Protecting your legacies
Whilst legacies and gifts in wills have always been important to charities, as a result of the Covid-19 pandemic maybe now, more than ever, legacies represent a lifeline. The lockdown meant many income streams for charities were reduced and legacies were left being the only reliable income source.
Even after the pandemic ends, many potential donors are now facing their own financial hardships and uncertainties. It may simply not be possible for them to continue to make regular donations or gifts, even though they would like to help a charity, particularly one with which they have a connection or affinity. Leaving a gift in a will is still a way that they can support your charity after their death.
The importance of legacies
Research from Smee & Ford shows that in 2019 legacy income was worth over £3 billion to the charity sector. Though Legacy Foresight has reported that due to the pandemic legacy income was expected to fall between 3-9% in 2020, by 2024 it is expected to bounce back to £3.67-£3.82 billion. According to Legacy Foresight, legacy income is predicted to double in real terms in the next 30 years.
There was also a significant increased demand for wills during lockdown. The Law Society reported a 30% increase in will making and Farewill, an online will drafting company, recorded a 300% increase. Charities only need a small percentage of wills to contain a legacy to them for it to make a real difference to their bottom line. That is why gifts in wills are so vital to charities.
The risks to legacies
It is important that having made the decision to make a will and benefit your charity, that a donor’s wishes are upheld. With an aging population and family relationships getting ever more complex, one has seen a steady increase in disputes relating to wills and estates. This trend is expected to continue especially for wills made during the current pandemic and beyond as the predicted economic downturn starts to bite.
In many cases, leaving a legacy to your charity is often to the detriment of the donor’s family members – if a charity inherits (particularly large residuary estates) then the family loses out. The anger and upset felt by the family is then directed towards your charity and can lead to claims such as a will challenge or for financial provision from the estate. Of course, if the will challenge is successful, the gift meant for your charity never reaches you.
Even if the claim is settled, which nearly always happens, it will still have caused delay and stress and your charity is likely to have used up some (if not all) of the value of the gift in legal fees.
Even if the will is quite clear on its face and there are no legitimate claims, tensions can be heightened if the family doesn’t feel that your charity is “worthy” or “deserving” of the legacy. Some lay executors may try to take it upon themselves to “right” the perceived wrong of the gift to your charity and fail to pay it out promptly, or in some cases, just not pay out at all!
Whilst it’s not possible for your charity to completely safeguard its legacies and prevent claims being made, there are some steps which you can take to reduce the risks:
Use a solicitor
Any donor wanting to benefit your charity in their will should be strongly encouraged to take independent legal advice and ideally instruct a solicitor to draft their will, particularly during the current pandemic. A solicitor can ensure that a donor has capacity to make the will, that the donor is free from undue pressure, ensure the will reflects their wishes and will be effective and that it is valid.
More importantly, the evidence of the solicitor who prepare the will and their will file are key evidence if a dispute arises at a later date. Your charity is also distanced from the will-making process and can avoid accusations that improper pressure was put on the donor to benefit your charity.
Communication should be encouraged
Some family members simply cannot accept that their relative didn’t want them to inherit and are immediately suspicious of any will which doesn’t align with their expectations, even if there is no real grounds to contest it.
If a donor mentions leaving a gift to your charity in their will, they should be encouraged to communicate with their family and be open about their testamentary wishes, either speaking to their family during their lifetime or else leaving a letter with their will setting out their reasons. If the donor has had “the conversation” or else left a note detailing their reasons, then this makes it less likely a claim will be made against the estate.
Educating the family
When the terms of the will become known, your legacy team should be encouraged to liaise with the donor’s family members in a timely and sensitive manner – explaining the good work that your charity does, how the legacy will be used and how the legacy is not a windfall for your charity but helps keep it operating.
You can also use this opportunity to address the often held mistaken belief that a charity is free to give the money back to the family if it really wanted to. Many people simply don’t know that a charity is legally obliged to only use legacies for its charitable purposes and only in very specific circumstances is it free to depart from that, otherwise the Charity Commission will come knocking.
Stand up for your legacies
Whilst your charity is quite rightly concerned about protecting its’ reputation and therefore seeking to avoid bad publicity, this should not be at the expense of receiving your legacies. The will reflects the donor’s wishes – they made that decision freely. If a legacy is being disputed or a recalcitrant executor won’t pay up, charities should not be afraid of taking legal advice from specialist solicitors involved at an early stage and look to protect their interests.
Legal advice shouldn’t be left to only when court proceedings are threatened - instructing specialist lawyers at an early stage means that they can advise on the legal position, work with your legacy team to develop a strategy and if required help with the wording of the early correspondence with the other party. Hopefully it can be nipped in the bud before it formally “goes legal”.
If litigation can’t be avoided, then the solicitor can easily take over conduct of the dispute and be that independent buffer between your charity and the disgruntled party and help to protect the legacy and the charity’s reputation.
Resourcing the legacy team
Once the money has been received, you might consider using some to strengthen the legacy operation. If the legacy is unrestricted (i.e. free to be used for whatever purpose your charity wants) then it would be very well spent on investing in your own legacy teams and developing a proper legacy strategy.
According to the Legacy Foresight Legacy Marketing Benchmarking Study 2020, only 4% of a charity’s fundraising budget is invested in legacies and yet it represents on average 44% of fundraised income. Therefore even a small increase in your legacy budget can reap major rewards.
Many legacy teams know that investment in legacy marketing is about playing the long game. The average time between a person making a will and dying is seven years. That is a long time in politics and even longer in the world of legacy forecasting. However, whilst such investment may not produce overnight returns (though sometimes it can), it is about securing the charity’s long term financial future.
Stewardship is another key area where legacy teams can really make a difference. The charity market has never been more competitive and an event such as the current pandemic really brings home to donors about what and who is important in their lives and makes them re-evaluate their wishes. If your legacy teams are regularly checking in on your donors that will build and cement key relationships and in turn this will be reflected in the amount and value of the gifts that are being left to your charity.
A clear opportunity
Whilst Covid-19 has no doubt had a detrimental effect on charitable income and legacies have not escaped unscathed, there are some really positive signs for the legacy sector and they represent a clear opportunity.
Charities need to be brave and take the mid to long term view in terms of their legacy strategy – investing in their own legacy teams and embracing the importance of stewardship. If those hard fought legacies are then under threat as a result of a dispute, then again your charity needs to be prepared to stand up and fight for them. Taking early legal advice can often be the key to unlocking the legacy potential and keeping the legacies coming in.
