In the second of our two-part series focusing on developments and initiatives at specialist contentious wills and probate firm IDR Law, Today’s Wills and Probate had an in-depth discussion with Hannah Brittain, head of IDR’s charity legacy disputes, to discuss why the firm has turned more attention to charitable legacies and common issues that can arise when dealing with them.
Today’s Wills and Probate: There has been a lot of recent press and research documenting the increase in charitable bequests and legacies, how do disputes arise and what kind of services does IDR Law provide?
Hannah Brittain: A charitable legacy is a gift left to Charity in a Will. Gifts to qualifying Charities are exempt from inheritance tax and such gifts can help reduce the inheritance tax payable on death from 40% to 36%, if used in the correct way, thereby benefiting the testator’s family in the long run.
The most common type of gift to a Charity is a pecuniary legacy (a fixed sum of money left to a particular person or organisation) or a specific legacy (a particular item left to a specific person/organisation such as property, jewellery, possessions). Charities can also be the residuary beneficiaries, receiving a share, or sometimes all, of an estate after all other payments have been made and 90% of the £3 billion per annum left to Charities in the UK come from residuary gifts left in Wills. There are often multiple Charities inheriting from an estate and they may appoint a lead Charity, although the lead Charity does not bind the others.
In addition to including specific charitable legacies in a Will, a testator can also avoid the failure of gifts of residue, for example, if named beneficiaries cannot be traced, if the Will contains a longstop gift to Charity or for charitable purposes.
Disputes arise when family members contest a charitable donation in a Will when they believe they are not receiving what they are legally entitled to. This is because the Inheritance Act states that a testator’s Will must provide for reasonable financial provision for dependants (such as children and partners). Disputes can also stem from a belief that the testator was unduly influenced when making their Will or lacked mental capacity to make a Will, which if successful could render the entire Will invalid.
We can assist Charities faced with family claims against the estate and advise on matters sensitively and tactfully in order to navigate the complicated issues, with an aim of reaching the best possible outcome for the Charity.
Today’s Wills and Probate: You have recently been appointed head of IDR Law’s charity legacy disputes. Can you please tell us why IDR Law is choosing to focus on this particular area of dispute?
Hannah Brittain: 40% of all UK deaths result in a Will at probate and 16% of those Wills at probate now contain charitable gifts. These legacy gifts were valued at £3 billion per annum in 2020 and this figure is set to increase; by 2030, UK charities are predicted to receive £5 billion per annum in legacy income from 146,000 charitable bequests (source: Legacy Foresight). With legacy income set to double, challenges to legacy income have the potential to increase as well. Charitable legacies are more open to challenge than any other, mainly due to socio-economic reasons such as the increase in children and family members relying on receiving an inheritance to fund retirement/discharge debts.
IDR Law are the only law firm in the UK that specialises solely in the resolution of disputes and problems that arise in connection with wills, probate, and trusts: it’s all we do. It would, therefore, be remiss of us to ignore Charities and only provide legal assistance to private individuals.
What makes us different to other law firms providing a similar service to Charities is that we can offer them the IDR Network which is a one stop (free) shop for all things wills and probate. It is designed for general browsing or for specific help for anyone dealing with contentious and non-contentious matters for families and Charities.
There are 5 main sections:
- Ask the Experts – which contains information setting out case studies, commentaries, specific campaigns we are running, the Almanack with Q&As gleaned from all our enquiries.
- Guides and Resources – with downloadable guides to specific areas of wills and probate including an Intestacy Remembrall, our Caveat Service, Larke & Nugus Requests, Insolvent Estates Service and all our general guides.
- Legal Tech Solutions – including our very own 1975 ACT online claim checker and Larke (an online App for will writers to assess and record information when preparing wills).
- Sector Spotlight – where we promote companies offering services/products relevant to inheritance disputes with discounts for our IDRN members.
- The IDR University, IDRU – an online learning platform which contains fact sheets, training guides, webinars and information offered by barristers and other experts.
Within each specific section you will find information applicable to Charities, where professionals and legacy officers can find information on charity legacies, how to deal with charities, what information to provide to a charity beneficiary, how to deal with problem PRs, case studies and fact sheets on topics such as how to challenge executors’ costs.
Today’s Wills and Probate: What are the common issues or pitfalls that can arise in charitable legacies?
Hannah Brittain: Many people underestimate the difficulty of challenging a Will and there is a widespread misconception that a Will can be challenged simply because it is unfair. Sometimes there is a genuine cause for concern – such as an elderly person leaving everything to a recent acquaintance or suddenly changing their Will in favour of a relative or an unrelated Charity for no apparent reason. However, a testator may also have come to a rational decision to benefit others, such as a Charity, based on the fact that the family are well established financially.
