I have an estate of a testator left the residuary estate to spouse for life and then remainder on death to various charities and other beneficiaries. There is no cypres clause and I am currently trying to ascertain whether or not and how to pay out one of the charitable beneficiaries. The charity existed at the date of death of the testator in 2003 but at the date of death of the life tenant (2020) it had gone into administration. The will makes it clear that if any beneficiaries predecease “me” the benefit is directed to their legitimate children in equal shares. The will remains silent as to the position for charities. I have asked for help from the Charity Commission but they have bounced it back to me.
I have therefore sent an interim distribution to the liquidator as the charity existed at the date of death of the testator. I have now had a response that the liquidator does not consider that he should accept the money. Have I done the right thing?
Might a way to approach this be by means of a deed of variation as there is another charity that carries out very similar work to the original charity and we could redirect it that way?
It seems to me that the fact the charity is in administration, does not dis-inherit it – see Re: ARMS (Multiple Sclerosis Research) Limited, Alleyne v. Attorney-General [1997] 2 All E.R. 679 Ch.D.
However, does the will incorporate the STEP Standard Provisions, 2nd Edition? If so, consider if clause 4.16.2 applies.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
I was just looking at this again when your email came in! Thank you.
I agree with your reasoning, which is why I paid the money to the administrators. However, they do not want to have it and have actually now written to me to say they do not think it reflects the general charitable intent of the testator to be used to pay off creditors. I think they must be near to finalising their administrations and do not want to have to open up the whole things and pay small amounts to various creditors! However, they have asked that I sued it to pay to another charity that carries out similar work in the area.
No STEP provisions whatsoever!
My proposal is therefore to prepare a deed of variation ( no impact for IHT or CGT as charitable recipients in both cases I believe) and even though years since the death of the testator I believe if we have a signature from both the administrator of the old charity and the representative of the new charity and te current trustees it will provide some protection or feeling of such for the trustees and the new recipient charity.
What do you think? Would this be the best way or do you feel it isn’t really necessary? I just don’t want anyone to turn round and claim it should have been paid elsewhere!
I believe the question that needs to be answered to determine the situation is whether the creditors of the charity are being paid in full.
If not, then by refusing to accept the legacy the administrator is denying them their legitimate due. Whilst the deceased may have intended the legacy to be used for charitable purposes, as identified in the ARMS case, referred to previously, it must be applied in reducing the charity’s debts. Whilst one can sympathise with the administrator’s view, if it effectively defrauds creditors is it a line that one could safely adopt (damage to reputation, etc.)
Should the legacy represent “surplus” funds, then I would ask if there is a scheme of arrangement in place to distribute any such surplus. If there is, then there would be no need to enter into any agreement unless the scheme fails to deal with the legacy now falling into possession. In which case it would probably be appropriate to look to the Charity Commission to agree a Scheme.
If the amount in question is relatively small, say no more than £1,000, perhaps a pragmatic approach might be adopted. However, if more than merely a modest amount, participating in the diversion away from the creditors who would have a legitimate claim on the moneys may have unwelcome consequences.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
The refund of money has been received from the administrators. The amounts in total are likely to be in the region of £30,000 so not insignificant at all.
I shall write back to them again indicating that this is not something within their gift to reject quoting them chapter and verse!