It is becoming increasingly common for testators to leave legacies to charities in their Will. This can be for many reasons, such as a personal connection or for Inheritance Tax planning. On occasion such a legacy may be made in spite where otherwise, it would have been expected for a testator to leave his/her estate to their family. This is often noticed with wealthy individuals who wish for their children to make a life for themselves and do not wish for them to live off their expected inheritance. Those of you who have seen the film “Knives Out” may be surprised to learn the wishes of a parent are not uncommon in real life.
Such Wills may lead to disputes and a disappointed beneficiary will likely seek to make a claim against the estate under the Inheritance (Provisions for Family and Dependants) Act 1975. One of our previous blogs covers whom can make a claim under the Act, but essentially this is:
- Spouse or civil partner;
- Former spouse or civil partner;
- Child of the deceased; and
- Dependant of the deceased.
Involvement of charities in Will disputes
When a claim is made in accordance with the Act and a charity has been named as a beneficiary under the Will, they will be joined to any dispute. There are a number of actions a charity can take in such a dispute, but this will often depend on the amount of any legacy left to them.
Where the legacy is specific and limited, such as a pecuniary legacy of ‘x’ amount, it would appear sensible for a charity to remain neutral as it is expected they will still receive the sum left to them under the Will. This is not always the case however, and in some cases a claim may result in an estate being left with inadequate funds to satisfy the charity’s legacy. Where the charity is expected to inherit less, it should be considered whether they are to remain neutral or instead defend the claim and this will largely be driven by a risk/reward analysis.
Where the charity is left part or all of the residuary estate, it is more likely any claim will affect their inheritance as it is often the residuary estate which will suffer as a result of a successful claim under the Act. Charities will have a choice to remain neutral, defend the claim and/or seek resolution at an early stage.
Remaining neutral may result in a charity losing part of its legacy without putting up a fight but will limit their involvement which can be advantageous. Remaining neutral will not allow a charity to defend their claim but is an option many charities will follow due to its advantages.
Charities are often stretched on resources and limiting involvement on disputes will allow more time to be spent on its charitable purposes and limit the charities costs exposure in the ensuing proceeding. This is particularly evident in smaller charities. Defending claims may also lead to negative PR, which also encourages charities to remain neutral.
Defending a claim
Defending a claim gives a charity a chance to defend their right to a legacy. As mentioned above, this may lead to negative PR as it could portray a charity as being the villain of the story even when this is not the case.
It is therefore advised that charities give this great consideration and seek legal advice before defending a claim. Defending a claim will often take up some of the charities time, even with a solicitor appointed, and may result in costs being incurred from the charity.
Seeking resolution at an early stage
Seeking to settle a claim will mean the charity supports an individual’s claim to an extent. This avoids further dispute and will limit the time spent on the matter. There are a number of ways a charity can do this, such as mediation or by agreeing to make an ex-gratia payment to any individual making a claim. It is again advised that legal advice is obtained before discussing any settlement.
As well as claims being made under the Act, a Will may also be challenged due to its validity. This could have a more serious impact as any Will found to be invalid should not be followed. In such event, the testator’s previous Will should be followed or in its absence, the intestacy rules will apply whereby a charity will not inherit at all. Again charities have the same options in respect of any challenge to the Will’s validity, albeit the risk of losing the entirety of a legacy are greater.
How Nelsons can help
Stuart Parris is a Trainee Solicitor at Nelsons.
If you are a charity and are involved in a potential dispute over a deceased’s estate, please contact a member of our Dispute Resolution team who will be happy to assist.