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Can anything good come from a tragedy? Considering charitable legacies

Last week Oxfam received £41m under the Will of Richard Cousins (CEO at the catering giant Compass).

What happened?

In December 2017 Mr Cousins, his 2 sons, his fiancée and her daughter died in a plane crash.

Under Mr Cousins’ Will, his 2 sons were the main named beneficiaries. However, Mr Cousins had made provision in his Will for a ‘disaster scenario’: namely that in the event that his sons could not inherit, Oxfam would be the beneficiary of the majority of his estate.

What would have happened had Mr Cousins not appointed Oxfam as a replacement beneficiary?

In short Oxfam would have received nothing and Mr Cousins’ assets would have potentially been distributed to people who Mr Cousins had not intended.

Where someone dies without a Will, or where the Will does not address all of the deceased’s property, the property which is not provided for in the Will is distributed under what are called the ‘rules of intestacy’.

Under the rules of intestacy, the way a deceased’s property is distributed is not always the way many people think. For example if you are married with children, your estate (depending on the size of it) may be shared between your spouse and your children rather than going to your spouse outright.

Where you are not married but are co-habiting (for example with a fiancée), your co-habitee would have no automatic right under the rules of intestacy to any property you own in your sole name.

Therefore the best thing to do is to have a Will which reflects your wishes, and covers what will happen in the event that all your favoured beneficiaries fail to inherit.

It is therefore important to at least consider providing for a disaster scenario. Where there isn’t such a provision – and all your named beneficiaries pre-decease you – your estate could pass to a family member who you have never met, or do not even like.

Why a charity?

Why not? If you have addressed who your beneficiaries are and how much they should inherit under your Will, why not consider leaving your estate to charity (or a number of charities) so that they can benefit from your estate in the event that your named  beneficiaries pre-decease you?

Is there any benefit to leaving a legacy in my Will to a charity?

You can of course leave legacies to charities under your Will where the disaster scenario doesn’t apply. Where you do so, you might wish to consider increasing that legacy in the disaster scenario.

Where you leave legacies under your Will to UK registered charities (“UK Charities”), certain tax benefits may apply, including:

  • The value of your estate being reduced by the amount of the legacy before Inheritance Tax (“IHT”) is calculated;
  • Where you leave more than 10% of your estate to UK Charities, IHT is generally applied on the taxable part of your estate at the discounted rate of 36% (as opposed to the standard rate of 40%).
Are there any further considerations when leaving a legacy/everything to a charity?

As with any legacy, you should carefully consider your reasons for leaving a legacy to someone in your Will, especially if you are doing so to the exclusion of others.

Under English law certain classes of people can bring claims against an estate, where a person is either not left a legacy under the Will or feels that they should be entitled to a larger legacy.

The person with the strongest claim under this legislation is the spouse (as the spouse does not need to prove any need for financial maintenance for their claim to be successful). However it can also include co-habitees, children, or other people to whom the deceased was providing financial support

If you intend to prepare a Will which excludes a dependent or natural beneficiary, you should seek legal advice in advance to see how you might try to limit the potential for a claim.

Should I also include a provision for the disaster scenario?

At the very least you should consider introducing a disaster scenario clause – no matter how remote it might seem that all of you beneficiaries will die before taking their legacy, it can happen as the tragic case of Mr Cousins and his family has shown.

If you would like to discuss any matters raised in this blog, please contact Richard Woods or someone else from our Wills and Probate team or  Alexa Payet who is a senior solicitor in the Contentious Probate team.

 

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