STEP Southern Central and the Institute of Legacy Management (ILM) held a collaboration event at Winchester Cathedral, England, on 24 April 2024. The event, Collaboration in philanthropy – working together in the legacy sector, aimed to:

• Increase understanding between charity beneficiaries and the legal sector;
• Improve key relationships, finding efficient and effective ways of working together and
• Hear more about regulatory and governance requirements to maintain competence and legal knowledge.

The speakers were: Gill Steel TEP; Matthew Lagden, CEO of the ILM; Thomas Dumont KC, Radcliffe Chambers and Zoë Seenan, Director of Development, Winchester Cathedral.

Matthew Lagden discussed how the relationship between estate practitioner and legacy manager can often be strained and how the ILM works to resolve this.

He discussed how legacies, which generated around GBP4 billion in 2023, are the fastest growing source of charitable income. Due to their significance, charity audits focus on such legacies.

Charities have a legal duty to maximise the value of the assets and secure the available tax exemptions. Charities are also bound by accounting regulations. Legacies must be shown on the balance sheet as early as possible. They must forecast their income and manage their cash flow.

Getting the charity name right

Gill Steel TEP reminded us of the importance of checking the correct charity name, as listed with the Charity Commission, when drafting a will, rather than relying on the client to get this right. Which charity do they mean to benefit? A local charity with a name similar to a large national one? Once dealing with probate, if the charity’s name is wrong, an application for a Royal Sign Manual direction may assist.

Zoë Seenan from Winchester Cathedral described how collaboration is key. Charities will listen to the testator’s wishes when using legacy funds. Is the gift for the benefit of a particular project? Is the gift for the fabric of the building? Or for music? Would a general gift to the charity be better as the particular area of importance to the client may not be where the charity needs to focus?

It can go wrong

As we all know too well, things can, and do, go wrong. Thomas Dumont KC warned us of the perils of poor will drafting that results in litigation and huge costs to all parties. What happens if there are both charities and family members as residuary beneficiaries? Who bears the burden of inheritance tax (IHT)?

Without a Re Benham clause, the non-exempt beneficiaries will bear a burden of IHT and this often results in a higher tax bill for all. Ask the client whether an equal division is required before or after IHT.

How can we collaborate with charities?

Communication

In all cases, charities need early contact and as a minimum:

• the deceased’s details;
• values and estimated timeline for payment;
• early warning regarding potential problems; and

confirmation that all sums due have been paid. If this not possible, then an explanation as to why not can be placed on the charity’s file in the event of audit.

If there are multiple charity residuary beneficiaries, we should consider appointing a lead charity to manage communications.

When charities are residuary beneficiaries, they also need details of estate income in the form of R185s so that they can reclaim tax.

Consultation

With charities as residuary beneficiaries it is particularly important to consult on the sale of property or other assets. Should there be an appropriation for capital gains tax? Would they like assets transferred in specie?

Consideration

Most charities sign up to Smee & Ford to receive notification if they are named in wills. How many of us have received a request for information from a charity that is named as a substitute when the residuary beneficiary is very much alive and well? While irritating, the charities may not have all the information the practitioner does, hence their requests.

Collaboration

Many legacy managers are legal or accounting professionals, members of STEP and other organisations. Ultimately, we have the same goal. We want the estate administered smoothly and the wishes of the testator are paramount.

Leyla Whitlingum TEP, Branch Chair, Central Southern Branch and Partner at Trethowans