Inheritance court case won’t affect Scottish charities

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Alan Eccles explains why a recent Court of Appeal decision to overturn a will that left money to charity is unlikely to apply to Scottish charities

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12th August 2015 by TFN Guest 1 Comment

There has been extensive coverage recently of a story concerning Melita Jackson’s will and estate, after she left her £486,000 estate to animal charities (RSPCA, RSPB and Blue Cross) when she died in 2004. The Court of Appeal has now decided her daughter should receive a third of the estate – £164,000 – despite her being cut out of the will.

As well as raising important issues for family members who are cut out of a will or disappointed beneficiaries, it also raises issues for charities. After all, when the RSPCA, RSPB and Blue Cross read the will they thought they would inherit a certain amount set out in black and white, and then it transpired that a court would alter that.

So, what should a charity do in this situation?

Firstly, do not assume how rules work in different legal systems.

Particularly if you are a Scottish charity, the first key step is confirm which law applies to the will and estate. While Melita Jackson’s will has attracted significant interest across the UK, the position in Scotland and England is very different in a situation such as this. The important concept of legal rights that exist under Scots law are something not found in English law. Indeed, for Scottish wills and estates the case does not change matters – Scots law accepts what is known as testamentary freedom (the right to decide who inherits your estate) subject to the important fixed legal rights entitlements.

Alan Eccles

Alan Eccles

Charity trustees must avoid becoming entrenched in any litigation and must consider whether settlement of that court action is the right step

Charities based in England or Scotland should make sure they take appropriate advice in the right jurisdiction. It would be wrong to assume that the position under English law would be the same or even similar under Scots law. Indeed, some rules work in entirely the opposite fashion depending on which side of the border is the applicable law. Melita Jackson’s estate is an example where the rules in Scotland and England work differently.

The next thing to consider is the fundamental charity trustee duties. The Melita Jackson estate case does remind us of key duties and decision-making processes for charity trustees considering engaging in any disputes and litigation.

Charities must seek to protect charity assets. In that regard they must act to protect entitlements they appear due to receive from an estate. Charities would be correct to consider challenging attempts by family or even other charities to diminish the charity’s expected inheritance. However, when considering such steps, Scottish charities (irrespective of the legal system applicable to the wills dispute itself) must make decisions in accordance with the Charities and Trustee Investment (Scotland) Act 2005.

The 2005 Act duties require trustees to, amongst other things, act with the care and diligence expected when looking after the affairs of another person. In other words, trustees must recognise that they are taking decisions that relate to the charity’s rather than their own assets. Accordingly, greater care and prudence is expected as well as consideration being given to the wider impact on the charity of a decision to pursue an action or not.

In keeping with the duties of care and diligence they must consider the prospects of success and risks to reputation and financial assets in pursuing or defending litigation (whether in respect of a wills dispute or other issue). Charity trustees must avoid becoming entrenched in any litigation and must consider whether settlement of that court action is the right step for the charity. It may feel like a short-term defeat, but in reality could be a sensible and responsible longer term decision for the future success (financially and otherwise) of the charity. Any such decision should be carefully considered and a record kept of the decision making and the advice taken.

As ever, the aim is to arrive at and record a decision which the charity trustees objectively believe is in the best interests of the charity and the furthering of its purposes.

Alan Eccles is a partner in the personal and family team at Brodies LLP

16th August 2015 by Willie Haines

Many thanks to Alan Eccles for his article. Could he let us know exactly what is the legal entitlement, under Scots Law, of a family member who is excluded under a Will. I understand that he/she can still claim a portion of liquid assets of the estate ie cash in the bank, ISAs, etc which then effects the amount a charity can receive. What is this percentage he/she can claim? Thank you