How to protect your legacies against charity scandals

A spate of scandals in recent years involving household name charities has sent shockwaves through the sector, which has damaged not only reputations but charitable income. In February 2018, Oxfam hit the headlines when it emerged that some of its staff had been involved in a sex scandal in Haiti. Aside from the immense damage to Oxfam’s reputation, 7,000 people stopped making regular donations to Oxfam, it lost out on £16m of unrestricted funding and had to make redundancies. Together with the collapse of Kids Company, charity governance and fundraising practices have been placed under scrutiny. Even those charities who appear to be running a tight ship are not immune from criticism. It was recently reported that the Royal British Legion was sitting on reserves worth 40% of annual income. Such allegations that the charity was hoarding its money has come right before the launch of the annual Poppy Appeal – the inferences being that the charity doesn’t need further donations, which couldn’t be further from the truth Research from the Charities Aid Foundation published earlier this year revealed that only 48% of people now believe that charities are trustworthy. Therefore it appears that these scandals are having a detrimental impact on public confidence in the charitable sector and undoing many years of hard work.   The effect on legacy income According to Smee & Ford 10,428 charities were named in wills in 2018 and £3 billion was donated via gifts in wills to charities, an increase of 50% in the last 10 years. However, nine of the 25 highest earning organisations earned less than in the year before. Smaller charities appear to be benefiting from the fall from grace of the larger ones. As the typical time period between making a Will and the person dying is seven years, the full impact of these scandals on legacy income may not be felt for many years. On average, legacy income accounts for approximately one third of a charity's voluntary income so any decrease in legacy giving would be disastrous for many charities.   Continuing impact Even if a charity rides the storm and a donor leaves them a gift in their Will, it could then face a further battle to actually get their hands on that legacy. In many cases, leaving a legacy to a charity is often to the detriment of the donor’s family members – if a charity inherits, then the family lose out. The anger and upset felt by the family is then directed towards the charity and can lead to disputes such as a will challenge or inheritance act claim. Tensions can be heightened if the family themselves don’t feel that the charity is “worthy” or “deserving” of the legacy. Lay executors may try to take it upon themselves to “right” the perceived wrong of the gift to the charity and fail to pay it out promptly, or in some cases, just not pay out at all! Legal proceedings can significantly impact a charity’s finances, and could cause further damage to a charity’s reputation – they don’t want to seen to be fighting over a donor’s estate with a grieving family or pursuing a difficult executor to pay up, even though the charity is legally in the right.   Tips for protecting legacies in the wake of a scandal If a scandal has affected your charity, what steps could you take to protect your legacies? Don’t panic Whilst there may be some impact on donations in the short term, it is the mid to long term that the charity will need to focus on. A Will is a legal document and is something a donor is likely to have considered carefully. They may have paid good money for that Will so may be less likely to have a knee jerk reaction and rip it up compared to a donor cancelling a standing order. There is still time to prevent the donor from making that change. Even if a donor does decide to exclude the charity from their Will, 7 years between making a will and dying is a long time – charities can take steps to restore a donor’s confidence and show they are still deserving of their trust and legacy. They can always change their mind! Use a solicitor Any donor wanting to benefit a charity in their Will should be strongly encouraged to take independent legal advice and ideally instruct a solicitor to draft their Will. The charity is then distanced from the will-making process. A solicitor can also ensure that a donor has capacity to make the Will, is free from undue pressure and ensure the Will reflects their wishes and will be effective. Importantly, the evidence of the solicitor who drafts the Will and their file is key evidence if a dispute arises at a later date. Stand up for your legacies Whilst a charity is quite rightly concerned about protecting their reputation, especially in the wake of recent scandals, this should not be at the expense of receiving their legacies. This is what the donor’s wishes were – they made that decision freely. Charities are legally not free to give the money back to the family, even if they wanted to. If a legacy is being disputed or a recalcitrant executor won’t pay up, charities should not be afraid of getting specialist solicitors involved at an early stage and look to protect their interests. Solicitors don’t just have to be approached for the first time when court papers are about to drop through the letterbox - instructing them at an early stage means that they can advise on the legal position, develop a strategy with the charity and help with the wording of the early correspondence with the family. Hopefully it can be nipped in the bud before it formally “goes legal”. If litigation can’t be avoided, then the solicitor can easily take over conduct of the dispute and be that independent buffer between the charity and the family to protect the legacy income and reputation.   Debra Burton is a Legal Director with Shakespeare Martineau and is a specialist contentious trust and probate solicitor.   Main image: legacy in print type on Shutterstock.com  

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