Legacies Roundup | September 2018


In this Legacies Roundup we touch on the findings in Smee & Ford’s latest Legacy Trends 2018 report, consider the key issues and things to think about if your charity is left a gift of property, and take a look at issues relating to disclosure of information in the context of 1975 Act claims and Larke v Nugus requests.

Legacy income highest on record 

Legacy income in 2017 was the largest ever reported, according to Smee & Ford’s Legacy Trends 2018 Report.

Last year, 36,445 charitable estates, worth £17.9 billion, included between £2.8 and £2.9 billion of charity legacy income. These figures show that, whilst the number of charitable estates overall remained fairly consistent with 2016 figures, the overall value of charitable estates grew by £1.8 billion.

This is positive news for charities, particularly those reliant on legacy income. Equally positive is the indication that over the long term the number of charitable estates is increasing and will continue to do so: Smee & Ford’s report highlights the potential for future growth noting that if just 1% of the total probated estates in 2017 had included a gift to charity, an additional £97 million could have been accessed by the charitable sector.

Only time will tell what effect Brexit will have on legacy income, and we will continue to keep our readers abreast of updates in legacy income trends in future editions.

Dealing with gifts of property

So what exactly is driving the increase in legacy income? Unsurprisingly, one of the major contributors is the value of residential property. 90% of charities benefitting under a will receive a residuary gift – which may well include the testator’s home, or another property.

Whilst a gift of property can be extraordinarily valuable to a charity, it is important to be aware that property is often susceptible to wider economic and political forces and as such additional care should be taken when considering how to deal with a gift of property. Whether you are a charity with an experienced legacies team, or you happen to be one of the 3,000 charities named in a will for the first time in 2017, you have a number of options when considering how to make best use of a gift of property. For instance, your charity could use the property (provided it is appropriate for the carrying out of your charitable objects and subject to planning and other statutory requirements), rent it out as an investment, or sell it if it is surplus to your charity’s needs. Whatever your choice, you will want to ensure that the gift benefits the charity as much as possible. Here is a short list of key issues to be aware of when your charity has been left a gift of property, whether outright or subject to a life interest:

Outright gifts of property

  • Know your property: it’s possible that the property to be gifted may be subject to mortgages or other liabilities, leases or tenancies. Identifying these early on means you will be able to decide how to deal with them, for example by maintaining a current tenancy arrangement or discharging a mortgage against the property.
  • Due diligence: you will need to carry out appropriate due diligence on the property, both on its physical state and on any legal issues which may affect it, noting that not all issues are readily identifiable from the title deeds. Whether you wish to sell, lease or use the property, its condition will be important and you may need to spend money on repairs, sometimes urgent or significant.
  • Regulatory requirements: if you decide to sell the property to realise its cash value, under charity law requirements a qualified surveyor’s report will be needed for y charity’s trustees to be happy that the terms are the best that can reasonably be obtained.

Property subject to a life interest

Properties can be gifted subject to a life interest, for instance providing that the testator’s partner may live in the property during their lifetime before the charity receives the property outright. This delay in your charity receiving the property means it is important that you:

  • Keep proper records: it will be important (in a sensitive way) to stay in touch with the life tenant, to ensure you keep abreast of the state of the property and the ongoing wishes of the life tenancy, and to avoid any claim to the property (e.g. adverse possession) before the property is transferred to you.
  • Consider ongoing maintenance obligations: a property is a significant asset for a charity to inherit and one that will need to be properly maintained to avoid any reduction in value. The will ought to provide for who is obliged to maintain the property (i.e. the life tenant or the charity), when and to what extent, and it will be important for the charity to review the documents and ascertain its obligations as well as those of the life tenant to ensure the property and its value are fully protected (e.g. who is responsible for insuring the property?).
  • Consider how you can realise the gift early: gifts of property subject to a life interest can be unattractive and problematic for both the life tenant and the charity: the life tenant will typically be restricted as to what they can do with the property and will have various obligations whilst they inhabit the property; the charity will have to wait to receive its gift (sometimes for decades). It is not uncommon, therefore, for the parties to agree to an alternative arrangement e.g. to sell the property and divide the proceeds between the life tenant and the charity. Legal advice should be taken on negotiating and implementing such an arrangement, as matters such as compliance with charity law requirements will need to be considered.

Whilst a gift of property can represent a valuable addition to your charity’s assets, the technical issues and other considerations set out above mean it will always be best practice to seek appropriate professional advice before making any decisions regarding the property.

