Best practice for managing legacy disputes

Legacy officers and others involved
in charity fundraising will have been pleased by data recently published by Legacy Foresight, which shows legacy giving returning to pre-recession levels. At the same time, however, charity fundraising practices are under intense public scrutiny, and court service statistics show that the number of contentious probate cases is on the rise.

Although charities cannot avoid legacy disputes altogether, there are steps they can take to make sure that any disputes that do arise are managed in the charity's best interests.

Possible challenges

Legacies to charities can be challenged in
various ways. The most common examples are:

• Validity of a will: It is possible for someone
  to challenge a will on the basis that it does not comply with the legal requirements as set out in section 9 of the Wills Act 1837, or because the testator did not have testamentary capacity to make the will, did not know of and approve its terms, or only executed the will under duress
  or undue influence. Less common, but not unheard of, is a claim challenging the validity
  of a will on the basis that it is a forgery. If such a claim succeeds, the will, including the charity legacy, will be set aside;

• Claims under the Inheritance (Provision for Family and Dependants) Act 1975: This legislation allows certain categories of people (including the deceased’s children, spouse, or civil partner, or those who were in some way dependent on the deceased for their maintenance) to ask the court to make financial provision for the applicant out of the estate. In a successful claim, the most common award is a lump sum payment, which can be any amount up to the value of the entire estate. Such claims therefore have the potential to reduce a legacy to a charity under the will – or possibly wipe it out altogether; and

• Proprietary estoppel: If a person (A) promises certain property to another (B), and B relies on A’s promise and acts upon it to their detriment, the doctrine of proprietary estoppel will prevent A from giving that property away to someone else, whether in their lifetime or under their will. Common examples include a younger family member or close friend giving up the chance of an independent career to work in a family business on the strength of a promise from the owner of the business that it would be theirs one day, or a person paying for the renovation of a property because the owner had promised it would be theirs if they did so. This kind of claim is becoming increasingly common, and if successful can result in valuable assets (e.g. properties or business assets) being removed from the estate, thus reducing the amount available to pay other legacies.

Practical steps

No charity wants to find itself involved in costly and time-consuming litigation with disgruntled friends or family members, and many will be understandably cautious in light of the judgments in certain high-profile cases, such as Gill v RSPCA [2010] EWCA Civ 1430 and Ilott v Mitson [2015] EWCA Civ 797.

However, charity trustees have a number of legal obligations, including the duty to gather
in and protect charity assets such as legacies,
and they cannot simply throw the towel in or write a large settlement cheque at the first
whiff of a dispute.

Despite what some of the more sensational tabloid headlines would lead one to believe,
it is entirely possible to resolve legacy disputes without recourse to litigation through the courts, if the parties are willing to act sensibly and reasonably. If a charity does find itself facing a dispute over a legacy, the following are practical steps it can take to resolve the dispute as quickly as possible, while keeping costs and reputational damage to a minimum:

• Seek early legal advice on the merits of the claim the charity faces. Much time and money can be saved by facing legacy disputes head on, either by working to see very poor claims off in their entirety through correspondence, or by engaging in settlement discussions to resolve claims with real merit without the cost of going to trial;

• Consider what evidence is available to support the charity's position. For instance, if the claim concerns testamentary capacity, it is usually possible to obtain a copy of the testator's medical records. If the will was professionally drafted, the solicitor who drafted it is obliged
  to provide an account of the circumstances surrounding the making of the will, which
  may include the testator's reasons for leaving
  a legacy to the charity in question;

• If, as is often the case, the testator included more than one charity in their will, the charities concerned should consider appointing one firm of solicitors to act for them all, on a joint basis, to share the cost. Other charities may also have additional useful information about the testator - for instance, the testator may have contacted them before they died to discuss their testamentary intentions;

• Consider lodging a caveat at the Probate Registry, to avoid anyone obtaining a grant
  of probate and distributing estate assets while the charity takes advice and collates evidence.
  The application is very simple to make, and
  the fee is only £20;

• If there is some merit in the claim, ascertain early on what the claimant is seeking. It is not unusual for claimants to instruct solicitors to send a letter of claim (essentially a pre-court action letter setting out their claim in detail) which doesn't put a monetary figure on the claim. In the absence of understanding what the claimant is really seeking, it can be very difficult to negotiate effectively;

• It is often possible to reach a settlement through telephone discussions and written correspondence. If that is not possible, consider a formal negotiation process, known as mediation, with a specialist mediator. Although mediation usually means incurring some legal fees and the cost of hiring the mediator, the process can be very effective at resolving even the most difficult and seemingly dead-locked disputes, and is much cheaper than seeing
  a dispute through to a court trial; and

• Always keep PR issues under review. Court action is public, and charities will be all too aware of the negative impact that unfavourable press coverage can have on donor income. Resolving matters before they reach court, where appropriate, is obviously preferable
  - not only will this avoid costs and negative
  PR implications, but a settlement agreement can include a confidentiality clause. If this is
  not possible, and a claim is issued at court, it is good practice to prepare a statement which clearly explains the charity's position. However, charities should be wary of making any kind
  of public statement until they have taken
  legal advice.

Although an undoubted nuisance, and a distraction from a charity's work with its beneficiaries, the vast majority of charity legacy disputes should be capable of resolution without having to end up involved in a costly court case, and the sooner a charity takes steps to address the situation, the better placed it will be to reach
a prompt and cost-effective solution. SJ

Leticia Jennings is a senior associate at Bates Wells Braithwaite. She specialises in charity legacies, trusts, and probate disputes, and regularly speaks at industry events