Managing legacy disputes
Legacies can be a great source of income for charities. In 2023/24 the estimated value of legacies to the charity sector was around £4 billion.
But what happens if, for example, someone makes a claim against your legacy or if the administration of the estate goes wrong? Maybe you discover that the estate is smaller than it should be because of some large 'gifts' made from the deceased's funds late in lifetime, or that your charity has been written out of the will shortly before the deceased's death.
Disputes involving legacies have increased over the last few years, possibly because of more complex family situations and an increase in financial abuse of vulnerable people. Any of these can leave charities embroiled in lengthy correspondence or even court proceedings.
Types of disputes
Before considering what you should do when faced with a dispute, here is a short summary of the main types of legacy dispute which charities are likely to come across:
CLAIMS AGAINST THE VALIDITY OF WILLS. These can be claims against a will of which you are a beneficiary, perhaps by a disappointed family member, or by another charity to overturn a later will which does not benefit it.
The main grounds of challenge include lack of testamentary capacity (i.e. that the testator lacked capacity to make their will), want of knowledge and approval (i.e. that the testator did not know or approve the contents of the will, perhaps because someone else drafted it), and undue influence (where the testator is coerced into making the will).
CLAIMS UNDER THE INHERITANCE (PROVISION FOR FAMILY AND DEPENDANTS) ACT 1975. This law allows certain classes of people such as spouses, cohabitees, children and dependants to claim against an estate if they feel that the Will does not make reasonable provision for them.
Ever more common
This type of claim has become ever more common, particularly following the Supreme Court case of Ilott v Blue Cross in 2017. Charities regularly find themselves as defendants to claims by estranged children amongst others.
CLAIMS IN PROPRIETARY ESTOPPEL. This is a claim that the deceased promised the claimant something and that they relied on the promise to their detriment. These claims disproportionately tend to involve farms, for example where someone has worked on the farm for years at low or no pay on the promise of receiving the farm on the death of the owner.
CLAIMS INVOLVING POORLY DRAFTED WILLS. Charities seem to suffer disproportionately from these where, for example, the Will drafter has used an incorrect name for the charity or written the name of one charity but the address or charity number of another. The court can be asked to interpret or rectify the will to try to overcome the problems, or the charity may need to bring a negligence claim if a professional will drafter is involved.
ADMINISTRATION ISSUES. Charities regularly encounter problems with executors or their solicitors, for example delays to the administration, failing to apportion inheritance tax correctly or distributing the estate incorrectly. There are various ways of resolving these situations such as removing the executors, bringing a claim against them for an account or, in the case of professionals, claiming in negligence.
The pre-action process
So what should a charity do when faced with a legacy dispute? You've received a letter of claim or been tipped off that the deceased made an odd will shortly before death which cut out their favourite charity. Maybe nothing has happened for months or even years on a valuable estate of which your charity is a beneficiary. What next?
The first step is to act fast. If you have concerns about the validity of a will and want to stop it from being admitted to probate, lodge a caveat with the Probate Registry. This is cheap (the fee is only £3) and it gives you time to investigate. If you receive a letter of claim, acknowledge it.
If you are one of a number of charity beneficiaries, contact the others. Charities regularly work together on legacy disputes which saves costs and time.
Gather evidence, for example, the will file, medical records and, in an Inheritance Act claim, financial information from the other party. Don't just accept what you are told. Often the real situation is very different from that portrayed in a letter of claim, as that is written through the lens of the claimant.
Instruct a specialist solicitor to advise you. The Association of Contentious Trust and Probate Specialists (ACTAPS) has a directory of specialist solicitors. Once you have finished gathering evidence, you or your solicitor will be able to evaluate this and be clear on the merits of the claim so that you know where you stand.
All of the above will normally take place before any court proceedings, at what is called the pre-action stage of the claim. The parties exchange letters of claim and response and relevant evidence. Most claims will be resolved at this stage (more on settlement below).
Court proceedings
If it is not possible to resolve the matter pre-action, it will go to formal court proceedings. What happens next will depend on whether the charity is the claimant or defendant. If it is the claimant, it will issue a claim form supported by either particulars of claim or a witness statement, depending on the type of proceedings, which set out the claim in more detail. The claimant will then serve these on the defendants.
With some types of proceedings, for example claims against the validity of a will, the claimant will also need to provide disclosure of key documents at the same time that they serve the claim form.
Disclosure can be an onerous and time consuming process if there are lots of relevant documents to sort through. In legacy disputes, however, charities tend not to have been involved with the deceased prior to death so the number of documents they will have on their electronic filing systems is usually minimal.
There may be some supporter records but most of the relevant evidence will be that obtained during the evidence gathering process, such as medical records, and is likely to be held by the charity's solicitors.
If the charity is the defendant then, once the claimant serves the proceedings, the charity will have a chance to respond, either by way of a defence or witness statement. The court will then likely list the matter for a hearing, either to set out a timetable for the claim or, if it is a simple claim, to dispose of it. The timetable will include directions for further disclosure if appropriate, exchange of witness statements and expert evidence.
Finally, the court will list the matter for a trial at which witnesses will be cross-examined and the parties will make their submissions.
Aspects of settlement
Very few cases make it to trial. Most are resolved through alternative dispute resolution (ADR). It is important to consider ADR at every stage of a dispute. Not only will settling the matter reduce the charity's costs, but making offers, either in correspondence or at some sort of settlement meeting, can be a good tactical move to put your opponents under pressure. It may also be possible to include a confidentiality agreement to help protect the charity's reputation.
There are various forms of ADR. Mediation is a very popular form of ADR which works well for legacy disputes. It is a type of settlement meeting where the parties spend the day with an independent mediator (either online or in person) who shuttles between them and tries to bring them to a settlement. One of the main benefits of mediation, particularly for charities, is that it is a completely confidential process so that nothing said during the mediation can be referred to later.
Mediation also helps to focus the parties' minds and, if you have an effective mediator, enables them to see the reality of their position and the risks involved in pursuing the matter further. Although it is not inexpensive, it is considerably cheaper than going to trial and is particularly useful in disputes where there is a degree of uncertainty for both parties, such as most claims against the validity of wills or proprietary estoppel claims.
Increasingly active role
In recent years, where there are issued proceedings, the court has taken an increasingly active role in ADR. It regularly conducts settlement hearings, for example, financial dispute resolution hearings. This involves the parties attending court for the day.
Rather than hearing the evidence and making a decision, the judge will read the papers in advance and set the parties various time limited tasks during the day to encourage them to think realistically about settlement. At some point during the day, the judge will give their view on the merits of the claim as it stands, again to encourage the parties to take a realistic approach to settlement.
Some disputes do not warrant the expense of mediation, for example where the estate is modest or where the charity feels confident of success, for example a claim for the removal of executors where they have delayed for many years. In those cases, offers in correspondence can be more cost effective.
Ultimately, in claims involving a non-monetary outcome, such as the removal of executors, it may be necessary to push the matter to a hearing so that progress can be made with the estate administration.
Reputational issues
As well as the legal issues, charities can face reputational threats when dealing with disputes, such as press interest or social media posts. Whilst it is important to be aware of the threats, and to mitigate them by, for example, having a press statement ready in appropriate cases, they shouldn't determine the charity's response to a claim. At the end of the day, by bringing or defending a claim, a charity is usually just trying to make sure that its supporter's wishes are carried out.
Disputes involving Wills are becoming increasingly common. By being prepared when they arise and managing them appropriately, charities can help to safeguard their legacy income and reputation.
