Leaving a gift to a charity in your Will is a popular way of making a lasting difference to a cause close to your heart. But what happens if the charity is not named correctly in the will, or changes its identity or if the charity no longer exists when the estate is being distributed?
We have had to advise clients on these issues recently, and in some cases, seek directions from the court as to the proper distribution of the estate.
Brownrigg's Executor (Vindex Trustees Ltd), Petitioner  CSIH 46 ('Brownrigg')
We have written before, here, on the case of Estelle Brownrigg, who left a legacy to "Nelson Mandela Educational Fund, South Africa", about which no information could be found on her death. However, a likely intended recipient could be found (the Nelson Mandela Children's Fund).
The executor petitioned the Inner House of the Court of Session for directions as to the distribution of the legacy. Whilst the court declined to make directions on the basis it "does not consider that it should adjudicate or give advice on the matter", the court noted that Counsel had advised that it seemed that the Nelson Mandela Children's Fund was the intended beneficiary, and that if the executor was of the same opinion, Counsel was of the view the executor could proceed accordingly.
The court considered it was ultimately a question that fell to be resolved by "the exercise of the executor's managerial discretion and good judgment" but in making the distribution, the executor would be doing so on the advice of Counsel.
What if a charity ceases to exist when the legacy comes to be distributed?
In the Brownrigg case it was possible, after thorough investigation, to ascertain the likely intended beneficiary to a legacy in circumstances where it seemed that the charity had been incorrectly named in the will. What about the situation where a charity was correctly named, but no longer exists when the legacy comes to be distributed, or it has changed its identity or merged with another charity?
Often, wills contain a clause giving power and discretion to executors to distribute a legacy to a similar charity. Advice is required to ascertain the interpretation of such a clause and its effect. All professionally drafted wills should contain such a power to avoid a potentially contentious situation arising as in Brownrigg. If there is no such clause, consideration needs to be given to whether the will indicates a general charitable intention. Much will turn not only on the facts and circumstances but also on the interpretation of the will and the intention of the testator. It is possible the legacy may become a "lost legacy" and fall to other beneficiaries, or into intestacy, or even to the Crown. It is unlikely this is what the deceased would have wanted, highlighting the importance of thorough drafting to cover these eventualities.
The Brownrigg case serves as a reminder that the role of an executor carries with it a great deal of responsibility. An executor is ultimately responsible for errors made in the administering of an estate and they may incur personal liability if they make a distribution to the wrong recipient. Acting on the advice of solicitors and Counsel may assist an executor in any future claims but it is easy to see why an executor may wish to seek directions from the court. In Brownrigg, the court considered the petition for directions appropriate in the circumstances.
It may be possible to take out indemnity insurance to protect the executor against future claims. We recently advised in a case where the charity named in a will drawn up in the 1950s no longer existed by the time the estate came to be distributed some sixty-five years later. Thorough investigations identified a possible successor but the evidence was inconclusive. Had the legacy failed, the funds would have fallen to the Crown. The executor was conscious of its duties, and the prospect of personal liability, so two opinions from different Counsel were obtained supporting the transfer to the possible successor and legal indemnity insurance was taken out to protect the executor in the event a claim being made by another successor charity.
New provisions which will help to protect charitable legacies from becoming lost and falling to an unintended beneficiary have been brought forward by the Scottish Government to bring these more in line with the position in England & Wales.
At present in England and Wales, the Charity Commission maintains a register of charity mergers. This register helps to prevent charitable legacies from becoming 'lost' or falling to an unintended beneficiary, in the event that a charity named in a person's Will no longer exists because it has merged with or transferred its assets to another charitable entity.
Under the provisions of the Charities (Regulation and Administration) Bill(link here), it is proposed that the Office of the Scottish Charity Regulator (OSCR) will house a register of charity mergers in Scotland. Among other wide ranging provisions, the Bill provides that the onus will be placed upon charities to notify the OSCR of any mergers to "assist with the transfer of legacies". This register will be publicly accessible and will contain details of all charitable mergers which OSCR are notified about, the date on which the OSCR recorded the merger, and any other information which the OSCR considers appropriate to record. Provided the merger is recorded by OSCR and that recording happens before the date of a testator's death, then the charity which benefited from or resulted from the merger, would be entitled to the charitable legacy. This would not occur where a testators Will makes it clear that this is not their intention.
Our contentious executries team is ranked Tier 1 in Legal 500 and has experience advising executors on charitable legacies in situations where the charity named in the will is improperly named, or no longer exists when the estate comes to be distributed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.