The donor, now aged 72, suffers from dementia and needs full time care. She lives in a care home which is privately paid for and is agreed by all parties to lack capacity to make decisions about making gifts.
The donor's son was appointed her sole attorney for her Property and Financial Affairs (PFA) under a Lasting Power of Attorney (LPA). As the donor's attorney, he sought the authority of the Court to make various gifts from his mother's estate including legacies to nine named charities, creation of a discretionary trust settlement in favour of the donor's grandson and a gift to himself.
The purpose of such gifting is to achieve - as long as the donor lives at least a further 3 to 7 years - reduction of inheritance tax on her death. The parties had reached an agreement between them and sought a Court order to this effect. It was shown that acceptance of this agreement could reduce the donor's inheritance tax liability by several million pounds.
The court highlighted that where a person lacks capacity, the key consideration was whether that decision was in the best interest of the donor. The court stated that tax mitigation is not sufficient to prove that the proposed agreement is in the donor's best interest. Nor is the fact that the proposed gifts are affordable by the donor's estate of over £18 million. This is in line with several previous cases.
However, having considered all relevant factors, the court held that this proposed agreement was acceptable. The court gave significant weight to the fact that gifting was to be made to recipients the donor had previously mentioned in her Will; that she had considered tax efficiency when making previous lifetime gifts; that the proposed gifts were affordable and that the agreement was accepted by all parties involved.
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