The Legacy sector – our 2019 round up
The S&F notification service is dead……long live the S&F notification service!
2019 began with a collective sharp intake of breath for legacy managers as HMCTS unexpectedly announced at the end of January that it would be terminating its’ existing legacy notification service with Smee & Ford. This was a big blow to the sector as the vast majority of charities rely heavily on the notification service to advise them of their bequests.
Smee & Ford was given a six month notice period and rather unhelpfully the government gave no guidance as to who or what would be replacing it. The main worry for legacy managers was that after July, notifications would fall off a cliff.
After many months of discussion and lobbying, in July it was finally announced that the replacement for Smee & Ford would be…..drumroll…. Smee & Ford!
HMCTS confirmed that the current arrangements will remain in place for at least the next 12 months until long term arrangements can be put in place much to the delight of the sector.
So the status quo remains, for now, though watch this space!
The rise and fall of probate fees (and delays)
Another story that began the year with a bang and rather thankfully ended with a whimper was probate fee increases. The government proposed changes to the current probate fee structure from April 2019 from a flat rate fee to one based on the value of the estate – which could amount to £6000 in fees for an estate worth over £2 million. The Institute of Legacy Management estimated that the changes would reduce charitable income by £10million.
April came and went and when the government announced a snap general election in November the proposals were shelved (for now).
However, the knock on effects of the threatened probate fee increase was the unprecedented surge of probate applications as PRs rushed to beat the proposed fee increase deadline.
Probate Registries could simply not cope with the volume of applications leading to massive delays in getting the grant. The average time rose from 5 – 18 days to in excess of 13 weeks. This led to collapsed property sales due to a lack of grant, delayed estate administration, delays in legacy payments and frustration all round.
Charities also reported a drop in notifications and the precious predicted income – it may take some time for these to recover.
Key case updates of 2019
Will Challenge cases – validity
Rea v Rea  EWHC 2434 (Ch)
The court upheld a professionally drafted Will which left the 85 year old testator’s estate to her one daughter to the detriment of her three sons. An earlier Will had split the estate equally between the four children.
The sons contested the 2015 Will on grounds of (1) lack of capacity (2) lack of knowledge and approval (3) undue influence and (4) fraudulent calumny.
The court placed considerable weight on the evidence of the solicitor who prepared the Will and the deceased’s GP who had provided a contemporaneous capacity assessment prior to its execution. The sons had very little evidence to counter their views.
This case highlights how difficult it is to challenge a Will and that the court’s role is not to assess what is “fair” but whether the Will is valid or not. A good case for charities to rely upon for Will challenges.
In both cases the Court of Appeal overturned the judge’s decision at first instance, not to grant permission for the widow to bring their 1975 Act claims out of time.
In Cowan the claim was 17 months out of time, in Begum it was 12 months. The Court of Appeal ruled in both cases that though there was no good reason for the delay, the claims could proceed as they had strong prospects of success.
This is relevant for charities who may be relying on the expiry of the six month deadline to defend 1975 Act claims. Each case turns on its facts, but it seems that whether or not the claim has strong prospects of success is a far more important factor in the consideration of the court than what the reasons are for the delay.
Charitable tax exemption
Routier and another v HMRC  UKSC 43
The court confirmed that a charitable trust does not have to be subject to the jurisdiction of the UK courts to benefit from the charity inheritance tax exemption under section 23 of the Inheritance Tax Act.
The case related to a gift in a Will of a UK property by a testator who lived in Jersey to a charitable trust governed by Jersey law. The UK property was worth approximately £1.7 million and therefore there was a possible £600,000 tax bill.
The Supreme Court found that HMRC’s restriction on charity tax relief was unlawful as a matter of EU law – it did not matter that the charitable trust was registered in Jersey – it could still benefit from the charitable exemption.
Want to know what we think is in store for 2020? Find out more here.