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Charities’ legacy income on the rise

HMRC statistics have revealed a jump in the number of high value charitable legacies, which is certainly good news for charities whose income from such legacies is increasing. However, the spike in such legacy income could also trigger a rise in the number of disputes involving family members who challenge charitable gifts in loved ones’ wills, say Lodders’ charity law expert Mark Lewis and contentious probate specialist Caroline Walford Cowley.

In 2011, the number of UK donations to charities of £1million and over was 2,500, and this number has steadily increased each year since, with the latest figures, for 2015/2016, showing 3,630 individual bequests of at least £1million, up from 2,855 the previous year.

This equates to a 27.1% jump in the number of charitable legacies worth £1million or more in the tax year leading up to April 2016, compared with the previous tax year.
A recent Co-op Legal Services survey also highlights this rise, revealing that according to their research, the value of gifts left to charity has increased by 30% in the past 12 months, and also that it is not just money that is left to charity, with some generous supporters leaving houses, land, painting and music collections too.

Flip side

Caroline Walford Cowley comments: “It is really good news for charities that legacy income is increasing.  But the flip side is the potential rise in disputes against the wills that contain legacies as family members challenge the gifts to charities.

“Whilst a legacy income is an income that is difficult to predict, charities do have a duty to their trustees to safeguard their assets (and therefore potentially to defend a challenge to any legacies) and will therefore, have to think about the legal costs involved in doing so.

“Charities must also consider whether the legal costs involved in dealing with any disputes would become disproportionate to the amount of the legacy in dispute.  There are also PR considerations when choosing to challenge a legacy and the media glare that many high value bequests and disputes carry with them.”

Planning essential

Mark Lewis also believes charities must take a proactive approach to the up- and down-sides of high value bequests, by planning and incorporating how they manage and handle them as part of their overall operational strategies:

“These new statistics highlight the need for charities to consider this valuable source of income and to take it into account in their marketing strategies.

“However, it is difficult to predict when such legacies may crystallise and so it is not a source of income upon which charities can rely, so seeking some guidance on the commercial options would be a very sage move.

“For larger charities it may be possible to form a circle of benefactors who have promised to leave more than a certain amount in their wills to the charity, and of course there is then the contentious aspect and the consternation which large legacies to charities may cause to family members, and it is so important to consult experienced solicitors who are aware of the issues involved for charities.”

Lodders’ specialist charity law team offers substantial, in-depth expertise gained through working with charitable and not for profit organisations of all shapes and sizes that value the firm’s personal and responsive service.

Partner Mark Lewis is head of the Charity Law team. He is recognised by the Legal 500 as an elite “Leading Lawyer” and for his ‘first class service’; in 2017 he received a special commendation award at the Coventry and Warwickshire FirstPro Awards for his legal work advising the charity and not-for-profit sector, and was a runner up in the Adviser category of the Charity Times Awards 2018.

Caroline Walford Cowley is a solicitor in Lodders Dispute Resolution team, specialising in Contentious Probate. Her work includes probate disputes, challenges to the validity of wills, claims under the Inheritance (Provision for Family and Dependants) Act 1975 and other claims against estates such as those based in undue influence or proprietary estoppel. She has a great deal of experience representing charities defending challenges to wills in which they are beneficiaries.

For more information or advice please contact Mark Lewis, email: mark.lewis@lodders.co.uk tel: 01789 206135 or Caroline Walford Cowley, email: caroline.cowley@lodders.co.uk, tel: 01242 229090.

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For more information or advice please contact Mark Lewis on 01789 206135 or by email, or Caroline Walford Cowley on 01242 229090 or by email.