Resolving legacy disputes for charities

Charities have to be very careful when defending any probate claims. They have to weigh up the consequences, value and likely costs before they make a decision.

The general rule is that the losing party pays the winning party’s costs. However, with inheritance disputes, the court can order that the costs of a claim are paid out of the estate, but this not guaranteed.

If the claimant is ultimately unsuccessful, they can expect to pay both sets of costs, which includes the costs of the estate and those of the other parties involved in the dispute.

The case of Gill -v- RSPCA is a prime example of where defending a claim resulted in costs orders being made against a charity. This was a financial and public relations disaster for the RSPCA at the time.

The Inheritance Act allows certain individuals left out of an estate, for reasons such as they were not included in a will or they did not inherit under the rules of intestacy, to ask the court for ‘reasonable financial provision’ from an estate.

Since the case of Ilott -v- Mitson in 2016, the Inheritance Act has been much more prevalent in both its application and the general awareness of its scope, fuelling a steady increase in claims being made under the Inheritance Act and is making charities more mindful of their approach to claims.

To be able to bring about a claim, the disappointed beneficiary must prove that they were financially dependent on the deceased. Potential claimants include:

• Spouses
• Ex-spouses
• Any person who lived with the deceased as a spouse within two years prior to their death
• Children
• Any person treated as a child and those wholly or partly maintained by the deceased immediately before their death

Proactive steps to preserve legacy income:

• If you are approached by a testator, ensure that the connection is emphasised in writing and always try to maintain links with the testator to establish a clear connection and intentions.
• Is there a needs-led defence? For example financial troubles, health related needs or dependants. Some charities can establish this position as they have more success as charities have a duty to preserve legacies where possible and rely on legacy income.
• Trying to reach a compromise could work more favourably for all parties, with options such as a discretionary trust being considered.
• Life time giving can provide an alternative, more protected way of gifting money.

Contesting a claim is time-consuming, costly and a drain on the precious resources of any charity.

We usually recommend that alternative resolution is considered with a view to agreeing to a settlement.

Courts will expect to see evidence that attempts have been made before the matter results in court intervention.

Whilst we will always encourage settlement, we are highly capable of pursuing a claim through the court if no reasonable settlement can be agreed.

If you are faced with a claim and the matter progresses to court for remedy, there are various considerations that the court will review with regards to the needs of both the beneficiary and the claimant.

These include:

• Financial resources
• Financial needs
• Obligations of the deceased to the claimant
• Responsibilities of the deceased to the claimant
• Size of the overall estate
• Physical and mental capabilities of the claimant
• Conduct of the claimant

Some disappointed beneficiaries may consider that charities do not have the same financial needs and resources as individuals and will often be more prepared to challenge a charity’s legacy than they may an individual’s legacy. However, in considering financial needs and resources, the court will consider that charities have obligations imposed upon them by the Charity Commission to maintain legacies left to them and that charities rely on their legacy income to continue their work.

The court ultimately needs to determine in any Inheritance Act claim, is whether reasonable financial provision was left for the claimant. Whether a beneficiary is a charity or an individual should not change the outcome.

If a claimant can show that the testator was forced into signing a will against their wishes, then they can establish a claim for undue influence.

Undue influence claims can be particularly unpleasant for those accused and the burden of providing compelling evidence of any wrong-doing can be challenging, making it difficult to successfully pursue such claim.

If you are approached by a testator who would like to leave a legacy to your charity, ensure that the connection is emphasised in writing and that the testator’s intentions are clear.

When your charity is left a legacy, no matter what the scope or value may be, the focus understandably turns to when that asset will be released from the estate and can start being put to good use.

If a claim is being made as the result of an inheritance dispute, then it is always worth factoring in the likely timescale and inevitable delays that could arise. If an inheritance dispute is unlikely to be settled out of court, affected parties may face a long and expensive legal battle.

There are time limits on when an Inheritance Act claim can be brought, but once it is in the court system, it largely depends on factors such as how busy the courts are, how quickly they can list matters, whether directions are complied with and whether there needs to be any extensions to court timetables for mediation to take place. It can easily take between six months and a year for an issued claim to reach trial. You must also take into consideration that pre-court action correspondence will probably have begun several months before proceedings are issued. As a result, matters can sometimes be ongoing for 18 months or more.

Proprietary estoppel claims can be brought where the deceased’s will does not reflect what was promised to a disappointed beneficiary or where the testator died intestate and the disappointed beneficiary is not entitled, either in full or at all, to whatever was promised to them.

As an example, an individual may promise his son that when he retires or dies, he will leave his business and property to him. The son relies on that promise and acts to his own detriment by working for lower wages, in the knowledge that one day he will inherit the business and property as promised.

There is plenty of case law demonstrating that these types of claims can be very successful, with the courts awarding substantial payments.

There are some practical steps that your charity should consider when faced with a potential claim under proprietary estoppel:

Obtain legal advice: it is always beneficial to obtain legal advice early in the claim. A review of the evidence should indicate the likelihood of the claim being successful, but a second opinion and advice on next steps from an experienced lawyer can be helpful.

Review and gather evidence: review the evidence against the requirements needed to satisfy the claim. Consider how strong the evidence is and whether further evidence is required to oppose the claim.

Consider a settlement: having reviewed the evidence, consider the possibility of a settlement. In the long run it could avoid unnecessary costs and time consuming proceedings for all involved and result in an agreement to suit all parties.

Plan your approach: consider how you will deal with the claim and agree your position early on. If the claim appears to be weak, then consider trying to bring the matter to a swift conclusion through carefully drafted correspondence and negotiation. If the legacy benefits a number of charities, time and costs can be saved by adopting a joined up approach to defending the claim.

Proprietary estoppel enables a claimant to acquire an interest in land without all of the normal formalities.

In order to establish proprietary estoppel, a claimant must show that:

• The owner of the property promised it to them;
• They relied upon that promise; and
• They acted to their detriment upon that reliance.

Claims made under the Inheritance Act must be made within six months of the of the grant of probate or letters of administration being issued.

Whilst the court does have discretion to extend this time period, exceptional reasons will need to be demonstrated to support the application.

If there has been a clerical error in a will must be made within six months of the grant of probate being issued. An application for the rectification of a will brought after six months can only proceed with the permission of the court.

Other types of claims against an estate are usually governed by the rules of the Limitation Act 1980, which allows 12 years from the date of death to make a claim.