Charities Disclaiming An Inheritance

A substantial amount of charities’ income arises from inheritances, whereby testators commonly leave specific legacies or part of their estate to a chosen charity. This is particularly beneficial for charities as at times the inheritance received can be a substantial amount, especially when a testator chooses to leave their whole estate to a charity.

Charity legacies can also be beneficial for testators due to various tax reliefs available in respect of inheritance tax, which is a good reason for more legacies being left to charities.

Instances where a charity chooses decline an inheritance

Whilst charities should aim to maximise income, there may be occasions where a charity would rather not accept the inheritance they are due. This will be a rare occasion and will come about when a charity decides it would be more beneficial to decline the inheritance due, rather than accept it.

A few examples of when a charity may choose to decline an inheritance are below:

• When the inheritance is controversial, whether the testator was controversial himself/herself and his/her views/actions were not consistent with that of the charity’s aim, or the source of funds was controversial;
• Where there is a dispute over the estate and the costs anticipated with being involved with the dispute outweigh the benefit;
• Where the asset due to inherit is of no value or use; or
• Accepting the inheritance would lead to negative publicity which, in the eyes of the charity, would outweigh any benefit received.

There are many other instances when a charity may decline an inheritance and the reasons will often differ from case to case.

A charity should not decide to disclaim an inheritance lightly and it is advised great consideration is taken before reaching such a decision. This is because trustees of a charity disclaiming an inheritance may be scrutinised and may be held to be acting outside the purpose of the charity.

Disclaiming an inheritance is simple, as a beneficiary cannot be forced to accept an inheritance. The charity disclaiming an inheritance need only to refuse the inheritance before any benefit is received. This can be done in writing, by deed or by conduct. It is important the refusal is made before any benefit is received as it is not possible to partly disclaim.

The reasons for initially disclaiming may later change and with it, a charity’s position on accepting the inheritance may also change. A declined inheritance can later be accepted provided the refusal was not effected by deed and the due inheritance remains within the estate. It may be possible to reverse a disclaimer by deed by entering into a further deed of variation. The possibility of not being able to later reclaim the inheritance raises more need for charities to pay greater consideration when deciding to disclaim.