Protecting Charities' Inheritances

Figures released at the end of September 2019 to mark the 10th anniversary of “Remember a Charity” week suggests that the number of people leaving gifts to charities in their wills has increased year on year since the campaign was first launched.  In 2018 some £3billion was donated to charities in wills an increase of about 50% since 2008.

According to research carried out by the Telegraph it is the smaller charities that have benefitted from this increase.  This may be as a result of adverse publicity received by the larger more well known charities – for example, Oxfam following the reports of sexual misconduct by one of their aid workers in Haiti after the earthquake in 2010 or Save the Children after they faced multiple allegations of discrimination and harassment of staff.  Alternatively, it may simply be as a result of testators’ preferences to leave money to charities with whom they have a personal connection coupled with a belief that gifs to smaller charities will make more of a difference.

Whatever the reason, the importance of charities doing all they can to protect these inheritances has become paramount in today’s society when many charities rely solely on donations from the public to keep going.

The Charity Commission has provided guidance to the charities’ trustees in respect of any claim.  Its advice is clear, namely that the trustees have a duty to act to protect and, where necessary, to recover assets belonging to the charity.

Any decision whether to bring or defend legal proceedings must therefore only be made in the best interests of the charity having regard to the risks and consequences that any legal action could bring, such as the question of legal costs (and any adverse order for costs) and reputational damage.

The commission’s guidance also makes it clear that no proceedings should be issued without the trustees having first explored other ways of resolving the dispute – for example, mediation.  Sometimes with the best will in the world court proceedings will be inevitable.

Challenges to wills can take many forms, not all of which can be “defended” by charities – for example, an allegation that a will has not been validly executed.  However, by far the most common challenge that a charity will face are claims under the Inheritance (Provision for Family & Dependants) Act 1975 (“the Act”).

By far the most high profile case under the Act is the Supreme Court case of Ilott v The Blue Cross & Others [2017].  In this case, the deceased left the majority of her net estate valued at a little under £500,000.00 to the three defendant charities at the expense of her only daughter to whom she left nothing.

The daughter had been estranged from her mother for over 30 years by the time of her death.  Nevertheless, she brought a claim under the Act contending that her mother’s will failed to make adequate financial provision for her.

In the end, the court found in favour of the charities, although they did award a modest sum of £50,000.00 to the daughter.  The decision is not only of importance to charities and provides a useful precedent for future cases but also reinforces the question of testamentary freedom, providing a useful reminder that subject to the provisions of the Act, testators in England and Wales remain free to leave their estate to whoever they choose.

Conclusion

The Ilott case is of the utmost importance to charities reinforcing as it does a testator’s right to testamentary freedom.  However, this is also a case where the costs of the proceedings given its appeal to the Supreme Court were likely disproportionate to the value of the estate which, although of considerable importance and financial assistance to the charities, was not the largest in the world.  The case therefore demonstrates the importance to charities to act quickly in order to do all they can to protect their inheritances.  Such steps should include:

• Obtaining early legal advice;
• Collaborating, if possible, with any other charities to whom the testator has left an inheritance;
• Consider the question of alternative dispute resolution; and
• Beware of the potential for negative PR implications.