Leaving charitable legacies in wills
26 March 2020
It is quite common for Wills to include charitable legacies. It is also quite common for charities to offer free or discounted Wills via a non-charitable subsidiary and for them to actively engage with individuals to encourage them to leave legacies to the charity.
This type of arrangement was looked at in detail by the Fundraising Regulator (FR) recently. The FR published a report on its investigation into KKL Executor and Trustee Company Limited (KKL) and JNF Charitable Trust (JNF), which highlights the importance of ensuring appropriate safeguards are in place for this type of arrangement.
In this case, the complaint was that KKL (a non-charitable, wholly-owned subsidiary of JNF that provided a Will writing service) had wrongly influenced an individual to leave a large legacy in his Will to JNF and that JNF did not have appropriate safeguards in place to manage its relationship with KKL. It was found that KKL had been actively encouraging people to donate to JNF by providing wording to include in Wills to leave a legacy to JNF and by offering free advice when Wills were to include a legacy to JNF. Although it was found that there had been no “undue influence” and that the individual had not been “exploited”, in this particular case, a number of breaches of the Code of Fundraising Practice (the Code) were found:
- Whilst KKL and JNF argued that they were separate legal entitles, the FR found that there was “insufficient meaningful separation” between them and so KKL being involved in the preparation of Wills that left a legacy to JNF was in breach of the Code.
- KKL had agreed to act as Executor of Wills which left a legacy to JNF and had not advised the individuals to take independent legal advice. This was, again, in breach of the Code.
- KKL had made it a condition of using the Will writing service that individuals would leave a legacy to JNF – rather than making it clear that it provided a free service without a legacy being left to JNF. This was also in breach of the Code.
As a result of this investigation, all charities who actively engage with individuals to encourage them to leave legacies to them will now wish to review their practices against the “legacy fundraising expectations” as set out in section 15 of the Code.
Of course, leaving legacies to charity on death is a fantastic way to support charities and to help them to continue the work they do but it is important that it is done properly to protect both the charities and the individuals.
It is also worth noting that as well as benefitting the charities, charitable legacies can also benefit the individuals leaving the legacies. There are some Inheritance Tax advantages for individuals who choose to include charitable legacies in their Wills. Firstly, gifts to charity are exempt from IHT and secondly, if 10% or more of an estate is left to charity then the rate of Inheritance Tax chargeable on the estate is reduced from 40% to 36%.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at March 2020.