With charitable gifts wills increasingly subject to legal challenge, what can legacy fundraisers and administrators do to help safeguard the final wishes of generous donors? Here’s some expert advice from Chris Millward

At the end of last year, I was asked by Legacy Foresight to predict what I thought might be the most significant moment for legacy giving in 2017. Having watched the case progress through many different courts for nearly a decade, it is for me the Supreme Court’s ruling on the final appeal in the case of Ilott v Mitson, expected in early spring.

Not just because it will, hopefully, provide clarity in terms of the extent of the court’s powers when considering claims under the Inheritance (Provision of Family and Dependents) Act 1975, but more importantly the extent to which testamentary freedom – a long-held belief that people are able to dispose of their assets in the way they wish when they die – will be upheld.

Legacies at risk of decline

The previous High Court ruling was unhelpful as it appeared to draw this principle into question. Clarity on this point would give those writing wills confidence that the people they care for and the causes they believe in will be supported in the way they wish after they die.  

Should the Supreme Court fail to provide clarity, I fear there is a risk that the number and value of charitable legacy wills may decline, as the lack of certainty may discourage many from writing wills in the first place. Given the critical contribution gifts in wills make to UK charities – worth £2.56bn in 2015 – then whatever our role, we all need to be aware of the implications of the final ruling in Ilott v Mitson.

Solicitors have, in recent years, reported a sharp increase in the number of challenges they have seen being brought against estates. As a result, charities find themselves increasingly drawn into difficult situations with both financial and reputational risks. We all have a part to play in safeguarding the final wishes of generous donors and ensuring their gifts achieve the greatest possible impact for the beneficiaries we serve.

The importance of good leadership, governance and risk management

Trustees and senior leaders are responsible for shaping organisational culture and overall strategy. This can have a fundamental impact upon the way in which organisations approach both legacy fundraising and administration, and so it’s vital that all stakeholders have a clear understanding of their roles in this regard.

The Charity Commission recently published an updated version of their Charities and litigation: a guide for trustees (CC38) document, which provides a useful overview for charity trustees thinking about taking or defending legal action.  

With regard to internal governance, I would always recommend that a formal scheme of delegation is put in place so that legacy officers are able to act with clear authority to fulfill trustees’ responsibilities, comply with legal obligations and optimise the value of legacy gifts.

I would also suggest that charities establish a clear gift acceptance policy in order to establish a shared ethical framework to guide the considerations of all parties.

Open and ongoing dialogue between legacy administration and finance teams is vital too in terms of risk management and income recognition. Given the increase in challenges to estates, charities should exercise caution when it comes to the accrual of income. Although ‘best practice’ is hard to establish, given the wide variety of circumstances and organisations that exist, the Charity Finance Group has produced a useful guidance note on this called SORP 2015 and Legacy Income.

Legacy fundraising legacy administration = legacy giving

The need for close collaboration and open dialogue is most critical between legacy fundraisers and legacy administrators. Although they are two very different professions, they have a complementary role to play in helping donors support their favourite causes through gifts in their wills. It’s vital that they establish mutual understanding of their respective roles to ensure gifts are safeguarded and their future value optimised.

Fundraisers can help support legacy administrators in a number of practical ways, including:

• Giving sound legal and financial advice when talking to supporters
• Being mindful of the impact of the restriction of gifts
• Capturing information on motivations to allow personalisation of the administration process
• Building positive working relationships with solicitors.

Conversely, legacy administrators can play a vital role in assisting fundraisers, by:

• Helping them understand the legal framework and its implications
• Providing legal guidance to inform the development of fundraising materials and communications
• Building positive working relationships with solicitors
• Supporting post-death stewardship
• Optimising the value and impact of legacy gifts
• Providing insight into legator motivations and demographics to support future activity.

Wherever the respective roles sit within your organisation, everything must be done to establish good working relationships between these two teams. My personal view is that everyone benefits when these teams work with a shared vision. In reality I appreciate that this isn’t always possible. In these circumstances, clear communication, and clear objectives and measurement, will go a long way to establishing the required culture.

Maintaining good relations with solicitors

Given that more than 80% of wills are still written by solicitors, they are crucial to the realisation and fulfilment of charity legacy gifts. It’s therefore essential that the sector builds a strong working relationship with them.

There are several steps that donors can take during the drafting of their will to ensure their final wishes stand the greatest chance of being fulfilled, such as:

• Including clear reasons for the decisions they have made
• Ensuring they appoint an executor who understands their affairs and wishes
• Not including conditions which are too specific as this may increase the likelihood of the gift failing
• Safeguarding the value and impact of a legacy by considering leaving a percentage of an estate rather than a fixed sum.

As advocates of legacy giving we have a pivotal role to play in ensuring donors are aware of these, and that solicitors are including them as appropriate in the wills they are drafting.

Given the vital role solicitors play in the legacy process, anecdotal suggestions of a decline in trust between charities and solicitors as a result of their dealings with charities as beneficiaries is worrying. This may have led some solicitors to suggest that lower value pecuniary (a specific sum of money) rather than residuary (all, or a percentage of, the remainder of an estate) gifts be left. In the most extreme cases, the suggestion is that some solicitors may recommend not leaving a charitable legacy at all.

If true, this is clearly a worrying trend and we need to do all we can to understand the causes and identify potential solutions. The Institute of Legacy Management is currently undertaking joint research with Remember a Charity to better understand the relationship between charities’ legacy teams and solicitors.

The 5 core principles of good practice

As with anything in life, open and honest communication sometimes leads to difficult conversations. This year, to help legacy administrators undertake their duties sensitively and successfully, the Institute of Legacy Management will be launching Good Practice Guidance.

The guidance will offer a set of five core principles that can be applied at each stage of the legacy administration process – from notification of a gift through to receipt and use by the charity’s beneficiaries:

• Sensitivity – as legacy professionals we treat everyone involved in legacies with respect, tact and dignity
• Transparency – we’re open about the work we do, taking every step to ensure all parties clearly understand the process and progress of individual legacies
• Integrity – we act according to the highest standards throughout the legacy process
• Collaboration – we work together to engage everyone involved in a legacy, using their skills and knowledge to ensure this legacy is handled appropriately
• Informed – we are dedicated to continuous professional development to ensure our expertise serves our donors and organisations.

The guidance has been developed in recognition of our members’ appetite to bring together and share the high professional standards they take pride in working to. Given the responsibility we all share to safeguard the final wishes of generous donors, we hope and expect that our new good practice guidance will be of real value to our members and the wider legacy giving profession.  

Mitigating the long-term impact

Whatever the outcome of Ilott v Mitson in the Supreme Court, the long-term impact is likely to be felt across the charitable sector. Given the critical role legacy income plays in funding the vital services UK charities provide, whatever our role, we should all resolve to ensure legacy giving is championed, understood and nurtured across our organisations.  

Chris Millward is chief executive of the Institute of Legacy Management