Do charities have a moral obligation to disclaim a gift in a will?
In our earlier piece, we explored the options which are available to charities when they consider there to be a moral obligation to make a payment to a third party, such as a deceased person’s family member.
But what should a charity take into account when there is a dispute as to whether it should make a payment and they do not consider there to be a moral obligation to do so? For instance, the charity might be asked to disclaim a gift in a will or they might be have to decide whether to defend a claim brought by a family member under the Inheritance (Provision for Family and Dependants) Act 1975.
Ilott v Mitson
In the leading case of Ilott v Mitson, the Supreme Court considered a claim by an adult child against the interests of a number of charities. Lord Hughes correctly identified that:
“Charities depend heavily on testamentary bequests for their work, which is by definition of public benefit and in many cases will be for demonstrably humanitarian purposes".
Trustee considerations
Once trustees of a charity are on notice of a possible dispute in relation to a legacy in a will, the trustees should take stock of the strengths and weaknesses of the case being brought and explore whether the costs of legal action can be mitigated, for instance by engaging in alternative dispute resolution such as mediation.
Trustees can find themselves at risk of personal liability in relation to costs if the decision to take or defend legal action was not a reasonably made decision. The costs which can be incurred could be significant, especially for the unsuccessful party. Due to the court’s powers in relation to the assessment of the reasonableness and proportionality of costs, a charity might not be reimbursed for all of its legal costs even if it is successful.
Minimising the risk
To minimise the risk of personal liability for costs, trustees should:
- Consider any applicable current guidance available from the Charity Commission.
- Explore whether making a particular decision is in the interests of the charity.
- Seek appropriately specialised legal advice at an early stage.
Given that many charities depend on gifts in wills for a significant part of their income, it is essential that the circumstances and documents are considered as soon as possible to ensure the correct approach is adopted, with a view to minimising the risks to the charity and its trustees.
