Understanding Deputyships and Guardianships

Introduction 

This briefing is a high-level guide to deputies and guardians. As this is a complex subject specialist tax advice may be required.  

The appointment of a deputy or guardian may be required where an individual lacks capacity to make decisions for themselves and where there isn’t an appropriate power of attorney in place. If a deputy or guardian is needed, the appointment process can take up to six months, in some cases this could be longer. The cost of appointing a deputy or guardian can vary. These include, but are not limited to, application costs, Court hearing costs and annual supervision costs. 

Therefore whilst the individual has capacity, the benefits of creating a Lasting Power of Attorney, in England and Wales, or a Continuing Power of Attorney, in Scotland, is this allows them to choose who can act on their behalf without the need for a deputy or guardian. They can also discuss their wishes and needs with the appointed person. There is a one-off registration fee for registering the Power of Attorney. 
 

Core considerations 

• Deputies and guardians are appointed where an individual lacks capacity and there isn’t an appropriate Power of Attorney in place. 
• Capacity should be assessed each time a decision is made, or an action taken.  
• The Deputy or Guardianship Order will set out the express powers of the deputy and guardian. 
• Authority to make gifts and to carry out inheritance tax planning is generally limited. The Court may need to approve this before it is carried out. 
• Deputies and guardians can invest on behalf of the individual, provided the Court Order allows this.

Contents 

• The role of the deputy and guardian 
• Types of powers 
• Gifting 
• Inheritance tax planning 
• Will planning 
• Investments 
• Taxation 

The role of the deputy and guardian

Where an individual lacks capacity and where there isn’t an appropriate Power of Attorney in place, it may be necessary for someone to be appointed to act on their behalf. In England and Wales, the Court of Protection will appoint a deputy to act for the individual. In Scotland, the Sheriff Court will appoint a guardian.  

Anyone 18 or over can be appointed. They are usually close relatives or friends of the person they will be making decisions for. Professional deputies and guardians can be appointed but they will charge for the service. 

Deputies and guardians are responsible for helping an individual to make decisions; or making decisions on their behalf. Capacity should be assessed each time a decision is made, or an action taken. If the individual doesn’t have the capacity, the deputy or guardian can make the decision or act for them.
 

Type of Powers

The types of decisions the deputy or guardian can make will depend on the type of authority they have been granted.  

1. Property and Financial financial affairs - these powers will relate to the finances and property of the individual. These can include buying and selling property, investing or providing for dependents. 
2. Health and Welfare – deputies and guardians can make health and welfare decisions for the individual. These can include where the individual lives, who they live with, day to day care including medical and dental treatment. 

The Deputy or Guardianship Order (‘the Order’) will set out their specific powers. If a deputy or guardian want to make decisions that they do not have the authority to make, they can apply to the Court.  If this is approved, the Order will be changed to extend their authority.
 

Gifting

If an individual has capacity to make the decision to make a gift, they can do this without the involvement of the deputy or guardian.  

If the individual doesn’t have capacity, the deputy or guardian must consider whether the Order allows them to gift. If it is included, their authority will generally be limited to the same rights as an Attorney acting under a Lasting Power of Attorney, in England and Wales, or a Continuing Power of Attorney in Scotland.  

Any gift made must be:  

• reasonable considering the size of the individual’s estate,   
• made to a charity the individual has previously gifted to or may be expected to gift to; or   
• customary (such as Christmas and birthdays) and the donee must be related or connected to the individual.  

If the Order doesn’t give the deputy or guardian the authority to make gifts, they can apply to the Court and ask for this to be included.
 

Inheritance tax planning

Inheritance tax planning generally requires assets to be given away during an individual’s lifetime, to reduce the value of the estate. This can involve making larger value gifts to one or more individuals or into trust such as a Gift trust or Discounted Gift Plan.   

Inheritance tax and estate planning will generally be outside of the deputy or guardian’s standard authority. 

If the individual has the capacity to make this decision, they can carry this out themselves. If they do not have the capacity to understand this, the deputy or guardian must ask the Court to authorise it. The Court could refuse this request. They will consider any estate planning to be secondary to ensuring that the individual is provided for during their lifetime. If they agree, the Order will be updated to include this authority. 

If this planning is carried out before the Court approves it, the deputy or guardian will be acting outside of their authority. They could be asked to return the gifts. They could also be removed from their position as deputy or guardian.
 

Will planning

The Court must authorise the creation or amendment to the individual's will.
 

Investments

Deputies and guardians can purchase investments on behalf of the person they are acting for if the Order includes this. The Order could limit what the deputies and guardians can invest in, whereas some may include a wide investment authority. 

These investments could include but are not limited to Individual Savings Accounts, mutual funds, National Savings products, and offshore and onshore investment Bonds. 

If the individual has capacity, they can make the investment decisions themselves.
 

Taxation

All investments and assets are owned by the individual. They will be assessable to income tax, capital gains tax and inheritance tax.