Can you take from the Church?

More and more often we hear stories of families excluded by a will and thus seeking to challenge it. This frequently results in family members encountering donations to charitable organisations, yet, to my knowledge, very few of these contestations involve the Church of England. This is despite the fact that charitable gifts make up a large part
of church funds.

According to statistics reported in 2012, parishes in the country raised a record £929m for the Church of England from a combination of investments, legacies and donations. In 2007, £1.5bn was left to charities in wills, and statistics from a survey conducted by AXA in 2004 showed that 9 per cent of retired people and 8 per cent of working age people in Britain would consider leaving a part of their estate to a charity. This is significantly lower than working age people in the USA and France, where 19 per cent and 31 per cent respectively plan to leave something to charity in their will. Women over the age of 75 leave nearly two thirds of the legacies which are received by charities.

The Church of England receives
an annual income of around £44m
per year through charitable gifts in wills, which is the result of over 5,000 people each year leaving legacies to support the work of their local church. This could be because the Church of England takes a more rational approach to gifts, considering themselves fortunate to receive any gift at all.

Perhaps it is because testators get their legacy clauses right, or perhaps it is because families are less likely to challenge celestial gifts to the church. I don't know the reason for this (and this article will not explore them) but the observation has prompted me to examine charitable donations to the Church of England, and the way in which the law interacts with religion. Various parishes recommend that a parish legacies policy is put in place, a legacy officer is appointed and that general awareness is raised through events, posters and leaflets.

Charitable gifts to the Church
of England

If you want to leave a charitable gift to the Church of England or to a specific church, how is this best achieved in
a will?

As a precaution, it is often best that the church concerned is contacted when drafting the will to ask them how the gift should be worded. This is because some churches work through charities while others are administered by the landowning diocese. It is important to get this right so as to ensure that the donation in the will is made as intended.

Unless your church's annual income exceeds £100,000, it is not necessary to include a charity number for Church of England donations in your will. The Church of England is not a legal entity and thus the 16,000 churches within the Church of England are exempt from registration with the Charity Commission.

If your church's income does exceed £100,000 and it does have a charity number (or you think it might) the required information is available from the Charity Commission.

It is possible to leave charitable donations to multiple parish churches or different areas of the Church of England. If this is your intention, the Church Legacy Service has more information on this subject and will be able to offer further guidance.

If the church itself does not provide help to those wishing to leave a legacy, it might be worth looking at the ecclesiastical volume of the Encyclopaedia of Forms and Precedents, which has a helpful section on testamentary gifts for religious purposes.

Often, the Church of England prefers that the Parochial Church Council is made the legatee of cash gifts. Many testators are not quite at ease with this idea, as they want their money to go to a specific church.
One way around this is to give the gift to the relevant churchwarden at the date of death.

It is important to note that neither churchwardens nor the Parochial Church Council can hold land, so a bequest of land needs to be made to the diocesan authority responsible for the chosen church's parish. The parish then in turn, holds the property as custodian trustee for the Parochial Church Council.

In any event, it is essential to ensure that there is a person of a specific office who is able to give a receipt for the gift, such as a churchwarden, at the date of your death.

Another consideration is whether the testator wishes the legacy to be used for a specific purpose. If this is the case, the request should be included in the will. However, be careful not to turn the purpose into a binding obligation. This can result in the inadvertent creation of a formal trust, which would no longer qualify as a charity and thus have potential to cause problems for the church. It is also notable that church's needs do change over the years, and thus a general purpose donation could in fact be most useful.

Some people also suggest that consideration should be given to where the legacy should go in the event of closure or merger of churches. This is particularly important if it is a residuary legacy, as the testator would not want the gift to lapse and pass under the intestacy rules. In this scenario it might be useful to make the replacement gift to the Parochial Church Council or to
a Christian charity.

One sample clause could read
as follows:

I give the sum of £10,000:

(a) to The Churchwardens of the Church of England at the date of my death absolutely, with the request that it be used for (whatever the purpose is) but without imposing a binding obligation on them to do so and if this gift shall fail, then sub-clause (b) of this clause shall take effect. 

(b) if sub-clause (a) fails then, but only then, to the Parochial Church Council of (the relevant parish) for such religious purposes in the parish being charitable as the Parochial Church Council shall in their absolute discretion think fit. I declare that the receipt of the treasurer of the Parochial Church Council at the date of payment shall be a sufficient discharge to my trustees for the said sum and that my trustees shall not be bound to see to or enquiry into the application thereof. I further declare that if at the date of my death the parish has been united with another parish or divided between two or more parishes, or has been dissolved, the gift contained in this clause shall have the effect with the substitution of the Parochial Church Council and the Parish of such other Parochial Church Council or Parochial Church Councils and such other parish or parishes as my trustees shall in their absolute discretion select. If this gift shall fail then sub-clause (c) of this clause shall take effect.

