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In the latest in a series of pieces giving advice to the voluntary sector, Laura Soley of Bates Wells and Braithwaite solicitors answers questions on legacy fundraising

We went to donors who want to leave a legacy of our charity. How they go about this?

Put simply, a legacy is a gift left to a charity in a will. Therefore the donor needs to make a will or change their existing one.

Who should write the will? Can our charity do it?

But can our charity to participate in any other way?

Not recommended. Your charity, and that includes trustees, employees, fundraisers and volunteers should not be involved in preparing the will or witnessing it if it contains a legacy to your charity. If they do, there is a risk that the validity of the will could be challenged, for example, on the basis that the donor was improperly influenced to leave the legacy to your charity.

If a donor already has a will, how can they change it to add a legacy to our charity?

The donor can make what is called a codicil, which is a simple legal document that changes the existing will. As a codicil is also a formal legal document which must comply with certain formalities to be valid, it is once again advisable to use a solicitor.

What types of legacy can donors leave?

There are three main types of legacy that donors can leave to your charity. The first is simply the gift of a sum of money: eg £500. This is called a pecuniary legacy. The gift of a particular item or items such as jewellery, furniture, a painting, stocks and shares or a house is known as a specific legacy. The final type is a residuary gift.

What do you mean by residuary?

The residuary estate is what remains of the donor's property after debts and other expenses, such as funeral costs and tax, have been deducted, and after pecuniary and specific legacies have been paid. A residuary gift is a legacy of the whole of or a share of this residuary estate.

What information should I give to donors who want to leave a legacy to our charity?

So that your charity is properly identified in the will and there is no confusion over which charity the donor intended to benefit, (such as can happen when legacies simply state "cancer research") it is advised that donors state your charity's name, address (registered office address if your charity is a company) and charity registration number.

It is good practice to include these essential details in your legacy marketing materials. And you should suggest that donors take these details with them when they visit their solicitor to have their will drawn up.

And the inheritance tax?

Can donors save inheritance tax on their estates by leaving a legacy to charity?

Any legacies that donors give to charity are exempt from inheritance tax so any legacies that donors leave to your charity could reduce the amount of inheritance tax that would otherwise be payable on their estates. However, the relevance of inheritance tax saving in relation to encouraging donors to give to your charity should not be overplayed. According to The Law Commission's consultation paper Intestacy and Family Provision Claims on Death, published in October 2009, the average size of an estate where there is a will is £160,000 and the average size of an estate without a will is £56,000. Therefore the majority of estates in England and Wales are well below the inheritance tax threshold.

Sometimes donors ask if they can leave a legacy to our charity for one of our charity's specific projects or activities. Is this possible?

Yes. There are two main ways that they can do this, either by making a gift subject to an expression of wish or making a gift subject to binding obligations as to its use.

The expression you want?

What this means is that donors can request or express a wish, usually in their will, that your charity use their legacy for a particular purpose. For example, a donor may leave a legacy to an overseas aid charity and request that it be used in a particular country. Although your charity is not legally obliged to use the legacy in accordance with the donor's wishes, your charity will be under a moral obligation to try to comply if able to do so. The advantage of this type of legacy is that it gives flexibility in case the activities/projects of your charity change between the date of the will and the date of death (when the legacy takes effect) so your charity can take account of any changing circumstances.

What about gifts subject to binding obligations?

Donors can leave a legacy to your charity and state, in their will, that the legacy must be used for a particular purpose. For example, an educational charity might be given a legacy which must be used to fund an annual scholarship in the name of the donor. Or a care home provider might be left a house which must be used as a care home. This type of legacy must be used for the purpose for which it is given.

Might that not present problems?

Indeed. The disadvantage of this type of legacy is that if your charity is unable to use it for the intended purpose it might fail and the charity may not be able to receive the legacy. Therefore, ideally you should indicate to donors, eg in legacy marketing materials, that if donors want to leave a legacy to your charity for a particular purpose, they should consult someone at your charity first to check that your charity can comply with the terms of the gift. Even then, you should warn donors that your charity may no longer be able to fulfil the purpose of the legacy at the time that the legacy takes effect. For obvious reasons, it is usually preferable to encourage gifts subject to an expression of wish rather than binding obligations as to their use.

There has been a lot in the media recently about legal disputes over legacies to charity. Should we be concerned?

While it is true that the trend for disputes seems to be on the increase, they are still, thankfully, relatively rare in comparison to the number of legacies left every day to charity. The types of disputes that can come up are incredibly disparate, from disputes over whether the person who made the will had mental capacity to make a will or claims that the person was subjected to undue influence, to claims over which of two charities was the intended beneficiary where the will is poorly drafted. You may also come across claims from family members and other dependants that the person who made the will has not provided adequately for them financially. These are commonly known as family provision claims.

What should we do if our charity is involved in a dispute?

The strict legal position is that the trustees of a charity have a duty to protect the assets of their charity including the charity's entitlement to any legacy under a will, so the charity must defend the legacy if there is a dispute. But in reality the best advice is that if there is any indication that there is likely to be a dispute over a will then you should seek early legal advice about the strength of your charity's legal position. Consider options such as mediation, if your lawyer advises that this is appropriate, to avoid the dispute getting to court. Legal disputes can be very costly so an early assessment of the strength of your charity's claim will help your charity to assess its position and to avoid unnecessary legal fees (and negative publicity) in pursuing an unmeritorious claim or defending a weak position.

Further information

Institute of Fundraising Code of Legacy Fundraising

Institute managers Legacy

Laura Soley is a solicitor at Bates Wells and Braithwaite solicitors (or email mail@bwbllp.com).

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