An attorney acting under a property and financial affairs lasting power of attorney can only make gifts on customary occasions, such as birthdays, weddings and religious festivals, to people related to or connected with the donor, or to charities the donor supported, and each gift must be reasonable given the size of the estate. Anything beyond that needs the Court of Protection’s authority. For inheritance tax, a gift made by an attorney is treated as a gift by the donor, so the usual exemptions and the seven year rule apply.

What does the law allow an attorney to give away?

Section 12 of the Mental Capacity Act 2005 says a lasting power of attorney (LPA) over property and affairs does not authorise gifts except as permitted by section 12(2). The attorney may make gifts:

  • on customary occasions to people, including the attorney, who are related to or connected with the donor; or
  • to any charity the donor made, or might have been expected to make, gifts to;

provided the value of each gift is not unreasonable having regard to all the circumstances and, in particular, the size of the donor’s estate. Section 12(3) defines a customary occasion as a birth, marriage or civil partnership or its anniversary, or any other occasion when presents are customarily given within families or among friends. The Office of the Public Guardian (OPG) gives Christmas, Eid, Diwali, Hanukkah and Chinese New Year as examples.

The power can be narrowed but not widened. Section 12(4) makes the permission subject to any conditions in the LPA, and the OPG guidance notes that the court held in Re Various Lasting Powers of Attorney [2019] EWCOP 40 that a donor cannot include an instruction authorising gifts beyond section 12. A wish to benefit someone can be recorded as a preference, which the attorney weighs but need not follow.

Every decision must also be in the donor’s best interests under section 4 of the Act. If the donor still has capacity to make the gift, the OPG says they should normally make it themselves.

How do the rules differ for enduring powers and deputies?

Enduring powers of attorney (EPAs) signed before 1 October 2007 can still be used. Paragraph 3(3) of Schedule 4 to the Act gives EPA attorneys a narrower power: gifts of a seasonal nature or on the anniversary of a birth, marriage or civil partnership, to someone related or connected to the donor or to a charity, and of not unreasonable value. The OPG says the same limits apply to an unregistered EPA used with the consent of a donor who still has capacity.

A deputy appointed by the Court of Protection takes its gifting authority from the deputyship order, which normally mirrors section 12. Maintaining someone the donor is obliged to support, such as a spouse, is not a gift, although the OPG advises an application to the court where it is unclear whether such an obligation exists.

What counts as a reasonable gift?

The Act does not define reasonable, and the OPG says it cannot give figures. Its guidance lists the points an attorney must weigh, including:

  • the effect on the donor’s income, capital and future needs, including possible care fees;
  • the donor’s life expectancy and any habit of giving before they lost capacity;
  • the effect on the inheritance under their will or intestacy, and the inheritance tax position on death;
  • whether family members are being treated equally, and whether the attorney is favouring themselves.

Gifts of a house or a share in one, or of the proceeds of selling it, are almost certainly outside an attorney’s powers. Loans to the attorney or anyone else are not authorised and are treated as unauthorised gifts. The Court of Protection has recognised small de minimis departures that need no application, but the OPG says these only apply where the estate is worth more than £325,000, and never to loans to the attorney’s family, sales below value or other conflicts of interest, following The Public Guardian v C [2013] EWCOP 2965.

When is Court of Protection approval needed?

Section 23(4) lets the court authorise gifts outside section 12(2). The OPG cannot approve a gift, and the court gives no informal advice: a formal application is required, under Practice Direction 9A, and the attorney should wait for the decision. The OPG’s examples of transactions that need the court include creating a trust of the donor’s property, varying a will by deed of variation to redirect the donor’s inheritance, investing in the attorney’s own business and selling or buying at an undervalue. The Official Solicitor usually represents the donor and makes their own enquiries.

Lifetime tax planning, such as substantial gifts to reduce a future inheritance tax bill, falls squarely into this category. The OPG lists the inheritance tax position as one factor, but the test remains the donor’s best interests.

How does inheritance tax treat a gift by an attorney?

HMRC’s Inheritance Tax Manual at IHTM10055 says gifts made by the deceased’s attorney are treated as gifts made by the deceased, and those within seven years of death should be recorded on form IHT403. Box 16 of the IHT400 asks whether the deceased had granted a power of attorney, which prompts HMRC to look for them.

A gift to an individual is therefore a potentially exempt transfer under the seven year rule, and the usual exemptions apply. GOV.UK lists the £3,000 annual exemption, which can be carried forward one year, small gifts of up to £250 per person, and wedding or civil partnership gifts of up to £5,000 to a child, £2,500 to a grandchild and £1,000 to anyone else. Our page on the annual and small gifts exemptions explains how they combine. Gifts to charity are exempt without limit.

The exemption for normal expenditure out of income needs a pattern of giving that is normal for the transferor, made out of income and leaving enough to maintain their usual standard of living (IHTM14231). HMRC’s own example at IHTM14242 treats regular birthday and Christmas gifts as a pattern. An attorney who continues the donor’s established habit is in a stronger position than one who starts a new pattern late in life; a single gift close to death needs strong evidence that a series was intended.

A gift of shares or property is also a disposal for capital gains tax, valued at market value at the date of the gift; see gifts and market value.

What happens if an attorney goes beyond their powers?

The OPG can investigate under section 58 of the Act. Its guidance says it may apply to have the attorney removed or suspended, freeze the donor’s accounts, call in a deputy’s security bond, require an application for retrospective approval, ask for gifts to be returned, or refer the matter to the police. Fraud by abuse of position is an offence under section 4 of the Fraud Act 2006. Where a gift has been challenged or returned, the executors should explain what happened when they prepare the IHT400 and IHT403.

How might this work in practice?

Illustration only. Eileen, who has lost capacity, has an estate of £900,000 and pension income that covers her care. Before her illness she gave each of her three grandchildren £500 on their birthdays and at Christmas. Her son, as attorney, continues this: £3,000 a year to people connected with her, on customary occasions, in line with her habit and affordable. For inheritance tax the gifts fall within her £3,000 annual exemption, and the established pattern may also support the normal expenditure exemption.

Her son then proposes giving himself and his sister £100,000 each to use her nil rate band. That is not a customary occasion gift and benefits the attorney, so he must apply to the Court of Protection first. If the court approves and Eileen dies within seven years, the gifts become chargeable and use her nil rate band in the usual way.

What mistakes do attorneys and executors make?

  • Following the donor’s will in lifetime instead of the limits in section 12.
  • Making gifts to the attorney’s own family without considering conflicts.
  • Keeping no record of gifts and the reasons for them.
  • Executors failing to review the attorney’s accounts when completing the IHT403. See executors’ liability for IHT.
  • Assuming the same rules apply in Scotland, where continuing powers fall under the Adults with Incapacity (Scotland) Act 2000 (IHTM10055).

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.