One of the questions posed at yesterday’s Frenkel Topping Deputy Day was to what extent was it legitimate for a deputy to approach the Court of Protection on behalf of a minor with a view to undertaking inheritance tax planning by way of gifts to the child’s parents, where the minor had received a personal injury award and (presumably) had a consequently severely impaired life expectancy?
The general answer was a fairly unequivocal ‘no’, on the basis that the award was intended to provide funding for care throughout the child’s life, that his life expectancy was fundamentally uncertain and could vary over a very wide scale in view of his young age, and that it was therefore impossible to conclude that any part of the award would not be required for the purpose for which it was made. Also, of course, there were clear conflicts of interest for the parents in accepting a gift from their son’s assets when they were at least partly responsible for taking decisions on his care package. And so, from my point of view, say all of us.
But what about the situation where a personal injury victim is considerably older, where life expectancy is not therefore subject to such a wide statistical variation, and where identification of surplus funds might therefore be undertaken with a greater degree of confidence? Is it legitimate in those circumstances for a deputy to have regard to inheritance tax issues in considering whether to authorise (or more accurately apply to the Court of Protection to authorise) a lifetime gift?
My personal view on this would still be fairly negative. It is quite likely that care costs will escalate toward the end of a person’s life, particularly if, as is clearly possible, they have outlived their parents or other potential family carers. Also, the requirement is not for the deputy to do what the patient would have done, but to do what is in the patient’s best interests, which is not necessarily quite the same thing.
Given the clear purpose and the careful computation of damages for personal injury, concluding that there is a surplus which can safely be given away is likely only in very rare circumstances to be a decision that the deputy and the Court feel justified in taking. And probably not in circumstances where the decision would have any beneficial inheritance tax effect in any case, given that it would usually be necessary for the donor to survive a gift by 7 years for this purpose. And it would be a brave deputy who looked that far forward and concluded that surplus funds were definitely available, I think.