Court of Protection exercises powers to gift house to Guardians free of Inheritance Tax and exclude father from estate
In a recent case of LCN v KF  EWCOP1 the court looked at the issue of settlement of a protected child’s property under the powers of the Mental Capacity Act 2005 (MCA) and Section 18 of the Family Reform Act 1987 (FRA) and the Court of Protection’s powers to make decisions regarding a protected party’s assets.
This case involved a child that was seriously injured at birth. As a result of this he was awarded £800,000 in damages plus periodical payments.
At the age of 13 he was living with two special guardians and their children in a property purchased with the damages. At this time he became critically ill. As he was too young to make a Statutory Will when he died his estate would pass though the rules of intestate to his mother and his biological father.
His biological father had however denied paternity, was not registered on the birth certificate, had played no part in his life and his whereabouts was unknown.
Prior to his death the child’s Deputy made an urgent application to court to for a settlement of a trust of the child’s estate to pass to his special guardians and his mother meaning that his biological father would not inherit from the estate.
Section 18 of the MCA gives the court the power to make decisions in respect of any persons subject to a welfare order under the Act.
The Courts powers include:-
(a) the control and management of their property;
(b) the sale, exchange, charging, gift or other disposition of their property;
(c) the acquisition of property in their name or on their behalf;
(d) the carrying on, on their behalf, of any profession, trade or business;
(e) the taking of a decision which will have the effect of dissolving a partnership of which they are a member;
(f) the carrying out of any contract entered into by them;
(g) the discharge of any debts and of any of their obligations, whether legally enforceable or not;
(h) the settlement of any of their property, whether for their benefit or for the benefit of others;
(i) the execution of a will;
(j) the exercise of any power (including a power to consent) vested in them whether beneficially or as trustee or otherwise; and
(k) the conduct of legal proceedings in their name or on their behalf.
Section 18 of the FRA confirms that for the purpose of intestacy a person shall not be presumed as survived by their father if their mother and father were not married at the time they were born unless the contrary is shown or he is registered as the father on the person’s birth certificate.
The application was issued on 20 November, was heard on 26 November and the child died on 4 December.
The court held that the child would have wanted his special guardians to remain in the property so they should receive this but as they could not afford to pay the Inheritance Tax this should be met from the estate, which was essentially the mother’s share.
The court also held that his father would not inherit from the estate despite the fact that he had not been a party to the application. It was ordered that the Deputy must try and serve the father with the final order and that he would have 21 days in order to apply to court from the date of service of the order.
What does this mean for practitioners?
The case reinforces the court’s powers in respect of unmarried parents and shows how the court are willing to exercise their power’s under the MCA in respect of a party’s estate.
The important factor in this case was that the application was made and concluded prior to the child passing away as the power’s under the MCA would not have been exercisable after the child’s death.
Practitioners acting as deputies have a difficult task in timing these applications correctly as if it is made too early the court may consider that the trust would deprive the party of their assets and too late and the party may have passed away.
It is also a good example how the court can act quickly when required.
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