Addressing the problem of disputes over donations in wills
A rising number of people are choosing to donate money to charities in their wills and in recent years there has been a marked increase in individuals seeking legal advice on how best to do so. The most recent government report containing UK charity tax relief statistics, published in June 2018, noted a £220 million rise in the amount of tax relief to charities for 2017-18.
Inheritance tax relief was the largest contributor to reliefs for individuals, increasing by £20 million on the previous year to be worth £860 million in 2017-18. This suggests many more people are choosing to make charitable donations as a means of cutting the amount of inheritance tax they owe to HMRC.
All of this is promising news for the UK’s charity sector, with a vast array of causes benefiting from the increased amount of funding coming their way. But, of course, there is tough competition for donations and charities are constantly looking for ways to bring in additional money for the important work they undertake.
Donations in wills are crucial forms of funding. When a will containing a large donation is challenged it can have huge consequences for the charity, especially for smaller, independent charities which could potentially be forced into closure without receiving that money. Whilst a charity cannot stop somebody from bringing a claim to challenge a will, there are certain measures that can help to safeguard donations for the future.
How disputes do arise
As many people are aware from high profile cases in the news, will disputes are typically spearheaded by a family member who believes they have been left out of a will, or not given the provision they think they are entitled to.
One of the most famous cases in recent years was that of Heather Ilott, who contested the will left by her mother, Melita Jackson. Mrs Jackson had decided to leave almost her entire estate to a number of charities and not a penny to her estranged adult daughter.
Whilst Mrs Ilott did receive an award from the estate in the lower courts, she challenged the amount of the award and the charities took their case to the Supreme Court and won, retaining the vast majority of the money due to them under the will. This sort of dispute is unfortunately not uncommon, with varying outcomes and frequent loss of funds for the charities in question.
Charities usually have no idea they have been named in a will until after a person has passed away and their executors are carrying out their duties. The executors contact the charities and notify them that they are a beneficiary of the person’s estate and whether they are set to receive a lump sum of money, or whether they have been left part of the residue of the individual’s estate once other outgoings have been deducted. In the latter case, the charity will be unaware of the actual sum they are entitled to receive until a later date.
While the surprise of being named in a will is, of course, a welcome one for the recipients, the individual’s family members are all too often shocked by the choices of their loved ones. This is particularly true of charitable donations, which may carry personal meaning to the donor that has not always been expressed to their family members during their lifetime.
By way of an example, there is the case where a husband created a will before his divorce to his wife was finalised, leaving a large legacy to an animal charity. He died suddenly and whilst the wife felt she was morally entitled to the funds in the estate, the charity defended its position on the basis that the will was valid and whilst the wife may have felt outraged by her last husband’s actions, the charity had an obligation to protect its legacy.
The case settled on favourable terms for the charity. This showed the importance for charities of taking legal advice as to the strength of their position in order to protect and maintain legacies left in a will.
Future-proofing will donations
While the above example is common, there are many cases where individuals approach charities during their lifetime and make them aware of an intention to name them in a will. In these scenarios, the charities can avoid problems further down the line by ensuring they have given their full charity name and registered charity number, together with an address.
The registered charity number is particularly important, as the other details can change over time. Particularly if this discussion happens early in a person’s lifetime and decades pass before their will comes into effect, as this can make it difficult to establish on death which charity the legacy was intended for.
Regardless of whether a charity rebrands or moves to a different address, its registered charity number will always remain constant. This means it is traceable by the executors of the will and can be easily identified as the correct recipient of any gifts, stopping a challenge by another charity which might claim they were the intended recipient of the donation.
If and when a person does approach a charity with the intention of naming it in their will, the charity should advise them to have the document professionally drafted by a solicitor. Of course, the nature of these discussions depends on the relationship between the two parties, but seeking professional guidance will stand the document in the best stead to withstand any challenge further down the line.
The solicitor will usually take note of the person’s instructions and give them an opportunity to explain their relationship with the charity and why they are leaving them a gift in their will. These kinds of details can assist if any disputes arise in the future, as they can help to prove that the individual was of sound mind and understood the exact ramifications of their actions.
Another measure which is becoming more popular is for charities to partake in schemes offering professionally drafted will services at a reduced fee. In exchange, they ask that an individual considers leaving a donation to the charity in their will. The benefits of this are twofold; people are making legally binding wills that are properly and professionally drafted and with careful consideration from the individual, and the charity is potentially receiving monetary gifts from someone who might not have previously considered them as a recipient.
Tackling unavoidable disputes
The measures outlined above should set the scene for charities, and for individuals wishing to avoid disputes to their wills and wishes, but inevitably these kinds of disputes can - and do - still arise, despite everybody’s best efforts. If a charity is named in a will that is already subject to a dispute, the best advice is for them to contact the executors of the will and find out exactly who is contesting it or bringing a claim against the deceased’s estate.
Immediately after doing this, the charity should get in touch with a solicitor and appoint them to represent their interests.
However, it is always important to remain pragmatic when dealing with a dispute. Court proceedings are expensive and the costs involved can have a huge impact on the size of an estate, which ultimately can affect how much - if any - of the donation in the will eventually comes to the charity in question.
There have been cases where charities have refused to enter into any negotiations with the party disputing the will, or claiming against the estate, preferring to proceed to a trial. The charity may well go on to be successful by following this method, but incur considerable expense in doing so. Under these circumstances, the charity may well have received a larger sum overall if they had agreed to settle the matter out of court at an early stage.
Assisting executives with evidence
A final piece of advice for mitigating the impact of a dispute is for the charity to assist the executors of the will in gathering evidence. Typically, when a party disputes the validity of the will involving a charity, the charity is informed of the situation and it is added as a party to the proceedings.
The onus is on the executors of the will to take steps to establish the validity of the will at court. However, the charity can help with this by supplying evidence that the deceased either made donations to or relied heavily upon the charity during their lifetime.
This kind of evidence can demonstrate that the individual had an existing relationship with the charity and therefore it may well be expected that a donation to the charity would be made in their will. A legal professional should also be appointed by the charity to assist with this.
If the claim being defended relates to the financial needs of a person who has been left out of the will, rather than the validity of the will, a legal professional can assist with fully setting out the needs and resources of the charity in order to try and minimise any reduction to the amount due to the charity under the will, in the event that person’s claim is successful.
Of course, there are many perfectly valid reasons that a person might have for contesting a will and this is difficult to avoid. But in the majority of cases where a charity has a justifiable reason to believe it is entitled to funding by being named in a person’s will, it is important to take all possible measures to safeguard this donation.
Taking action to help prevent will disputes, or providing information that might help establish why the charity should receive money under a will, will benefit not only the charity in question, but the individual who wants their wishes to be carried out after they are gone.
