Leaving a gift to a UK charity in your Will is a powerful tool for supporting charitable causes and mitigating inheritance tax. Despite best intentions, there are circumstances where such gifts may fail leaving both the charitable gift and the testator’s wishes in jeopardy.
The recent case of Dryden (as administrator of the Estate of Marjorie Robinson Thompson deceased) v Young and others [2024] EWHC 1095 (Ch) (Dryden) sets out some key principles to guide executors in how to save charitable legacies in Wills that are ambiguous or unclear.
- Identification of beneficiary
The first step is to identify the beneficiary, though this is not always easy as the beneficiary may not be registered, or it may have changed name, merged with another entity, or ceased to exist. This can be a multi-stage process starting with understanding who (or what) the beneficiary was at the time the Will was drafted and ending with who the beneficiary is at the time the estate is dispersed.
- Construction of Will (words and context)
Dryden now sets out some clear principles to follow to aid identification of the correct beneficiary. As a starting point, it is necessary to construe the words of the gift in the Will in the context it was used by having regard to wider factors to ascertain the beneficiary when the Will was drafted.
Where the identity is unclear because of careless or inaccurate drafting such that the spelling of the name or address is incorrect then this will not invalidate the gift under the established principle of falso demonstratio non nocet (literally, a false description does not spoil).
Where the identity is unclear for reasons other than ambiguous or inaccurate wording, regard to external factors will also aid to identify the correct beneficiary.
- Section 21 of the Administration of Justice Act 1982 (AJA 1982)
Similar to the common law principle of construction as set out in Dryden, section 21 of the AJA 1982 provides a statutory route of construction which allows a court to rectify mistakes in Wills that would otherwise affect the validity or effectiveness of charitable bequests. For example, in Knipe v The British Racing Drivers’ Motor Sport Charity and Ors [2020] EWHC 3295 (Ch), section 21 of the AJA 1982 helped ascertain the proper construction of the Will to rectify the non-existing entities described therein and allow a charitable application of the funds. In that case, Judge Paul Matthews relied on wider factors such as the testator’s professional background, his connections with the bodies concerned, as well as “construing the words in the Will in the context in which the deceased used them”.
- Cy-près
If, at any stage, there is no such entity or it is unclear which entity is meant, then unless it can be applied cy-près (meaning “as near as possible to”) by way of scheme under section 62 of the Charities Act 2011 because a general charitable intention can be evinced, the gift will fail.
Dryden now establishes a new principle for identifying charities based on its registration status: essentially, where a specific entity can be identified as the recipient of the intended gift then the rules depend on whether the entity is an unincorporated entity (i.e. a Will Trust or an Unincorporated Charitable Association) or an incorporated entity (i.e. a Company or a CIO).
Unincorporated entity: the principle established in Dryden is that a gift to a charitable trust or to a charitable unincorporated association will be construed as a gift for the charitable purposes for which the charity holds its property.
Some scenarios in which failed gifts to unincorporated entities can be saved are as follows:
- Initial failure – if the unincorporated entity has ceased to exist in the lifetime of the donor, and there is now no entity carrying on those purposes, the gift can be applied cy-près and be valid subject to there being a general charitable intention. The issue therefore depends on whether or not a general charitable intention exists.
- Change of charitable purpose or entity - if the unincorporated entity has changed its charitable purpose or ceased to exist in its previous form, the gift will be valid if the new entity can be regarded as a continuation of the original charity.
- Supervening failure - if the unincorporated entity has ceased to exist after the donor has died but before administration of the estate, the gift can be “applied cy-près without more” (Phillips v RSPB [2012] EWHC 618 (Ch)). However, the position changes if the entity is in the process of ceasing to exist by way of liquidation.
Incorporated entity: the next principle established in Dryden is that a gift to a corporate charity will be treated as a gift to the corporate entity itself and not a gift on trust for charitable purposes.
Some scenarios in which failed gifts to incorporated entities can be saved are as follows:
- Initial failure - if the incorporated entity has ceased to exist during the lifetime of the settlor by reason of dissolution, then the gift fails, although this position changes if the dissolution is a result of a charity merger recorded on the Register of Mergers. Although the gift may be saved if it can be applied cy-près by way of scheme, it may be more difficult to identify a general charitable intention where the gift is to an incorporated charity which has ceased to exist (Re Harwood [1936]; Re Finger's Will Trusts).
- Change of charitable purpose – if the entity has changed its objects then the gift remains valid.
- Supervening failure - if the incorporated entity has ceased to exist after the donor has died but before administration of the gift, the gift can be cy-près and is therefore valid. However, this position changes if the entity is in the process of ceasing to exist by way of liquidation.
- Non-existing entity
In the case of a gift to an entity which never existed, the gift will be administered cy-près provided a general charitable intent can be made out. If there is no such intention the gift will pass as on an intestacy.
In Dryden, a gift to “The Heavy Horses Preservation Society Old Rectory Whitechurch” was held to be a valid gift notwithstanding that no entity existed under that name or address. There existed a similar society called “The Shire Horse Society” which was an incorporated charity but which operated from a different address. Although there were other charities dedicated to heavy horses, The Shire Horse Society was the only society that “preserved” heavy-horses (as confirmed by its objects) notwithstanding it was limited to just one breed of heavy-horse. Accordingly, the Judge was satisfied that when the Deceased referred in her Will to “The Heavy Horses Preservation Society” she was referring to the Shire Horse Society, and the gift was applied to that body.
- Failed gifts and cy-près
Where a gift fails it will be applied cy-près by way of scheme provided a general charitable intention can be found and if no such intention can be found then it will apply as on an intestacy. As mentioned above, proving a general charitable intention may be more difficult if the gift is to an incorporated charity that ceased to exist during the testator’s lifetime (Re Harwood [1936]; Re Finger's Will Trusts).
Testators should take care when drafting their Wills to prevent legacies to charities from failing and to avoid unnecessary administration costs for their executors. Keeping your Will up to date will help to ensure that your gifts to charity are applied as you intend.
Thanks to Nancy Purle for preparing this article. If you have any questions from this briefing note, then please contact our experienced Charity and Private Client team today on 0207 222 5381 or email Khalid Sofi (Khalid.Sofi@lbmw.com) or Anna Gaston (Anna.Gaston@lbmw.com)