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How to protect your legacy donations

How to protect your legacy donations

Testamentary freedom is the right (subject to some exemptions) for a person to leave their estate to whoever or whomever they wish – be that their favourite child or the “Cat’s Home”.

There is no requirement for a person’s estate to left to family or shared equally. Charities obviously benefit greatly from this – research from Smee & Ford shows that legacy income reached a record high of at least £2.8bn in 2017 – up by £37.8m from the previous year.

However, leaving a legacy to a charity is often to the detriment of the donor’s family members.

John Caudwell, the founder of Phones4U, recently made headlines when he vowed to leave the majority of his £1.5bn fortune to charity rather than his five children. Though Mr Caudwell’s children will still receive millions of pounds each from his estate (in his words they will still be filthy rich!), for many families, it is often the case that if a charity inherits, then the family lose out. It can come as a nasty shock to those disappointed family members and that anger and upset is directed towards the charity leading to disputes.

Legal proceedings can significantly impact a charity’s finances, who risk losing a vast majority, if not all of their legacy, if a disgruntled family successfully challenges the will or brings an inheritance act claim. It can also cause damage to a charity’s reputation, who don’t want to be seen to be fighting over a donor’s estate with a grieving family.

Whilst it’s not possible for a charity to completely safeguard their legacies and prevent claims being made, there are some steps which they can take to reduce the risks:
 

1. Use a solicitor

Donors who wish to leave legacies to charities should be encouraged to use a solicitor to prepare their will.

  • The solicitor can ensure that the donor’s wishes are followed properly and recorded, particularly their reasons for making the legacy to the charity if it is to the detriment of other family members.
  • The solicitor can ensure that the will is validly executed (many wills are invalid because they weren’t witnessed properly)
  • The solicitor should satisfy themselves that the donor has capacity to make the will and to advise the donor to get a medical report if capacity is in doubt.
  • If a claim is made against the estate, then the solicitor’s will file will be crucial evidence and the solicitor who prepared the will can be a key witness.

 

2. Communication

Donors should therefore be encouraged to communicate with their family and be open about their testamentary wishes. Some family members simply cannot accept that their parent/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 the donor has had “the conversation” with their family and addressed concerns during their lifetime, then that makes it less likely a claim will be made against the estate (like John Caudwell).

 

3. Education

When the terms of the will becomes known, charities should be encouraged to liaise with the donor’s family members in a timely and sensitive manner – explaining the good work that the charity does, how the legacy will be used and how the legacy is not a windfall for the charity, but helps keep the charity operating.

The charity can also use this opportunity to address the oft held mistaken belief that the charity is free to give the money back to the family if they really wanted to. Many people simply don’t know that the 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.

As legacy giving is on the increase, so are disputes, so it’s also important that if a charity is faced with a challenge to a will or a claim against an estate, that they take their own specialist legal advice

Debra Burton is an Associate at Shakespeare Martineau.

 

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