Can Someone With Dementia Make a Gift? Capacity to Make Gifts Explained

Gifts are not just a Christmas issue.

They come up throughout the year: birthdays, weddings, religious celebrations, anniversaries, charitable donations, inheritance planning, property transfers, financial support for family members, and sentimental gifts made during a person’s lifetime.

Sometimes the gift is small and familiar. Sometimes it is substantial: money, jewellery, a vehicle, a share in a property, or even the person’s home.

That is when the question becomes more serious: Does the person have the mental capacity to make this specific gift, at this specific time?

At Nellie Supports, we provide decision-specific mental capacity assessments for families, solicitors, attorneys, deputies and professionals who need clear, evidence-based answers before important financial or legal decisions are made.

What Is Capacity to Make a Gift?

Capacity to make a gift means the person can understand the nature and effect of giving something away.

This is not about whether other people agree with the gift. It is not about whether the gift seems generous, unusual or unwise. A person is allowed to make a decision that others consider unwise, provided they have capacity to make that decision.

The real question is whether the person can understand, retain, use or weigh the relevant information, and communicate their decision. The Mental Capacity Act 2005 framework is decision-specific, which means a person may have capacity for one decision but not another. Nellie Supports explains this wider framework in our Mental Capacity Act 2005 guide.

For gifting decisions, the relevant information usually includes:

• what the gift is

• the approximate value of the gift

• who will receive it

• why the person wants to make the gift

• whether the gift is affordable

• how the gift may affect their own future needs

• how the gift may affect their estate

• whether other people might reasonably expect to benefit from their estate

• whether there is any pressure, coercion or undue influence

The larger or more unusual the gift, the more careful the assessment needs to be.

Why the Size and Nature of the Gift Matters

The leading authority on capacity to make lifetime gifts is Re Beaney [1978].

The key principle is that the level of understanding required depends on the size and nature of the gift in the context of the person’s overall assets. The Law Society summarises the position clearly: a small or trivial gift may require a lower degree of understanding, but where the gift disposes of the donor’s only valuable asset or affects how their estate will pass, the person may need a level of understanding similar to that required for making a will.

That means there is a major difference between:

• giving a grandchild £50 for a birthday

• donating a familiar modest amount to a charity

• gifting jewellery of sentimental but modest value

• transferring £20,000 to one child

• giving away a share of a house

• transferring the person’s main home

• making gifts that significantly change inheritance expectations

A small customary gift may be straightforward. A large lifetime gift may need a formal capacity assessment and legal advice.

Can Someone With Dementia Still Make a Gift?

Yes, sometimes.

A diagnosis of dementia, acquired brain injury, learning disability, mental illness or cognitive impairment does not automatically mean a person lacks capacity to make a gift.

Capacity is not decided by diagnosis alone. It is decided by looking at whether the person can make the particular decision in question.

For example, someone may not be able to manage all their finances independently but may still understand a simple, affordable gift to a close family member. Equally, someone may appear socially confident but be unable to understand the consequences of transferring a large sum of money or giving away property.

That is why gifting capacity should be assessed in the real-world context of the proposed gift.

Where the wider issue is whether the person can manage money, bank accounts, bills or broader financial affairs, a mental capacity assessment to manage finances may also be relevant.

Gifts Made by Attorneys or Deputies

There is an important distinction between:

1. a person making their own gift, and

2. an attorney or deputy making a gift on that person’s behalf.

If the person has capacity to make the gifting decision, they should usually make the decision themselves.

If the person lacks capacity, an attorney or deputy may only make gifts within strict limits. Current Office of the Public Guardian guidance says deputies and attorneys have limited powers to make gifts, and that gifts must be reasonable, affordable and in the person’s best interests. The guidance also says the person’s capacity to understand the gifting decision should be considered before a gift is made.

For attorneys acting under a property and financial affairs LPA, gifts are generally limited to customary occasions, to people connected with the person or charities they supported or might have supported, and must be reasonable in value considering the size of the person’s estate.

Examples of customary occasions can include birthdays, weddings, civil partnerships, Christmas, Eid, Diwali, Hanukkah and Chinese New Year.

So yes, Christmas gifting can still sit inside this blog — but as one example of a wider legal issue, not as the whole focus.

When a Gift May Need Court of Protection Approval

Some gifts go beyond what an attorney or deputy can safely authorise.

The Office of the Public Guardian states that any gift or transfer of real property, including land, a house or a share in a property, is almost certainly outside the powers of a deputy or attorney and is likely to require Court of Protection permission.

Court approval may also be needed where:

• the gift is large compared with the person’s estate

• the gift affects inheritance expectations

• the gift benefits the attorney, deputy or their family

• there is a conflict of interest

• the gift is part of tax planning

• the gift involves property

• the person has high care costs or likely future care needs

• there are safeguarding concerns

• family members disagree about whether the gift is appropriate

Where a Court of Protection application is being considered, a COP3 mental capacity assessment may be needed to provide clear, decision-specific evidence.

Where the proposed gift overlaps with estate planning or a statutory will application, our Statutory Will Assessment Package may also be relevant.

Capacity to Gift Property

Property gifts require particular care.

