Being appointed as an attorney under a Lasting Power of Attorney (LPA) is a position of significant trust and responsibility. While attorneys are empowered to make decisions on behalf of another person (known as the donor), there are strict rules governing what they can and cannot do.
One area that frequently causes confusion is gift-giving. Many attorneys assume they can make gifts from the donor’s money or assets in the same way the donor once did. However, under UK law, an attorney’s authority to make gifts is limited.
Understanding these rules is essential, as getting it wrong can lead to investigations by the Office of the Public Guardian (OPG), repayment orders, or even removal as an attorney.
What Is a Lasting Power of Attorney?
A Lasting Power of Attorney is a legal document that allows a person (the donor) to appoint one or more individuals (the attorneys) to make decisions on their behalf if they lose mental capacity or no longer wish to make certain decisions themselves.
There are two types of LPA in England and Wales:
- Property and Financial Affairs LPA
- Health and Welfare LPA
Only attorneys acting under a Property and Financial Affairs LPA have authority to deal with the donor’s money and assets.
Can an Attorney Make Gifts?
The short answer is yes—but only in limited circumstances. Under the Mental Capacity Act 2005, attorneys may make gifts:
- On customary occasions, such as birthdays, weddings, anniversaries, or religious celebrations.
- To individuals connected with the donor, including family members and friends.
- To charities that the donor supported or might reasonably be expected to support.
Importantly, any gift must be reasonable in value when considering all of the circumstances, including the size of the donor’s estate.What is considered “reasonable” will depend on factors such as:
- The donor’s income and savings.
- Their ongoing care costs.
- Their life expectancy.
- Their previous pattern of gift-giving
- The impact the gift may have on their financial security.
There is no fixed monetary limit set out in legislation.
What Attorneys Cannot Do
Attorneys cannot:
- Give away large sums of money without authority.
- Transfer the donor’s home to themselves or relatives.
- Make gifts to reduce inheritance tax.
- Change the donor’s will.
- Prioritise their own interests over the donor’s best interests.
For example, an attorney cannot decide to give each family member £10,000 simply because they believe it reflects what the donor would have wanted. Equally, they cannot transfer property into their own name as an early inheritance.
Attorneys must always act in the donor’s best interests and keep clear records of any gifts made.
What About Inheritance Tax Planning?
Inheritance tax planning is a common area of misunderstanding. Many people are aware that individuals can make gifts during their lifetime to reduce the value of their estate for inheritance tax purposes. However, attorneys do not automatically inherit this power.
Even where the donor regularly made substantial gifts before losing capacity, an attorney should not continue making them unless they are clearly authorised to do so or have obtained approval from the court.
The fact that a gift may save inheritance tax does not mean it is lawful.
When Is Court Approval Needed?
If an attorney wishes to make gifts outside the limited powers granted by the Mental Capacity Act 2005, they must apply to the Court of Protection for approval. The court will consider several factors, including:
- The donor’s wishes, feelings, beliefs, and values.
- Whether the donor previously made similar gifts.
- The donor’s financial position.
- The impact on the donor’s future needs.
- Whether the proposed gift is in the donor’s best interests.
Applications are commonly made where:
- Significant inheritance tax planning is proposed.
- Large gifts are intended.
- Property transfers are contemplated.
- The donor has a substantial estate.
Without court approval, attorneys risk acting beyond their legal authority.
The Consequences of Getting It Wrong
The Office of the Public Guardian takes concerns about financial abuse seriously. If concerns are raised, the OPG can investigate an attorney’s actions. Possible outcomes include:
- Requiring funds to be repaid.
- Applying to have the attorney removed.
- Referring matters to the police in serious cases.
- Seeking orders from the Court of Protection.
Attorneys should therefore maintain detailed financial records, retain receipts, and document the reasons for any gifts made.
Practical Tips for Attorneys
If you are acting under a Lasting Power of Attorney, consider the following before making a gift:
- Is the gift for a customary occasion?
- Is the recipient connected to the donor or a charity they supported?
- Is the value reasonable in light of the donor’s finances?
- Will the donor still have sufficient funds for their future needs?
- Should you seek legal advice or court approval first?
If there is any doubt, obtaining professional advice can help avoid costly mistakes.
Final Thoughts
Acting as an attorney is both an honour and a significant legal responsibility. While UK law permits limited gift-giving under a Lasting Power of Attorney, attorneys must remember that they are managing someone else’s assets—not their own.
When in doubt, the safest approach is simple: if a gift is substantial, unusual, or intended to reduce inheritance tax, seek advice and consider an application to the Court of Protection before proceeding.
A well-intentioned gift can quickly become a legal problem if an attorney exceeds their authority. Understanding the rules today can help protect both the donor’s interests and the attorney’s position in the future.
Article by Leanne Parkinson
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