The challenge to legacy income Image

The challenge to legacy income

Posted: 30/09/2015

Charities are under pressure to adopt a business-like approach to the management of their organisations whilst subject to increasing regulation and accountability - all under the watchful eye of the public and media. 

Similarly to businesses, one of the challenges that charities face is how to preserve and forecast future income. For many charities, legacies are an essential source of income with some reliant on legacies to fund in excess of half their charitable work. 

The case of Illot v Mitson, in which three charities were bequeathed Melita Jackson’s £486,000 estate, has attracted considerable attention. Mrs Jackson's daughter successfully brought a claim against her mother’s estate and was recently awarded £164,000 of the estate. Some believe that the case may encourage similar claims and potentially undermine testamentary freedom. Unsurprisingly, this is concerning to charities that are reliant on legacy income and individuals who wish to leave a legacy to charity in their will. 

Challenges to wills can arise either in relation to the validity of the document or, as in the above case, certain categories of claimant can challenge an estate where reasonable financial provision has not been made for them.

Supporters can assist charities in defending claims of this nature and in projecting future income by communicating their intention to leave a legacy to a charity or charities and consenting to the charity keeping a record of this. A pattern of gifting and details of a long-standing relationship with a charity can provide evidence of the supporter’s intention that the charity is to benefit. This evidence was not available in the above case. Charities are aware that they cannot rely on the promise of a donor’s future income and that the donor has freedom to alter his or her bequest. A will that is professionally drafted, together with clear instructions as to how it should be administered, is always preferable.

It is difficult for a charity to avoid a will dispute entirely but it will be in a better position to defend a claim and also project future income with some advanced warning.

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