Charitable Gifts In Wills – Common Problems & Resolutions
In 2024, charities in the UK received gifts from wills totalling £4.5 billion. This figure is forecast to reach £5 billion in 2030 and double again to £10 billion in 2050, well ahead of past rates of inflation.
To encourage philanthropic giving, legacies to charities are exempt from inheritance tax and, if at least 10% of the net value of the estate is given to charity, the overall rate of inheritance tax is reduced to 36%.
Given the scale of this income, charities have a duty to maximise what they receive and have to be careful to ensure that they receive the full legacy due to them under a will. However, the administration of an estate containing a charitable gift does not always run smoothly and there may be some hurdles to overcome. We have outlined some of the more common problems that can arise with charitable gifts in wills in this article, alongside how they can be addressed.
Identification of the charity
The first problem that can occur with charitable gifts in wills is the unclear identification of the charity in the will. Ideally, the will should specify the name of the charity and the charity’s unique registration number, so there is no doubt about which charity the testator intended to benefit.
However, further problems can arise if the recipient is not a registered charity.
In a high court case concerning the will of Barrie Russell Williams (Knipe v The British Racing Drivers’ Motor Sport Charity), the judge considered intended gifts to the ‘British Racing Drivers Club Benevolent Fund’ and the ‘Cancer Research Fund’. No charities with those names existed.
The executors made an application to the court for declarations, so that they could distribute the estate with the court’s approval. The court held that the deceased must have meant to benefit The British Racing Drivers’ Motor Sport Charity, administered by The British Racing Drivers’ Club, of which the Deceased was a member. As for the ‘Cancer Research Fund’, it was held that the Deceased did not have a particular charity in mind, but that they had a general charitable intent, meaning that the executors could make a gift in keeping with that intent. This gift was shared by Cancer Research UK and the World Cancer Fund.
Given the risk that a charity with a similar name could bring a claim alleging that they were the intended recipient, beneficiaries should always consider the terms of the will carefully. The executor may make an application to the High Court for a declaration that the charity has the right to receive the gift, so that they have protection against a claim for wrongfully distributing an estate.
Purpose of the gift
In most cases, the testator will not state a purpose to which the charity has to put the gift. This generally avoids problems with charitable gifts in wills. However, there could be a problem if the testator expresses a purpose contrary to the charity’s own purposes. If so, the gift might fail and be redirected to a charity that does fit the stated purpose.
A common example is a gift made to the local branch of a national charity. In that case, the charity may have to ring-fence the funds to make sure that they benefit that branch specifically. If not, the charity could be in breach of its own rules, and the trustees might have a personal liability for misuse of those funds.
Claims under the Inheritance (Provision for Family and Dependants) Act 1979
Under the Inheritance (Provision for Family and Dependants) Act 1979, some family members and dependants have the right to bring a claim against the deceased’s estate if they feel that they have not received a reasonable provision. If a charity is the residuary beneficiary of the estate, it will likely be a party to any court proceedings.
The charity trustees must act in the best interest of the charity when deciding whether to defend proceedings. It will need legal advice about the strength of the case, the cost of defending the claim, and the likely benefits to be gained. Trustees are answerable to the charity itself for their decisions, and potentially to the Charity Commission. If in doubt about whether they have the power to defend or settle a claim, the charity trustees can seek approval from the Charity Commission.
Getting advice about charitable gifts in wills
Charitable gifts in wills are an increasingly important source of income, but issues can arise during the estate administration process in relation to the identity of the charity, the purpose of the gift, and claims brought by family members and dependents. If you are a charity trustee faced with a difficult will, specialist legal advice at the earliest stage can help you to ensure that both the charity’s entitlement and the trustees’ position are protected.
At GA Solicitors in Plymouth, our specialist wills, inheritance and trust dispute solicitors can provide you with the advice you need to ensure the best outcome for all involved. Our expert team have vast experience advising a range of charities and trustees on their next steps and will help you to navigate any complexities you are facing with confidence.
For more information, please call us on 01752 203500 or email enquiries@GAsolicitors.com to see how we can help.
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