Clause 12 - Scope of lasting powers of attorney: gifts
Mental Capacity Bill
3:15 pm
Mr Tim Boswell (Shadow Minister, Home Affairs; Daventry, Conservative)
The provision is designed to curtail the powers of an attorney to make gifts under an LPA. There is, perhaps, an understanding, consistent with Committee members' arguments, that there need to be safeguards in that direction. It is one thing to be generous with one's own money, but another to be generous with somebody else's, particularly when there is an overriding duty to act in that person's best interests.
I shall speak to the amendments and their implications in turn. Amendment No. 27 is small and designed to obtain Government confirmation on one kind of situation. It is by no means uncommon within families to decide to reduce the price of an asset—for example, a house owned by a family member—instead of charging the full price. Perhaps that would be done for a young person who could afford some of the cost, but not the whole cost.
There is also the separate issue of cases in which the attorney himself might be in receipt of property. That might be a perfectly proper transaction, at arm's length and at full market value. However, the situation would be difficult if the attorney manipulated things so as to receive a property or asset at less than market value. I am sure that the Minister can imagine lots of other situations in which, instead of charging the full market price, a reduction was envisaged.
I do not seek to open wider issues about the taxation of retirement equity release schemes, for example. We could spend the whole day on such matters, which would not be appropriate. I just say to the Minister that if he is making provision for gifts, he ought to pause on whether it is desirable to consider assets sold at a discount or at less than market value. That is the purpose of the amendment.
The numerical order of amendments Nos. 210 and 211suggests that they are afterthoughts, tabled after I revisited the matter on the advice of a colleague. There
is a potential difficulty with the clause. I understand that the Minister seeks to confine gifts made by the attorney, who is acting on behalf of the person without capacity, to what might be termed normal acts of charity and ordinary, decent family relations. The person, when he had capacity, would have wished to make provision for birthday presents to his spouse or child or a friend and would have wished to subscribe modest, regular amounts to a charity of which he was fond. That is not an issue. However, there is apparently a bar at that point.
The Minister, who has been so liberal and non-interventionist in his constraints on the use of the power of attorney, is saying, ''Thus far, and no further.'' He will rightly draw my attention to the fact that the explanatory notes signpost us to clause 23(4), under which the court could give permission for a more substantial gift. The example in relation to the clause is that if the older person has substantial assets, there might be a good reason in terms of tax planning for making a larger gift. Surely that would be the case if the person were asset rich, but no longer able to administer their assets, and somebody with a lasting power of attorney to administer them could say that it made little sense for the person to hang on to them; it would be more tax-efficient, and, perhaps, useful to other family members, if they were to divest themselves of them. There would then be the safeguard in going to the Court of Protection.
That is not the only scenario that could arise. I can imagine one in which two siblings—brothers—were sadly seriously injured and lost mental capacity as a result of their injuries in a car accident. If one had substantial life insurance, or insurance against permanent disability, and the other had none, the one would be in receipt of a large sum from the insurance company—assuming the claim were legitimate, which I suspect it would be—and the other would receive nothing.
An attorney—perhaps the joint attorney for both—might say that provision should be made for both, or that if the younger brother survived the death of the older, it would be a comfort to know that the assets could be spread around, because it was probable that both brothers, if they had a good relationship, would want that to happen. This is not simply about tax planning and fat cats. There might be various scenarios, large and small.
There is provision for the assets to be the subject of an application to the Court of Protection for permission to divest them. I do not say that that procedure is unreasonable, but it will be expensive and may delay things for a time. It would not be possible to get a decision quickly, although a quick decision on some assets would be desirable, particularly in respect of a house or property and perhaps in relation to stocks and shares. Amendment No. 211 would merely facilitate or define a way to do that.
The exceptions to clause 2(10) provide that if the person drawing up the power of attorney against an eventual loss of mental capacity wished to specify that
the attorney should have the power to make gifts—and if they gave a definite set of instructions to the attorney, as they might on other matters, such as their health care or financial arrangements—and if they said that they wanted to make a gift, it is reasonable in principle that they can do that without reference to the court.
The donee of the power of attorney would still have an obligation to consider the person's best interests and not give away assets when it became dangerous to do so, regardless of the instructions they might have received. Nevertheless, that would be a sensible prior indication of something that somebody might want to do and the Minister should consider it.
Amendment No. 27 is designed simply to get the Minister to define what is and is not a gift. Amendment No. 210, which is accompanied by amendment No. 211, is intended to get him to give the flexibility that he has given in other parts of the Bill to the issue of gifts. I hope he will consider them seriously.