(c) if sub-clauses (a) and (b) fail then, but only then, to (charity number of the charity) of (the address of the charity) absolutely.

There are many variations on this type of clause, which can be adapted to the required circumstance.

Recent challenges to charitable donations in wills

Probably the most recent and well-known court battle between a charity and non-charitable beneficiaries is that of RSPCA v Sharp [2011].
The facts surrounded the will of Mr Mason, who left the 'maximum' that could be left free of tax to his friends Mr and Mrs Sharp (78 per cent) and his brother John (22 per cent), and bequeathed his house in Gosport to the Sharps. He left his residuary estate to the RSPCA, which as a charity is exempt from inheritance tax.

Mr and Mrs Sharp and John Mason claimed the 'maximum free of tax', £300,000, irrespective of the house value, even though this triggered inheritance tax. In other words, Mr and Mrs Sharp claimed £234,000 plus the house and John Mason £66,000 (totalling £469,000). If their interpretation was correct, that also meant tax due of £112,000 out of the estate - Mr Mason died in 2007 when the inheritance tax threshold
was £300,000.

The case went to the Court of Appeal, who unanimously upheld the RSPCA's argument that its benefactor intended his estate to pass free of inheritance tax, i.e. that the Sharps should receive £102,180 plus the £169,000 house and John Mason just under £29,000 (totalling £300,000).

The case of RSPCA v Sharp demonstrates the need to perform a balancing act in this area of the law. Charity trustees have an obligation
to ensure that their charity receives
the funds due to it, and this needs
to be weighed up against the risk of gaining a reputation for depriving
(and thus disappointing) affected family and friends.

A charitable beneficiary will always (by virtue of never being entitled under the intestacy rules, which outline how a person's estate should pass if they die without a will) be named in the will of the deceased. This is on the basis that the will is the last piece of written evidence of the deceased's wishes and that the deceased, who of course is no longer with us and cannot be asked what he or she would like to happen to their money, is our best witness.

Probate disputes are reported with increased regularity and, considering the sheer value of charitable legacies in the UK, there are relatively few reported cases involving charities, and even fewer involving religious charities or churches. Many disputes, quite sensibly, are settled out of court.

However, the increase in such litigation prompts some noteworthy questions. For example, is there not a presumption that a testator intends to benefit his family and friends in priority to those organisations to whom he felt no special obligation? Surely the last thing most testators want is a dispute over their will?

Advice to testators and churches

Assuming this, what can be done to prevent disputes arising?

One option may be to draft a will leaving a specific legacy to the charity or church. The disputes seem to arise more often when a charity is left a share of residue, e.g. 10 per cent or 100 per cent of everything left after the payment of funeral, testamentary expenses, taxes and other legacies.

If a testator has a particularly large estate and would like to pass on benefit to a variety of charities, that testator may like to leave his or her residuary estate on a discretionary trust. It is quite possible that this will fall into accordance with a morally binding letter of wishes left by the deceased.

A testator may even like to set up a charitable trust in their own name, e.g. the Mary Smith Charitable Trust, and appoint trustees (during their lifetime) to carry out their wishes. A testator could set up the trust in their lifetime and have funds paid into it either in their lifetime or through their will or both. Therefore, there is no need to donate significant amounts of cash in one's lifetime. Many consider this a safer option, since it reduces the chance of misjudging how big a donation should be and suffering unforeseen financial detriment.

What is imperative is that a testator has a properly drafted will and takes advice on the subject. If a testator is elderly, it might be worth making the will more 'bullet proof' by having a doctor or psychiatrist act as a witness.

From the church's point of view, you can provide sample legacy clauses to testators who may wish to leave something to the church.

The law and religion

The law surrounding disputes over wills is most often governed by the Chancery Division. This is a division of our court system which grew up out of legal principles known as 'equity'.

Equitable principles were originally applied by the church to right any wrongs created by the strict application of common law.

It gives comfort to know that the underlying historical approach of the Chancery Division is fairness, and perhaps this is why many disputes involving charities or churches settle out of court.

Should a different approach
be taken?

No approach is perfect. The principle of testamentary freedom, i.e. that one can leave one's money to whoever one wishes, has, in my view, got to be the correct and equitable general principle.

Comfort can also be taken from the fact that when disputes arise, the court governing the disputes will mostly attempt to apply the equitable principles of fairness.

They will not always get it right but, of course, anything which prevents disputes from occurring in the first place has to be correct, as there are very few testators who would go out of their way to encourage a dispute between their chosen beneficiaries.

Helen Freely is a partner in Druces' private client team