: apart from some exceptions, the law says you must not make gifts from the person’s estate.”
To count as an exception, the gift must satisfy three points, namely, the gift must be made to a connected person, be given on a customary occasion, and be of a reasonable value.
This can cause some concern to clients who are in the habit of making regular gifts to their children (or grandchildren and wider family) as part of their Inheritance Tax (IHT) planning. Gifts for IHT planning, significant gifts (for example to assist a child with a property purchase) and regular gifting out of surplus income are not permitted without Court of Protection authority – a timely and expensive process that is unlikely to achieve the desired result.
With all the above in mind, it might be sensible to look at alternative options to ensure the future of your gifting and ongoing wealth planning.
Detailed expression of wishes for attorneys
Whilst not legally binding, a detailed letter prepared in advance could prove extremely influential in any future Court of Protection application for continued gifting. However, this option is not guaranteed and could prove very costly for the estate.
Discretionary Trust
This could be an effective strategy for those wishing to set aside funds for future gifting. Distributions from the trust can be made at an appropriate time, and will be dealt with by the trustees, not the settlor. With a detailed letter of wishes prepared for your trustees, this could ensure continued gifts.
Family Investment Companies
Typically, an FIC is a bespoke private company set up to own investment assets, with the initial funding to be provided by the person wishing to reduce the size of their estate (the . The company can then be structured so that benefit and control are separated, with parents, for example, retaining control via voting shares, and children benefitting from financial growth via non-voting shares (often referred to as A & B shares). It is also possible to structure the FIC so that, for example, the first £1million in growth belongs to you, and thereafter belongs to your children. This growth structure will be established when the company is incorporated and would therefore take effect even if you had lost capacity in the meantime.
Life Assurance and Investment Policies with built in gifting features
Finally, certain policies may offer the gifting protection you require. We would strongly recommend taking proper financial advice from a qualified advisor before taking out a policy.
Conclusion: Think about your future planning now. There might already be a suitable mechanism you can put in place to ensure your well-planned gifting can continue.
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Disclaimer
This information is intended for general informational purposes only and does not constitute legal advice. We recommend seeking professional advice before taking any action on the information provided. If you would like to discuss your specific circumstances, please feel free to contact us on 0800 2800 421.
