Inheritance Act Claims: Considerations for Charity Trustees

Charity trustees give a great deal of time, commitment and effort making decisions to help good causes to thrive.

However, sometimes the decisions which need to be made by charity trustees can be both complex and risky, such as when dealing with claims against estates from which the charity is intended to benefit.  The handling of these emotive disputes can be rife with pitfalls, both financially and reputationally.

Claims Against Estates

Charities have an obligation to use funds for charitable purposes, with many relying on income from gifts in Wills, so difficulties can arise when a legacy to a charity becomes the subject of an estate dispute. Estate disputes can take many forms; a challenge to the validity of a Will, a dispute as to the interpretation of a gift or a claim under the Inheritance (Provision for Family & Dependants) Act 1975 to name but a few. In the latter example, it’s often the case that the stakes (and emotions) are high, so charity trustees should be aware of the problems posed by this particular type of dispute.

Limits on Testamentary Freedom?

In England and Wales, a person making a Will has freedom to leave their estate to anyone (or to any charity) they wish, subject to the powers given to the Courts under the Inheritance Act which provides for awards to be made from an estate to certain classes of individual claimant with a need for financial provision from the estate.  The extent of an award will vary on a case-by-case basis, with each dispute decided on its own facts and considering a wide range of factors including the claimant’s age, any disabilities, the size of the estate and conduct of the parties.

There have been many examples of claims under the Inheritance Act in which charities were a party to legal proceedings, with judges providing their views on the approach to be taken in each particular instance.  Two of these notable cases are:

Re Abram [1997]:          “Charity is in my view something to which you give your money when you have provided sufficiently for your dependants and fulfilled your obligations.”

Ilott v Mitson [2017]:     “The claim of the charities was not on a par with that of Mrs Ilott. True, it was not based on personal need, but 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. More fundamentally, these charities were the chosen beneficiaries of the deceased. They did not have to justify a claim on the basis of need under the 1975 Act, as Mrs Ilott necessarily had to do.”

The key point for charity trustees to be aware of from the above judgments is that because each case is decided on its own unique facts, there is no formula which can be applied across the board in every dispute.  In some cases, the deceased person’s wishes might be deemed to be more important than the obligation the deceased might have had towards a family member or dependant.  Due to the wide range of outcomes available in the Court’s decision-making process, charity trustees should obtain early advice from a specialist in this complex area of law.

Charity trustees ought to be particularly mindful of the risk of legal costs being awarded against them personally, as well as the potential legal costs which might be incurred by the charity if a claim is not handled with the appropriate strategy, including decisions as to whether alternative dispute resolution ought to be explored.

How we can help

For more support on how becoming a trustee and our Charity and Philanthropy expertise please contact Matthew Briggs or Stephanie Kerr.