Before there is a flurry of over excited gifting, let me make it clear that this gift was only approved by the Court after a thorough consideration of the situation and a best interest assessment.
Attorneys have very limited powers to make gift without the Court's approval. For example, an attorney can buy a birthday present for themselves or someone else if that is what the donor would have done and provided the amount is reasonable. Tax planning gifts will always need to go before the Court.
In this case, JMA was 72 and suffering from early onset dementia. She had a substantial estate, in excess of £18 million. The money had come from her late husband. She had a son PBC and a deceased daughter, both from a previous marriage. PBC was the attorney. He made an application for gifts to be made from JMA's estate.
JMA's late husband had left a will which left everything to JMA but if she did not survive him, gave gifts to his siblings, nieces and nephews, three former employees and six charities. He said that if JMA survived him he would like her to consider making gifts to these people and other beneficiaries of his will. JMA made a will which included the charities but not the others. She left the majority of her estate to PBC.
There was no gifting done during the husband's lifetime, other than to allow PBC to live in a property rent free after his divorce, but following his death JMA gave approximately £600,000 to her son and £15,000 to her sister. There was a suggestion that JMA had decided not to make further gifts to him although her adviser said this was only for a period of a few years. JMA had also made gifts to the charities.
The parties (PBC, JMA's grandson and the charities) agreed a gift of £6million to PBC, gifts of £50,000 to each charity and also £100,000 the Alzheimer's Society and a trust fund of £422,000 for a grandson, the son of JMA's deceased daughter. This would save approximately £3 million in Inheritance Tax if JMA survived for three years because of the effect of taper relief.
The Judge was clear that JMA would have more than enough to meet her needs. The Court will not approve gifts that would cause hardship to her.
The Court looked carefully at JMA's circumstances, her wishes and feelings as far as they could be gleaned from her conduct in the past and her history of tax planning and gifting. The Court approved the gifts.
Here the Court said that there is no assumption that Inheritance Tax planning is something someone ought to do. Each case needs to be looked at individually and a best interests decision made. There is no default assumption that people should carry out tax planning.
The Court was clear that payment of tax from JMA's estate after her death would not affect her and 'it is no part of the Court of Protection's function to protect either an inheritance or a revenue stream' (ie tax revenue)
JMA's current wishes and feelings could not be ascertained and she had no understanding of the proposals. The Court looked at whether there was a history of tax planning and gifts. There was some. The Court recognised though that JMA's situation when newly widowed was very different. Then she was 64 with a high standard of living and many years ahead of her. Now she is 72 and in residential care with a more limited life expectancy.
The Judge specifically commented that JMA and her late husband having taken professional advice about the management of their assets from a high net worth tax specialist, as this gave an indication of her previous wishes and feelings on the subject.
The Court adopted the 'balance sheet' approach, looking at the factors for and against the gifts. Family harmony, or the prevention of more disharmony, was a relevant factor too. Ultimately, the factors in favour of the gifts outweighed those against.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.