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Disputed wills, trusts and estates - series on disputes

David McGuire looks at the key legal, ethical and practical considerations for a charity in the first in our series of articles on disputes.

The effective management of disputes and maximising charitable legacy income

Introduction

It is fundamental for any entity or person involved in a dispute to effectively manage the conflict to achieve their best possible outcome. However, a charity finding itself embroiled in a probate dispute has a number of specific legal, ethical and practical considerations to take into account when making decisions before, during and after a dispute has arisen.

Probate disputes are not uncommon. According to the Ministry of Justice’s ‘Civil Justice statistics quarterly: April to June 2020’, the Property Trusts and Probate list experienced over a 50% increase in its caseload over the last four years, with the Probate sub-list seeing the most significant increase of over 95%. The same can be said for the annual value of testamentary charitable legacies. Smee & Ford, HMCTS’ legacy notification service provider, found that legacy income is now worth more than ever, recently reaching in excess of £3 billion.

Charities are therefore well advised to consider how law, ethics and practice govern and apply to disputes and the maximisation of charitable legacy income as early on in the dispute as possible.

This note is by no means exhaustive but will provide a brief and high level summary of these key considerations and raise some crucial questions for a charity to ask itself in order to assist in effectively managing a dispute.

Legal

  • Are the steps being taken prior to and during the litigation in keeping with the charity’s and its trustee’s duties and responsibilities?
  • Is the charity’s conduct in compliance with the Charities Act and guidance from the Charity Commission and Charity Law Association?
  • Are the trustees acting in the charity’s best interests and taking proportionate steps in order to protect those interests?
  • Can the trustees demonstrate that they have complied with guidance and demonstrated the general principles of the guidance?
  • Does the charity require the Charity Commission’s consent to take any next steps?

Ethical

  • Is the charity’s conduct of the litigation aligning with the requirement of charities to “proactively champion ethical behaviour and reflect and apply their charitable values in any activity they undertake, in addition to meeting their legal and regulatory requirements” (NCVO)?
  • Is the charity’s position likely to encourage or discourage donors? Donors make a decision to give a benefit to charities. If wider society sees charities either failing to protect that donation or, alternatively, pursuing it to the extent that it is ultimately lost in legal fees, what impact will this have on donative intent and charities’ maximisation of legacies? To what extent will the charity’s decision-making and next steps reassure prospective donors?
  • Where a charity’s legacy income is frustrated by the protection of families’ inheritance, on the one hand the family will take the view that the funds in question should be theirs. On the other, the charity will believe itself to have a legitimate claim to the property. It might be, for example, that where there has been a ‘clerical error’ or negligence on the part of the drafter, a charity has benefited at the expense of another intended beneficiary. The testator may have failed during his lifetime to give effect to some promise or expectation of benefit in favour of a person to whom he has a moral obligation. In circumstances such as these, is a charity able, and are they in fact morally obliged, to waive their right to receive income or make an ex gratia payment to a beneficiary?
  • How will the charity approach the tension between maximising charitable legacy income and the protection of families’ inheritance running through the law of wills and succession? The policy tension has been thrust into the spotlight recently, most prominently in the high profile case of Ilott (Respondent) v The Blue Cross and others (Appellants) [2017] UKSC 17, in which the Supreme Court unanimously allowed the charities’ appeals against the Court of Appeal decision awarding Ms Ilott £143,000 in order to purchase her home, thereby reducing the level of her inheritance. A significant policy issue arises out of Ms Ilott’s dependence on state benefits in circumstances where her mother left her entire estate to charity.
  • Ilott turned on the application of The Inheritance (Provision for Family and Dependants) Act 1975, which at first blush provides families with a means to protect their inheritance and frustrate charities’ maximisation of legacy income. It is well-established that the “default rule” in the law of succession is that “an Englishman still remains at liberty at his death to dispose of his own property in whatever way he pleases”. However, the Inheritance Act makes “significant incursion” into this principle, in that it empowers the court to make an order for financial provision out of the deceased's estate to a person identified within a class prescribed within the Inheritance Act. To what extent does a charity wish to be perceived as either supporting or resisting this invasion of testamentary freedom, particularly where, for example, there is a claimant who would perhaps ordinarily receive support/benefit from a charity with a similar mission statement to the opposing charity?
  • Illot put the conflict in the spotlight, but this conflict is not limited to circumstances in which the Inheritance Act applies. The same tension arises throughout the law of probate, particularly where the validity of testamentary documents is challenged.

Practical

  • Charities are often assumed to adopt the role of a defendant, but circumstances can exist in which the charity is enforcing what it considers to be the true intentions of the testator. How aggressive will a charity be perceived as a party to the litigation? Charities wearing a claimant ‘hat’ are arguably under more intense scrutiny, being the party commencing proceedings, and the reputational implications of failure are therefore more severe.
  • Disputes come at great expense to charities, both from a financial and reputational perspective. The often significant legal costs of disputes, and the benefits of Alternative Dispute Resolution, are an important consideration for charities when pursuing their policy goals.
  • What is the charity’s approach to risk? What are the charity’s prospects of success and how willing is the charity to take a chance on proceeding to trial and losing?
  • Who are the other parties to the dispute? How will relationships, potentially with other charities, be affected?
  • Who will be the point of contact(s) dealing with the dispute within the charity? Is there sufficient time for that person or those people to be assisting with the dispute, taking away from their other day to day tasks?