Disappointed family members can often dispute this, taking the view that the Charity has received an unfair advantage and that the deceased’s family should receive their rightful inheritance. There is often an expectation by the disgruntled family members that the Charity should surrender all or part of its interest without appreciating that Charities have a duty to maximise their legacy entitlement under a Will. Indeed, the trustees are not permitted to simply surrender an interest, unless it is a genuine compromise of litigation or pursuant to the principles of ex gratia payments (as authorised by section 106 of the Charities Act 2011). Charities are often apprehensive that they will be perceived negatively for accepting the gift and are often prepared to compromise with the family to their detriment, simply because they do not want to be considered “greedy” for accepting their full entitlement.
Further issues for Charities can arise where an estate is being badly administered or there are severe delays in the administration and the Charity is unable to realise it’s legacy in a timely manner. Charity beneficiaries often come across uncooperative PRs who are refusing to provide information about the estate assets they are handling or appear to be out of their depth in administering the estate. For many Charities, legacies are their largest source of income and donations from supporters who chose to remember them in their Will are a valuable source which enable the Charity to fulfil its charitable purpose. A considerable delay, particularly when it comes to large bequests, can heavily influence cash flow and project timelines and have direct impact on the Charity’s day-to-day activities.
IDR Law are able to advise and assist Charities on holding the executors to account for their actions, or inactions as it may be, and replacing the executors or bringing a claim for breach of trust, should that prove necessary.
Excessive executors’ costs in administering an estate is another common issue for Charity beneficiaries, particularly residuary ones. Charities who have concerns about the costs being charged by the PR or solicitor acting as or on behalf of the PR can often be left feeling like they have no control. However, there are various methods available to them for challenging the costs of the solicitor, such as requesting a breakdown, making a formal complaint, challenging and negotiating a reduction or issuing an application with the Court for detailed assessment under section 71(1) of the Solicitor’s Act 1974.
It is important that Charity beneficiaries consider what their rights are in any given circumstance and early legal advice is always recommended to ensure that the Charity’s rights are protected at minimum cost, as well as ensuring that strict time frames for action are not overlooked.
Today’s Wills and Probate: Are there any recent cases that highlight the kinds of disputes that IDR Law can help with?
Hannah Brittain: Most charity legacy disputes remain unreported as they rarely end up in Court. Any cases that do end up in Court and in the press do not always reflect well on the parties. For example, the RSPCA case back in 2010, where the Charity was left the entire residuary estate in the Will which was successfully challenged by the daughter on grounds of lack of knowledge and approval, undue influence and proprietary estoppel and then appealed by RSPCA, who lost the case at both first instance and at appeal. This case attracted a great deal of media attention at the time for which the Charity was portrayed as opportunistic when approaching litigation. As a result, Charities are extremely sensitive to their reputational management and the possibility that pursuing a legacy that may taint their public perception and jeopardise future income.
Charites would much rather communicate effectively with the family or Personal Representatives to resolve matters amicably and reach a compromise that benefits all involved, than incur the time and costs involved in litigation.
However, Charity trustees do have a duty to protect assets belonging to the Charity and this includes legacies left to them in Wills. It is, therefore, inevitable that some cases will end up in legal action. However, the decision whether or not to initiate or defend proceedings must only be made in the best interests of the Charity. Any consequences or risks need to be considered and taken in to account, such as the probable legal costs involved and whether or not these are likely to outweigh the value of the legacy and any potential reputational damage for the Charity.
Today’s Wills and Probate: Do you have any advice for practitioners working within charitable legacy?
Hannah Brittain: Many Charities, especially the larger ones, have in house legacy teams with legacy officers who are highly experienced, qualified solicitors dealing with bequests left to their Charity in Wills and any disputes that may arise from them. However, occasionally, where the Charity is seemingly being ignored by the family or executor or matters have escalated, a strongly worded letter from an independent firm of solicitors is exactly what is needed to get things moving in the right direction. Information sharing is crucial and early collaboration with other charities benefiting under a Will is advisable in order to move matters forward expediently and help reduce costs, although be wary of potential conflict.
It is imperative that practitioners advising Charities are mindful of negative public relation implications for the Charity and must ensure that this is managed in parallel with any wider consideration of a dispute. A balance must be struck between advising on the legal merits of a claim and approaching the situation with pragmatism, so as to avoid the pursuit of hostile litigation whenever necessary.
Further, the Charity Commission and the Courts expects trustees to consider legal action as a last resort and only after other alternatives for resolving the dispute, such as mediation, have been explored. It is therefore important to provide clear, strategic, and focused advice with the aim of guiding a Charity to a successful outcome, be that winning in court or achieving an out-of-court settlement.