A gift of property may include:

• transferring a house to a family member

• gifting a share in a jointly owned property

• selling a property for less than market value

• transferring land

• gifting sale proceeds after a property sale

• changing ownership arrangements for inheritance or tax reasons

These decisions can significantly affect the person’s estate, care funding position, future security and the expectations of beneficiaries.

Where the proposed gift involves a home, land or ownership interest, a mental capacity assessment to buy, sell or transfer property may be appropriate. Nellie Supports’ property capacity service expressly covers property decisions including gifting an interest in property.

Capacity, Gifts and Lasting Power of Attorney

Gifting concerns often arise in LPA cases.

Sometimes a person wants to make a Lasting Power of Attorney and also express preferences about gifts, family support or charitable donations. Sometimes an attorney is already acting and wants to know whether they can continue the person’s usual pattern of gifting.

It is important to understand that an LPA cannot simply give attorneys unlimited gifting powers.

The Office of the Public Guardian guidance explains that preferences and instructions in an LPA must be read in the context of the Mental Capacity Act. A person making an LPA can restrict an attorney’s powers, but cannot expand gifting powers beyond what the law allows.

If there is uncertainty about whether someone can make an LPA, Nellie Supports provides mental capacity assessments to grant a Lasting Power of Attorney.

Warning Signs That a Gift Needs a Capacity Assessment

A formal capacity assessment should be considered where:

• the person has dementia, brain injury, delirium, mental illness or cognitive impairment

• the gift is unusually large

• the gift is out of character

• the gift favours one person over others without clear explanation

• the person appears confused about the value of the gift

• the person does not understand the effect on their own finances

• the gift may affect care fees or future care planning

• the proposed recipient has been heavily involved in arranging the gift

• family members are in dispute

• there are concerns about undue influence, pressure or coercion

• the gift may later be challenged after the person’s death

Where the matter is complex, disputed or high value, an Enhanced Mental Capacity Assessment may be more appropriate than a standard assessment because it allows for deeper evidential analysis, safeguarding consideration and a more robust report.

What Does a Capacity to Make Gifts Assessment Consider?

A good gifting capacity assessment should not simply ask, “Do you want to give this gift?”

It should explore whether the person understands the decision properly.

This may include assessing whether they understand:

• what they own

• what they are giving away

• the approximate value of the gift

• whether the gift can be reversed

• who will benefit

• who may lose out

• the effect on their future care and living costs

• the effect on their estate

• whether they have made similar gifts before

• whether anyone is pressuring them

• whether the decision is consistent with their wishes, feelings, values and previous behaviour

A mental capacity assessor should also consider what support the person needs to take part in the assessment. This might include simplified explanations, adjusted timing, communication support, visual information, family context or solicitor input where appropriate.

What If the Gift Has Already Been Made?

Sometimes concerns only arise after the gift has already happened.

This might be after a large bank transfer, a property transfer, a change in ownership, or after the person has died and beneficiaries discover that substantial assets were given away during their lifetime.

In those cases, the question may become: Did the person have capacity to make the gift at the time it was made? That is a retrospective question.

Nellie Supports provides Retrospective Mental Capacity Assessments for disputed past decisions. These reports reconstruct the person’s decision-making ability using contemporaneous evidence such as medical records, care notes, solicitor files, correspondence, bank records and witness evidence.

This can be particularly important in probate disputes, financial abuse investigations, contested estates and challenges to lifetime gifts.

Capacity to Gift and Testamentary Capacity

Large lifetime gifts can overlap with inheritance issues.

If a person gives away a major asset during their lifetime, that gift may alter what is left in their estate. It may also affect people who expected to benefit under a will or intestacy.

That is why Re Beaney is so important. Where the gift effectively changes the destination of the person’s estate, the level of understanding required may become closer to the understanding needed to make a will.

For more detail on the will-making test, Nellie Supports has a guide to Banks v Goodfellow, the leading authority on testamentary capacity.

Why Capacity to Make Gifts Matters

Gifts can be meaningful. They can preserve relationships, reflect a person’s values, and allow someone to continue patterns of generosity that have mattered to them throughout life.

But gifts can also create risk.

Without proper capacity evidence, a gift may later be challenged. Families may disagree. Attorneys and deputies may be criticised for acting outside their authority. Solicitors may need clearer evidence before completing a transaction. Vulnerable people may be exposed to financial abuse or undue pressure.

A clear assessment can help protect:

• the person making the gift

• the intended recipient

• attorneys and deputies

• solicitors and professionals involved

• the person’s estate

• family relationships

• future legal proceedings

  
  

The aim is not to stop people making gifts.

The aim is to make sure the person’s decision is properly understood, properly supported and properly evidenced.

Need a Capacity Assessment for a Proposed Gift?

If you are unsure whether a loved one, client or protected party can make a gift, the safest step is to get advice before the gift is made.

Nellie Supports provides independent, decision-specific capacity assessments across England and Wales. Our reports are evidence-based, court-ready where required, and completed by experienced professionals working within clear professional standards and court credentials.

You can contact Nellie Supports to discuss whether a gifting capacity assessment, financial capacity assessment, property capacity assessment, retrospective report or enhanced capacity assessment is the right route.

For more background reading, visit our Guides and Resource Directory.