Conclusion

Many disputes can be prevented with the proactive management of situations of conflict. However, the process of pursuing charities’ and families’ respective policy goals, by their very nature, often entails raw family emotion. The conflict arises in circumstances where the aggrieved party or parties might have lost a loved one. The principles governing the law relating to wills, trusts and probate can make it difficult, often impossible, for charities to have sufficient foresight or ability to maximise its legacy income without conflict. It is crucial, therefore, that charities at least take time to consider the above issues to assist them in navigating their policy conflict, guide the process of decision-making and generally managing disputes more effectively once they have arisen.

It should follow from the effective management of disputes that charities maximise their income and/or entitlement, whilst upholding the core values of the charity and its followers. It is, however, crucial that the exercise of considering the above issues is undertaken as early as possible so as to mitigate risk and avoid any unwelcome consequences of the charity engaging in a dispute.

Types of Contentious Probate Disputes

The definition of a ‘contentious probate dispute’ is fluid and can encompass a wide variety of disputes. David McGuire sets out a bullet point guide covering the types of contentious probate disputes that can often arise: 

Capacity

A common ground for challenging a Will so that a previous Will or the intestacy rules apply. A person must have the requisite mental capacity to prepare a Will, understand what they are doing and the extent of the property which they are giving away. They need to be able to comprehend and appreciate the claims to which they ought to give effect and no disorder of the mind must poison their affections, pervert their sense of right or prevent the exercise of their natural faculties.

Creditor Claims

Claims brought against the estate by people/businesses to whom the deceased owed money.

Forfeiture

A beneficiary cannot take under a Will if they have unlawfully killed the testator, or unlawfully aided, abetted, counselled or procured the testator’s death.

Forgery

Another ground for challenging a Will. It must be proven that a Will has been forged or the signature of the person allegedly making the Will has been forged, in order for the Will to be held invalid.  

Fraud

A notoriously difficult ground under which a Will is challenged. This is an intentional deception made by a person for their own gain or to damage another individual and is a claim typically brought where it is believed that a Will does not contain the testator’s true intentions.

Inheritance (Provision for Family and Dependants) Act 1975

This Act allows certain people to bring a claim against the estate of someone who has passed away where that person has not made reasonable financial provision for the person bringing the claim.

Knowledge and Approval

Another ground for challenging the validity of a Will which can succeed where it can be shown that a person executing a Will did not understand and approve its contents.

Mutual Wills

Where two individuals agree on the disposal of their property and execute mutual Wills in pursuance of the agreement. In such circumstances, the survivor’s assets are held upon trust for the beneficiaries named in the Wills.

Opposing a Grant

A dispute relating to the interest of someone claiming an entitlement to a grant of probate or to letters of administration.

Personal Representatives (PRs)

Claims can include claims for losses caused by PRs arising out of a breach of their duties as a PR or perhaps as a trustee. Disputes can also include applications for the delivery up of assets, testamentary documents or for the PRs to take certain steps in relation to the administration of the estate. There may also be circumstances in which claims/applications are made for a PR to be substituted or removed.

Presumed Death

A declaration sought when a person has been missing and there is no evidence to suggest they are still living. Claims can also extend to seeking an order varying or revoking a declaration of presumed death.

Proprietary Estoppel

A claim brought where there is a representation or assurance made to the claimant, a reasonable reliance on it by the claimant and detriment suffered by the claimant in consequence of that reliance.

Rectification

A claim brought where a Will fails to carry out the testator’s intentions in consequence of a clerical error or a failure to understand the testator’s intentions. Can often be a pre-cursor to, or pursued in mitigation of, a professional negligence claim against a solicitor or Will writer (see below).

Revocation of a Will

A person can revoke their Will in numerous ways and an act constituting a revocation can be a ground for challenging a Will. A Will may be revoked by marriage (or annulment/dissolution of the marriage), executing an instrument declaring an intention to revoke, making a subsequent Will or destruction of the document.

Revocation of a Grant

Where a Will has already been proved in common form and there is an allegation that it is invalid, or that the grant should not have been made, a claim can be made for revocation of the grant.

Solicitor/Advisor Claims

Examples include claims to recover losses suffered by the deceased during their lifetime, the costs of a failed or successful challenge to a Will and claims to recover a sum that a beneficiary should have received, but did not as a result of negligence.

Trust Disputes

Can extend to a wide variety of disputes, including disputes between trusts, beneficiaries and trustees, actions to remove trustees or variations of trusts.

Undue Influence

Establishing that the mind of the testator has been so dominated that the testamentary disposition in question is the result not of their own volition, but of that of the person exerting the influence.

Want of Due Execution

Another ground for challenging a Will where, under section 9 of the Wills Act 1837, a Will does not comply with a number of specific formalities.

Find out more about our will dispute legal advice service.

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