Pre-action disclosure in 1975 Act claims 

Court ordered disclosure during the course of litigation is a common occurrence. But what’s the position if a potential claimant under the Inheritance (Provision for Family and Dependants) Act 1975 seeks disclosure of information before deciding whether to pursue a claim?

Section 25(b) of the Administration of Estates Act 1925 provides that personal representatives of a deceased person are under a duty to provide a full inventory of the estate and an account of their administration when ordered to do so by the court. The court can make such an order upon application by anyone with an interest in the estate, including those with a potential claim against the estate.

In addition, anyone with a claim (or potential claim) against a deceased person’s estate is entitled to obtain a copy of their medical records in accordance with the Access to Health Records Act 1990.

Charities are often defendants to 1975 Act claims, and although it might be tempting to resist any requests for pre-action disclosure so as to avoid assisting a disgruntled friend or family member bringing a claim, potential claimants have rights to certain information and it is unlikely to be cost effective to obstruct that disclosure. Doing so might also cause the charity to be on the receiving end of negative publicity.

The Association of Contentious Trust and Probate Specialists (ACTAPS) has provided guidance, which is not binding, but is often followed, making it clear that best practice is to explore at an early stage how a matter could be resolved without recourse to formal, protracted and potentially acrimonious court proceedings. If a potential claim has merit it is always advisable to tackle it head on and consider early settlement. If a claim does not have merit it ought to be possible to dispose of it in correspondence, and it is likely to be a much better use of a charity’s resources to focus on doing so than seeking to avoid disclosure of documents a potential claimant is entitled to.

Larke v Nugus and GDPR

We are sure that everyone (including lawyers!) is fully saturated with GDPR-related articles! If our readers can bear it, one interesting issue that has recently arisen for practitioners is how GDPR affects a solicitor’s ability to provide a Larke v Nugus statement.

The case of Larke v Nugus confirmed that the court has the power to order that the professional who drafted the will provide information about the circumstances in which the will was drafted and executed. Common questions asked of the will drafter include “did the testator provide instructions for the will themselves?”, “did the will drafter ask questions pertaining to the testator’s capacity?”, “did the will drafter discuss with the testator significant departures from any prior will?” In addition to answers to such questions the will drafter often provides a full copy of their file.

If the will drafter is a solicitor, their obligation in this regard is despite their obligations of client confidentiality. But what about GDPR? How does GDPR impact the will drafter’s obligation to comply with a Larke v Nugus request?

First, the will drafter will need to consider whether any of the information requested is personal data as defined in the data protection legislation i.e. information relating to a living individual who can be directly identified from the information or who can be indirectly identified from that information in combination with other information that the will drafter has.

It is important to note that GDPR only relates to living people and therefore any data regarding the deceased can be disregarded for present purposes. However, a will, a will file and related documents and information often contain personal data relating to people other than the deceased e.g. executors and beneficiaries, meaning it will be important for the person in receipt of a Larke v Nugus request to consider how GDPR impacts the request. If the information contained in, and relating to, the will contains personal data, then the drafter will be a controller for the purposes of the GDPR, and must comply with its obligations. Those obligations affect any kind of processing of personal data, including disclosing the personal data to third parties (such as requesting charities).

Having said that, the Data Protection Act 2018, which supplements the GDPR, includes a number of exemptions from certain obligations under the GDPR. For example, disclosure necessary for the purpose of, or in connection with, legal proceedings (including prospective legal proceedings) can be permitted without having to comply with certain provisions of the GDPR, as can disclosure necessary for the purpose of obtaining legal advice or for the purposes of establishing, exercising or defending legal rights.

Charities seeking to defend a challenge to a will should continue to seek information via a Larke v Nugus request. Information and documents disclosed pursuant to a Larke v Nugus request can be useful, particularly at an early stage in proceedings when charities are assessing the strength and weaknesses of their position. The exemptions to GDPR contained in the Data Protection Act 2018 mean that charities can still expect a full response to such a request. If a will drafter purports to refuse to comply on data privacy grounds, charities should be able to point to the relevant provisions of the Data Protection Act 2018 (contained in Schedule 2) which contain the exemptions in question.

With this said, charities should remember that these exemptions do not apply to all obligations under the GDPR. There will be a number of other key data privacy obligations which charities still need to consider (particularly once they receive the personal data in question and become controllers in their own right), such as obligations relating to data retention and data security.

For those of you who would like more information on GDPR and how it relates to legacies, take a look at our factsheet.

This information is necessarily of a general nature and doesn’t constitute legal advice. This is not a substitute for formal legal advice, given in the context of full information under an engagement with Bates Wells.

All content on this page is correct as of September 27, 2018.