Leaving funds to a charity in a will can be a meaningful way to support a cause very close to the testator's heart. However, there are a number of issues that both the charity and the testator should be aware of when making such a bequest. Below I have set out some that charities should be aware of following notification that they are included in a testator's will.
Challenges to the will or estate
Often, family members can be left disappointed if they are not the sole beneficiaries of the estate. They may argue that they have been left inadequate financial provision or that the will is invalid.
Other disputes
Other disputes may also arise, for example, where the testator made a promise to another that they would receive the legacy left to the charity (proprietary estoppel) or a dispute as to the ownership of the property (resulting or constructive trust claim). Such disputes can lead not only to a delay in the charity receiving their entitlement but also to incur legal costs protecting their interests. The charity will need to ensure that any litigation commenced is in the interests of the charity or they may be in breach of their duties. They will be expected to have tried to settle the dispute using mediation.
Changes to the charity
Legacies left to charities can often be left to a specific charity and/or for a specific purpose. Where the clause is insufficiently drafted to recognise the charity's predecessor organisation the gift may fail. Furthermore, where the legacy is left for a specific purpose which no longer matches the charities mission statement or work then, again, the legacy may not be viable. It may be that a charity is still able to benefit if the gift is approved by the Charity Commission following a cy-près application.
Tax requirements
Depending on the amount left and the way in which it was left to the charity it may be that tax is due on the legacy. The charity should be careful to ensure that the correct tax is paid promptly to avoid penalties and bad publicity.
Misuse or mismanagement of funds
Where charities are left funds for a specific purpose, they must be careful to use the funds for that sole purpose. Furthermore, charities should be careful to have policies and procedures in place to avoid the misuse or mismanagement of funds, either intentionally or unintentionally, by employees. To minimise the risk of a legacy failing, the testator should ensure that the will is drafted carefully by a legal professional. Upon notification of their entitlement under a will, the charity should also take legal and accountancy advice to ensure that the charity's interests are protected, and they have complied with their duties.
DMH Stallard have experience in not only ensuring a testator's will avoids the above pitfalls but also in assisting charities to make cy-près applications, securing legacies, negotiating settlements and understanding the particular needs of charities.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
