BWB’s Charity Legacies, Trusts & Probate Disputes team continues to be busy with a wide range of legacy-related matters. Highlights this month include advising on a difficult property legacy in Northern Ireland, and assisting a number of clients with changing the purposes of restricted legacies.

Highlights

In this edition of Legacies Roundup, we take a look at some key developments and how they may impact upon charity legacies. We consider the proposed changes to probate fees, summarise recent changes to charity fundraising in relation to vulnerable donors, and take a look back at our recent seminar on property legacies. We also report on the latest legacy income figures published by Legacy Foresight, as well as further developments in the long-running case of Ilott v Mitson.

Probate fees – proposed changes

Currently, applications for grants of probate are set at a flat fee of either £155 when the applicant is a solicitor, or £215 when the applicant is an individual. Estates worth £5,000 or less do not incur a fee.

In February, the Ministry of Justice published its consultation on plans to introduce a new system of fees for grants of probate, depending on the size of an estate. The MoJ has made no secret of its desire to reduce the burden on the taxpayer of the costs of running the court system, and the introduction of a tiered system for probate fees is just one of the measures it is considering to ensure the courts are funded.

Under the proposals, estates worth between £50,000 and £300,000 before inheritance tax would pay a fee of £300, between £301,000 and £500,000 a fee of £1,000 and so on, with the fee gradually rising depending on the value of the estate, up to £2M. Estates valued at over £2M would incur a fee of £20,000. However, at the same time, the value at which an estate would start to incur a probate fee would rise from £5,000 to £50,000, taking thousands of estates which would currently pay the flat fee out of the fee regime altogether, reducing the burden on low value estates. 

The proposed changes have been heavily criticised, including being described by some industry commentators as representing an increase in inheritance tax by the back door.

What does this mean for charities? Currently, executors only pay the modest flat fee of either £155 or £215. Under the proposed new arrangements, much larger probate fees would be charged on estates, particularly those exceeding £500,000, reducing the amount available for distribution to the residuary beneficiaries including any charity residuary beneficiaries.

There are also practical implications, as probate fees must be paid before estate funds can often be accessed. Therefore, executors could be faced with the prospect of having to take out loans, or asking beneficiaries (including charities) to assist the estate to meet the fee.

The Ministry of Justice’s consultation closed on 1 April 2016, and we will keep you updated as the plans develop.

Charity fundraising - recent developments

One of the key issues that has arisen out of the negative press coverage and regulatory intervention in relation to charity fundraising, is how charities deal with vulnerable donors. Our readers will be all too aware of this hot topic, including concerns about cold-calling and unsolicited mail, and allegations that charity fundraisers have focused their efforts on vulnerable or elderly people in the belief that they are easier to extract donations from.

The Etherington Report made a number of recommendations, to improve industry standards and restore public confidence in the Third Sector. These included greater responsibility for charity trustees, the introduction of a new fundraising regulator, and the creation of a Fundraising Preference Service (FPS) (similar to the existing TPS for telephone marketing) which would allow members of the public to opt out of charity appeals. The current plan is for both the regulator and FPS to be up and running by the end of 2016.

The key proposals of the Fundraising Preference Service’s working group, which were put out for comment up to 31 March, include permitting family members and certain others to be able to register someone on the FPS if they believe that this is necessary given the person’s vulnerability and lack of ability to manage fundraising communications.

In addition, the Institute of Fundraising has made various changes to its Code of Fundraising Practice, to protect vulnerable people, including replacing the Code's ambiguous reference to ‘reasonable persuasion’ with a clear prohibition on intrusive or persistent behaviour that places undue pressure on a person to donate. The Information Commissioner’s Office is also due to produce new direct marketing guidance to provide greater clarity on the data protection issues involved.

The Charity Commission has been active on the issue as well: it is currently consulting on a revised draft of its fundraising guidance (CC20), and in February it sent out a warning to 1,700 charities to alert them to the possible harm caused by their fundraising activities.

Although most of its provisions are not yet in force, the Charities (Protection and Social Investment) Act 2016 received Royal Assent last month, and contains new controls on charity fundraising including in relation to fundraising agreements, annual reporting and regulation. Under the Act, agreements with professional fundraisers and commercial participators will need to state how fundraisers will protect vulnerable people and others from unreasonable intrusion on privacy, unreasonably persistent fundraising, and undue pressure to donate. Charities with an annual income over a certain level will need to include certain information about their fundraising practices, including how the charity protects vulnerable people, in their annual report.

Many of these developments will be of significant interest to legacy fundraisers who deal with potentially vulnerable donors considering leaving a gift to charity in their Will. Our advice to charities is always to recommend that the potential legator speaks to an independent solicitor, so that he or she can get appropriate advice and ensure that the Will is valid. We also recommend that charities keep records of any donor contact they may have.

We will keep our readers updated as matters develop, and BWB’s Charity and Social Enterprise team provides a useful weekly briefing on the changes to charity law and practice as and when they happen.

Growth in legacy income

Figures published by Legacy Foresight in March suggest that growth in legacy income has slowed to its lowest level since 2013. Legacy Foresight suggests that there are several factors behind this slowdown, including cooling house prices and falling share prices, as well as the impact of a relatively large number of high value bequests to consortium members that were received in 2014 and paid out before 2015.

However, Legacy Foresight saw a significant increase in legacy notifications last summer, and is predicting better growth in the second half of this year.

Ilott v Mitson

Following last summer’s disappointing Court of Appeal decision in the long running case of Ilott v Mitson, the Supreme Court has given the animal charity beneficiaries permission to further appeal that decision. The Supreme Court will now decide whether the Court of Appeal was wrong to set aside the High Court’s initial award to Ms Ilott, wrong in the way it approached the issue of maintenance under the Inheritance (Provision for Family and Dependants) Act, and whether it was wrong to structure the award in such a way that allowed Ms Ilott to keep her benefits entitlement.

We will keep you informed as the case develops.

Events!

Our seminar on Property Legacies: a practical guide to gifts of property left by will took place in February. It was very well attended, and explored the key issues to think about in relation of gifts of property to your charity, as well as tips on protecting and maximising gifts of property and problem areas. We enjoyed catching up with the attendees over drinks following the seminar. If you were unable to attend and would like more information, please contact us at legacies@bwbllp.com and we would be pleased to send you a copy of the seminar pack.

Finally, don’t forget that this year’s ILM Annual Conference will be held on 13 May 2016. BWB’s Charity Legacies, Trusts & Probate Disputes team will be in attendance, and we look forward to seeing you all there.


Robert Oakley photo

Robert Oakley

Partner

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+44(0)20 7551 7792 / 07891 143718

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r.oakley@bwbllp.com
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Laura Soley

Partner

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+44(0)20 7551 7768

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l.soley@bwbllp.com
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Leticia Jennings

Senior Associate

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+44(0)20 7551 7657 / 07791 883095

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l.jennings@bwbllp.com
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Jaqui Symcox

Associate

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+44(0)20 7551 7696

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j.symcox@bwbllp.com
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Posted on 06/04/2016 in Legal Updates

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