Further gifts are to be made to charity, reducing the woman’s estate by over £7 million and making a saving of £3 million on inheritance tax provided that (due to inheritance tax rules on gifting) the mother lives for at least a further 3 years.
The 72 year old mother suffers from dementia and needs full time care. She had two children from her first marriage – the Applicant son, and a daughter who died in 2009 leaving a son (who was a Respondent in the proceedings).
The decision was made by Judge Carolyn Hilder in the Court of Protection following an application by the man which the judge described as ‘self-serving’. The case was heard earlier this year and the judge has now delivered her decision in a written ruling. The Court of Protection deals with applications for Deputyship Orders, Statutory Wills and other such matters relating to people who lack the mental capacity to make decisions for themselves.
The mother made a Lasting Power of Attorney on 5th August 2010 which registered by the Public Guardian on 16th December 2010, giving her son the power to manage her property and finances. Her wealth amounts to £18.6 million.
Despite the self serving nature of the application, the judge was satisfied that the application “had not been improperly brought.” She also noted that the woman’s long-standing financial adviser was “fully in support”. The judge considered the factors for and against making the proposed gifts in a balancing exercise:
- The recipients of the proposed gifts are those that the mother had chosen to benefit in the Will she made when she had capacity to do so.
- The benefit they would receive had a good prospect of being increased by the effect of tax mitigation but would otherwise be much the same overall whether or not the gifts are made.
- Management of the mother’s property and affairs with a view to tax efficiency was consistent with her beliefs and values as demonstrated by her actions when she had capacity to manage her financial affairs for herself.
- When she could, she took regular financial advice and made decisions in accordance with that advice to minimise her exposure to lifetime taxes, including strategies with incidental inheritance tax benefits.
- Her change of circumstances now made it feasible to consider post-death tax exposure.
- The proposed gifts are amply affordable and will have no discernible impact on her ability to meet her conceivable needs from her remaining funds.
- The proposed gifts reflect an agreement reached between the various recipients and with independent representation of the mother herself.
- Any further argument is avoided, thereby reducing potential exposure to costs.
- Giving effect to the agreement may have a beneficial effect on family relationships which have been adversely affected by difficult circumstances.
- The mother had on one occasion expressed a wish that her son should know that the end of financial support from her had come.
- Her tax mitigation whilst she had capacity did not extend to post-death taxes save where that was incidental to life-time tax planning intended to address her own needs.
- The proposed gifts reduce the mother’s estate and therefore the funds available to her during her lifetime by approximately 38%.
The judge stated that taking all things into consideration, she was satisfied that the factors in favour of the proposed gifts outweigh the factors against. In the context of the wider agreement between the parties, she was also satisfied that the proposals were in the best interests of the mother.
The mother had representation from the Office of the Official Solicitor, which ensures that the interests of those without mental capacity are protected. Those representing her also backed the decision.
Case reference: PBC v JMA & Ors  EWCOP 19 (16th April 2018)