Defending an Inheritance Act claim against a charity
When defending an Inheritance Act claim against a charity it is important for the trustees to take specialist advice from contentious probate solicitors and to carefully weigh up the risks against the likely benefits.
Inheritance Act claims
The Inheritance Act is a complex and often misunderstood piece of legislation. Claims are frequently brought by claimants when there are no grounds to do so, or there is no evidence to support the case.
Equally, many claimants pursuing an Inheritance Act claim will be genuinely in need and entitled to seek financial provision from an estate.
Trustees must therefore assess the individual merits of each claim individually to ascertain what course of action is in the charity’s best interests, having regard to the trustee’s duties to protect the legacy, limit the exposure to legal costs, and manage the charity’s reputation.
When a claim is made under the 1975 Act the claimant will be required to set out the basis of their case and submit details of their needs and resources.
The court will be required to consider the needs of all parties, including those of the charity itself. This will usually require the court to perform a delicate balancing exercise.
The courts’ approach to claims against charities
Charities are at a disadvantage when it comes to demonstrating need in the face of a competing claim from a child, a spouse or another individual who was financially dependent on the deceased and is suffering demonstrable hardship as a result of their death.
Nevertheless, as the case of Illot v The Blue Cross and others demonstrates, claimants do not have it all their own way in an Inheritance Act claim against a charity. In that case the adult daughter’s claim was only partially successful, with the court awarding a modest sum from the estate by way of reasonable financial provision. The court also recognised that charities are heavily dependent on legacies and are the chosen beneficiaries of the deceased.
Trustee’s duties
The Charity Commission says that a trustee has a duty to act in the best interests of their charity, and this includes protecting legacy income.
However, this duty is tempered by a competing duty to minimise the risk of exposing the charity to legal costs and to explore ways of resolving any dispute through negotiation or mediation.
A cost/benefit analysis should always be carried out, ideally with input from a specialist solicitor.
Trustees should also document their decision-making process, recording their reasons for defending the Inheritance Act claim, or alternatively why they decided to concede the case,
An Inheritance Act checklist
When contemplating defending an Inheritance Act claim against a charity, trustees and their solicitors should consider a range of issues, including:
- Whether the claimant is entitled to make a claim under the 1975 Act
- Whether the claimant is actually in need of financial provision
- What evidence the claimant is relying on to establish need
- What the overall value of the estate is
- What the value of the legacy is
- What associations the testator had with your charity, and
- Why the legacy income is so valuable to your charity
It is important for charities to bear in mind that Inheritance Act claims against charities are not necessarily ‘all or nothing’. The courts have a wide discretion as to how an estate should be distributed, so the outcome could result in the charity’s legacy being reduced, rather than being entirely exhausted.
Mediation and risk reduction measures
The parties should be wary of the legal costs which can arise in a contested claim, and consider reaching a compromise, especially when the merits are finely balanced.
Mediation can be a very effective way of resolving a dispute. We are highly experienced in this form of dispute resolution, and proud of our track record of success in settling Inheritance Act claims at mediation.
It may be possible to limit costs by working with other charitable beneficiaries and sharing the costs. And by filing a ‘neutral defence’ the charity can further safeguard itself.
No Win, No Fee funding
Where there are reasonable prospects of defending an Inheritance Act claim against a charity, our experienced team of contentious probate lawyers will be happy to consider working on a No Win, No Fee basis.
We believe we are one of only a very few specialist firms to offer No Win, No Fee funding to charities wishing to defend an Inheritance Act claim.
No Win, No Fee funding is particularly attractive to trustees who are concerned about fulfilling their duty to limit the charity’s exposure to legal costs and wish to avoid criticism.
When defending a 1975 Act claim on a No Win, No Fee basis it is important for us, and for you, to be absolutely clear about what outcomes will constitute a ‘win’. We will therefore start by assessing the merits of the case free of charge, before going on to discuss your expectations and objectives with you, and explaining how No Win, No Fee funding will operate in your particular case.
Free legal helpline
If you would like to talk to us about defending an Inheritance Act claim then email [email protected] or phone us on 0333 888 0439.
