15/10/2020

CEO and Trustee considerations in legacy giving

KATHERINE ELLIS colour

Many charities have been rocked by Covid-19, and many within the sector have been concerned as to whether the income received from legacy giving will sustain.

However, with a reported surge in the number of charity legacies being written into Wills during the coronavirus pandemic, and legacy income predicted to rise in the next five years, it seems that gifts in Wills has, once again, proved itself to be one of the more sustainable forms of charity income.

Charity Law

The challenge for charity CEOs and trustees at this time is therefore how they ensure that an income stream which will often take the form of numerous, substantial payments, is being handled appropriately and within charity law regulations and requirements.  

Katherine Ellis recommends to charity CEOs and trustees, that they give full and frank consideration to the following:-

  1. Do you have a clear delegated authority in place? Charity trustees are duty bound to manage the charity’s resources responsibly, and whilst it is impossible for charity trustees to personally sign off every payment and receipt, trustees should still put in place appropriate procedures and safeguards to protect the charity from fraud, theft, and other forms of financial abuse etc. For example, who within the organisation has legal authority to acknowledge legacy payments on behalf of your charity? Where does the responsibility rest when it comes to making decisions relating to an estate in which your charity has an interest (such as whether to accept an offer for a property, etc)? Clear guidance on questions such as these help ensure clarity for your organisation as well as external third parties.
  2. Is specialist advice being obtained when necessary? Charity trustees are under a duty to act with reasonable care and skill, and this is no different when managing gifts in Wills. That duty extends to seeking specialist advice on a variety of issues which arise when managing legacies, to ensure you are maximising the financial value of the gift as well as operating lawfully when it comes to this special form of charitable giving (e.g. ensuring tax is only being applied to the legacy when necessary; the best decisions are being taken with regard to the sale, transfer or investment of estate assets etc).
  3. Securing legacy income. Ensuring the charity’s resources are managed responsibly is a must for charity trustees and CEOs. This includes considering the various methods available when it comes to securing legacy income more quickly (such as interim distributions etc), thus allowing the charity to utilise those funds for their intended purpose. However, this is only one side of the story and often such payments can come with associated risks and a need for safeguards. It is therefore imperative these issues are carefully considered and balanced when forming a view.

It is vital that charities and their trustees assess their legacy management strategy to ensure they have the necessary procedures and processes in place to legally and effectively manage this form of charitable giving. If not, they can fall foul of the Charity Commission’s expectations which can lead not only to a PR disaster for the charity, but in extreme cases can result in trustees facing personal liability.

For advice on creating or progressing your legacy management strategy call 0345 20 73 72 8 and ask for Katherine Ellis or email kellis@thursfields.co.uk.

KATHERINE ELLIS colour

Katherine Ellis,

Senior Associate Solicitor, Charities and Communities

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