Lifetime Gifts can be a useful way of distributing your estate to family and loved ones during your lifetime without the burden of Inheritance Tax. Sometimes, gifts may be distributed by a Lasting Power of Attorney, but, in some cases, this can lead to financial abuse. Contentious Probate expert, Jenny Ray, discusses the issues that may arise and explains how we can help you if you are concerned.
What is a Lifetime Gift?
A lifetime gift is something that is given to another person during the lifetime of the giver. This can be of monetary value, property or land, household goods or other personal items or assets. This differs from a testamentary gift, which is something given to another person after the death of the giver, usually via a Will. Lifetime gifts are often made in later life as part of their estate planning and inheritance tax planning. Inheritance Tax is not payable on a Lifetime Gift as long as you live for seven years after making the gift.
What is a Lasting Power of Attorney?
A Lasting Power of Attorney (LPA) is a legal document giving someone the authority to make decisions on your (the donor's) behalf. LPAs allow another individual to deal with financial or legal issues or make decisions regarding your medical care. This may involve spending money that belongs to the donor.
If you are appointed as an attorney, you should make sure you understand how the power can be used. Keep careful financial records and seek professional advice if you are in any doubt about what you can and cannot do, or in the event you are accused of using the power inappropriately.
In order to minimise the risk of disputes, it is important to choose your attorneys very carefully and to communicate your wishes to your attorney or attorneys, your family and loved ones.
Can a Lifetime Gift be challenged?
Lifetime Gifts can be challenged if someone believes the person giving the gift did not have capacity to do so, or it was made by mistake. It's possible that Lifetime Gifts can be given without the knowledge of the donor as a result of undue influence, coercion or fraud.
Disputes relating to Lifetime Gifts can be resolved on behalf of the donor or their attorney. Challenges can also be made after the death of the donor on behalf of their executors of disappointed beneficiaries. In many cases, gifts can be successfully recovered where they should not have been made.
Challenging a Lasting Power of Attorney
There may be a concern that an attorney has abused their power or acted in breach of their duties when making gifts to themselves, to others, or mismanaging funds belonging to the person who has made the LPA. Such disputes can occur whilst the donor of the Power of Attorney is alive but are often not discovered until after their death.
Money can be recovered if transferred out of the estate so that assets can be recouped during the lifetime of the donor to ensure they have sufficient funds for their own needs. If matters are only discovered after death, assets can be brought back into the estate and distributed in accordance with testamentary wishes. In some cases, criminal proceedings will also be brought.
Where necessary, attorneys can be removed, and applications can be made to the Court of Protection.
If you are thinking of putting in place a Power of Attorney or have concerns about how a Power of Attorney has been used on your behalf, or on behalf of someone close to you, you should seek legal advice as soon as possible.
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.
