Court of Protection intervenes to save IHT

Reproduced from The Times, 4 September 2018
A son should be allowed to give himself £6 million from his mentally incapacitated mother’s £18.6 million fortune for tax reasons, a judge has ruled.

The man, whose mother suffers from dementia and has no other surviving children, asked Judge Carolyn Hilder to allow him to give himself a “gift”, as doing so would potentially reduce inheritance tax liabilities. The mother, 72, needs full-time care and gave her son sole power of attorney eight years ago.

The judge outlined her decision in a written ruling after analysing evidence from a hearing this year in the Court of Protection, where issues relating to people who lack the mental capacity to take decisions are considered.

The judge, who ruled that the woman could not be identified, said that some people might say the man’s application was “self-serving”. She was satisfied, however, that the application had “not been improperly brought”. She said that the woman’s long-standing financial adviser was “fully in support”.

The woman was represented by staff from the Office of the Official Solicitor, which helps mentally ill people caught up in litigation. They had also given their backing.

Judge Hilder said that the woman had made a will seven years ago under which her son would inherit the majority of her fortune. She also gave the man permission to make “gifts” from his mother’s funds to charities.

The judge was told that £7 million of the woman’s money would be given in gifts in total — which could cut inheritance tax liabilities by £3 million. She added that “factors in favour” of the “proposed gifts” outweighed “factors against”.