IHT and LPA Gifts UK: Can an Attorney Make Gifts for Inheritance Tax Planning? (2026)
An attorney under a Lasting Power of Attorney can only make small customary gifts (section 12 MCA 2005). Substantial IHT planning gifts — annual exemptions, PETs, normal expenditure from income — require a Court of Protection order. All major IHT gifting must happen while the donor still has mental capacity.
LPA Attorneys and IHT Gifting
What an attorney under an LPA can give: section 12 MCA 2005
An attorney acting under a property and financial affairs Lasting Power of Attorney (LPA) has authority to manage the donor's finances — paying bills, managing investments, dealing with property. However, the attorney's power to make gifts is specifically limited by section 12 of the Mental Capacity Act 2005. Under s12 MCA 2005, an attorney may make gifts only: (1) On customary occasions — birthdays, anniversaries, religious festivals (Christmas, Eid, Diwali) — to persons related to or connected with the donor; (2) To charities to which the donor made or might have been expected to make gifts; (3) Of a reasonable amount having regard to all the circumstances, especially the donor's financial position. 'Reasonable amount' is interpreted narrowly. There is no specific statutory figure, but HMRC and the Court of Protection's guidance suggests that amounts of a few hundred pounds on a customary occasion are within s12, while gifts of thousands of pounds — even within the £3,000 annual IHT exemption — are generally not. An attorney cannot use s12 to make deliberate IHT planning gifts (annual exemption gifts, PETs, normal expenditure from income) without Court authorisation.
Why attorneys cannot make IHT planning gifts under s12
The restriction on attorney gifting exists to protect the donor (the incapacitated person) from loss of their assets — which they may still need for their own care and living expenses. The attorney's duty is to act in the donor's best interests, which includes preserving assets for the donor's own use. Making significant IHT planning gifts — even where the donor would have made them if they had capacity — reduces the donor's available funds and conflicts with the attorney's primary duty. This means that common IHT planning strategies become unavailable once capacity is lost: the £3,000 annual exemption gift cannot be used by an attorney without Court authority; PETs cannot be started; normal expenditure from income gifts — even from surplus pension income — cannot be made unless the Court has authorised them. The only exception is the limited customary gifting under s12. The practical message for IHT planners: all substantial lifetime gifting must happen while the donor still has mental capacity.
The Court of Protection route: applying for gifting authority
Where a donor has lost capacity and an LPA is in place (or a deputy has been appointed), substantial IHT planning gifts can still be made — but only with specific authority from the Court of Protection. The attorney (or deputy) must apply to the Court, explaining: the donor's estate and likely IHT exposure; the proposed gifts (amount, recipients, planning rationale); why the gifts are in the donor's best interests (taking into account not just the donor's financial welfare but their past wishes, values, and likely preferences if they had capacity). The Court will consider the application on its merits — it is not automatic. The application takes several months to process and involves legal costs. HMRC has confirmed that Court-authorised gifts can qualify as PETs and use the annual exemption — provided the Court order authorises the specific gifts. However, the 7-year clock for PETs runs from the date the gift is made (after Court order), not from the date of the application. For most families, applying to the Court of Protection is an expensive and time-consuming last resort — far better to have made IHT planning gifts while the donor had capacity.
Deputies and gifting: the same restrictions apply
Where no LPA was made and the Court has appointed a deputy (through a deputyship order), the deputy has the same restrictions on gifting as an LPA attorney under s12 MCA 2005 — in most cases even more restricted, since deputy orders typically do not grant gifting authority at all. A deputy who makes gifts beyond s12 without Court authority is acting outside their powers and may be personally liable to compensate the estate. Court-authorised gifting by a deputy follows the same process as for LPA attorneys — application to COP, statement of reasons and evidence, Court decision. Again, this is time-consuming and expensive, and far better avoided by making IHT planning gifts before capacity is lost.
Practical implications for IHT planning: act before capacity is lost
The most important practical implication of the s12 restrictions is: all substantial IHT planning gifts must be made by the donor while they still have mental capacity. Once capacity is lost, the window for IHT planning largely closes — the Court of Protection route is available but slow, expensive, and uncertain. This means: (1) Start annual exemption gifting now — not 'when the time comes'. (2) Begin PETs for large amounts as early as possible — the 7-year clock must start while the donor has capacity. (3) Set up normal expenditure from income arrangements while clearly capable — and document the pattern. (4) Make an LPA — a property and financial affairs LPA enables the attorney to manage finances if capacity is lost, and enables them to apply to COP for gifting authority if needed. Without an LPA, even the COP application is harder (a deputyship must be obtained first). (5) Consider whether early retirement or illness creates urgency — do not wait until cognitive decline is already present.
The LPA does not extend the attorney's gifting powers
A common assumption is that an LPA can be drafted to grant the attorney wider gifting powers — for example, allowing the attorney to make annual exemption gifts or gifts for IHT planning. This is a misconception. Section 12 MCA 2005 sets the statutory limit on attorney gifting, and this cannot be widened by the terms of the LPA document itself. The Office of the Public Guardian will reject LPA documents that purport to grant wider gifting authority than s12 allows — the OPG's guidance is clear that s12 is the outer limit, regardless of what the LPA says. Only the Court of Protection can authorise gifting beyond s12. The LPA's role in IHT planning is therefore indirect: it enables a trusted attorney to manage the estate efficiently and, crucially, to bring a COP application for gifting authority if needed. This is far better than no LPA — where a deputyship must be obtained before any COP application can proceed.
Frequently Asked Questions
Can an attorney under an LPA make IHT planning gifts?
Only very limited customary gifts under s12 MCA 2005 — seasonal gifts and birthday gifts of a reasonable amount. An attorney cannot make substantial IHT planning gifts (using the £3,000 annual exemption, making PETs, or setting up normal expenditure from income arrangements) without a specific Court of Protection order authorising the gifts. All significant IHT gifting must happen while the donor has mental capacity.
What is the s12 MCA 2005 gifting restriction for LPA attorneys?
Section 12 of the Mental Capacity Act 2005 restricts attorney gifts to: (1) customary gifts on special occasions (birthdays, Christmas, etc.) to connected persons; (2) charitable gifts the donor made or would have made; (3) of a 'reasonable amount' given the donor's financial position. 'Reasonable amount' is interpreted narrowly — typically a few hundred pounds per occasion. It does not authorise the annual IHT exemption (£3,000/year), PETs, or normal expenditure from income gifting.
How can a family make IHT gifts if someone has lost mental capacity?
By applying to the Court of Protection for an order authorising specific gifts. The attorney (or deputy) applies to the COP with evidence of the donor's estate, IHT exposure, and proposed gifts. The Court considers whether gifting is in the donor's best interests, having regard to their past wishes and values. Court-authorised gifts can qualify as PETs and use IHT exemptions. The application process takes several months and involves legal costs. It is a viable but slow and expensive route — far better to make IHT gifts while the donor still has capacity.
Does an LPA grant wider gifting powers if it says so?
No. Section 12 MCA 2005 sets the statutory maximum for attorney gifting, and this cannot be extended by the LPA document. The OPG will reject LPAs that purport to grant wider gifting powers. Only the Court of Protection can authorise gifting beyond s12. The LPA's role in IHT planning is to enable efficient estate management and to facilitate a COP application if needed — not to directly enable IHT planning gifts.
What is the most important IHT planning action to take before losing capacity?
Start all significant lifetime gifting while you still have mental capacity. The annual exemption (£3,000/year), PETs (7-year clock), and normal expenditure from income are all only available to the donor personally — once capacity is lost, these tools are unavailable without a Court of Protection order. Make an LPA now (while clearly capable) so that if capacity is later lost, an attorney is in place to apply to the COP for gifting authority if needed. Do not wait — the window for IHT planning can close quickly after a diagnosis of dementia or following a stroke.
Make Your LPA Now — While You Have Capacity
A property and financial affairs LPA enables an attorney to manage your estate if you lose capacity — and to apply to the Court of Protection for gifting authority if IHT planning gifts are needed later. Without an LPA, even this route is closed until a lengthy deputyship application is completed. WillSafe will kits include LPA guidance.
View Will Kits from £39.99