Will it go to charity?
Back in 1978, 17-year-old Heather Jackson left her home in England to live with her boyfriend Nicholas Ilot. Her mother Melita, widowed before Heather's birth, was totally opposed to her actions. Heather married Nicholas in 1983 and they are still together, the parents of five children.
Although there were three attempts at reconciliation, Melita never forgave Heather for eloping. She bequeathed her estate, worth almost £500,000, to three animal charities. Heather got nothing. After her mother died in 2004 she began proceedings. There were a few glitches along the way, but these seem to have finally come to an end with the England and Wales Court of Appeal decision in July, Ilott v Mitson  EWCA Civ 797. The Court decided that the daughter should be awarded £163,000 to purchase a home, well up on the £50,000 first awarded by a County Court in 2007.
Contesting wills in England is not uncommon. The Inheritance (Provision for Family and Dependents) Act 1975 gives a child of the deceased the right to apply for an order if a will does not make reasonable provision for them. However, it appears that relatively few are decided in the courts, with most settled out of public view.
Legal commentators have raised some misgivings about the decision. Some say it has introduced an element of uncertainty for those drafting wills as it seems to suggest that even in the most strained relationships there could be a successful claim against the estate. There is, however, a consensus that the law hasn't really changed but the wide publicity given may increase the number of claims when non-related charities are involved.
The case has certainly worried charities. United Kingdom charities receive £2 billion a year in legacy income, the Institute of Fundraising says. Following the decision, the three charities expressed their concern in a statement, saying the outcome could have serious ramifications for the future of the charity sector as a whole.
Meanwhile, in New Zealand
Bequests are also important to New Zealand's charities. Information from Charities Services on the latest annual returns submitted shows organisations registered as charities received bequests valued at $192 million. For many of these, bequests are a very important source of income.
The legal situation in New Zealand is effectively similar to that in the United Kingdom. Section 4 of the Family Proceedings Act 1955 allows the Court to determine whether a testator has discharged his or her moral duty to make adequate provision for the proper maintenance and support of eligible persons.
The Court of Appeal decision in Williams v Aucutt  NZLR 479 cited with approval the principles stated in Little v Angus  1 NZLR 126 at 127 that "the inquiry is as to whether there has been a breach of moral duty judged by the standards of a wise and just testator or testatrix; and if so, what is appropriate to remedy that breach. Only to that extent is the will to be disturbed."
The role of charities as an interested party in family proceedings actions is recognised. In Auckland City Mission v Brown  2 NZLR 650, the Auckland City Mission and Salvation Army appealed a High Court decision in which the surviving adult daughter who contested a will was awarded a substantially increased portion. The residue – which was substantial – was left to the two appellant charities.
The High Court Judge had remarked somewhat critically on the "unusually" active role the charities had taken in the proceedings, had also compared the amount of the legacy to the City Mission with its annual income, and had noted the testator's apparent lack of any particular connection with the two charities.
The Court of Appeal did not agree, and its remarks endorse a more active role by New Zealand charities in contesting bequests. Rather than abiding by the decision of the Court and avoiding a "litigious approach" as charities had traditionally done, the Court of Appeal said charities could now be properly regarded by altruistic testators as having an enhanced role.
"It is not unreasonable that the charities draw the attention of the Court to their work and the benefits for the public which they can achieve with the support of substantial donations," said Richardson P. He also found that in the circumstances it was entirely proper for the charities to support the will, test the claims "and while perhaps formally submitting to the Order of the Court, respectfully suggest what, if any, further provision should be made for the claimants."
Greg Kelly of Greg Kelly Law Ltd says that while a lot of challenges to wills are between relatives, there are a number of cases – "not massive" - where a relative will challenge a will where they believe a charity has been left too much.
"In the past the courts certainly tended to favour the family ahead of charities. Now, I think they're taking the view that you've got to respect what the deceased wanted to do. For a lot of charities this is the only way they've got to make any money. I don't think the charities here are too worried about the English Court of Appeal decision."
Encouragement of bequests
In just over a week, New Zealanders will find themselves in "Include a Charity Week". This runs from 6-12 September and is promoted by the Include a Charity organisation. Include a Charity is an initiative in which 68 charities have joined to try to increase the number of New Zealanders who include charities in their will.
Fewer than 8% of New Zealanders give to charities in their will, Include a Charity spokesperson Eleanor Cater says.
"It's not because they don't want to; it's because they don't think of it," she says. "We're working to change that."
Ms Cater says lawyers are seen as very important players in increasing awareness.
"We know from research that if the lawyers ask a question 'Would you like to give to charity in your will?' when people are in the process of writing a will, twice as many people will do so. That's how important it is, that question. I doubt that many lawyers realise that that conversation can have a real impact on fundraising in the charity sector."
She says while lawyers obviously don't want to influence to whom their clients leave their estate, many just haven't thought of including a gift to a charity: "It's a very kiwi way that we leave all our worldly goods to our children or other relations."
Eleanor Cater believes that if asked, most people would know what charity they want to support. However, there is also assistance in the long-established New Zealand Charity and Legal Gazette. Published annually since 1974, the Gazette is distributed free of charge to members of the NZLS Property and Family Law Sections. A mix of listings and paid advertisements, it is designed to be made available to clients who may be considering a bequest to a charity.
"It provides a platform for non-profit and charitable organisations to make their case for bequests and donations," publisher and managing editor Michael Woolf says.
"We're proud of the Gazette's position as this country's de facto reference for bequests and donations."
Neurological Foundation General Manager Communications and Fundraising Sue Giddens says her organisation always takes a prominent placement in the Charity and Legal Gazette.
"That's for people who perhaps don't have family, or who do have family but want to include a charity in their will. But we also advertise bequests within all of the marketing or communications material that leaves the Neurological Foundation's office – in our newsletter, in our annual report and so on."
Ms Giddens says the Foundation also advertises in North and South and the Listener.
"We have heard through lawyer word of mouth that people have taken the advertisement in to a meeting with their lawyer when they've been revising their will or making a will."
The importance of bequests is shown by the efforts made by some charities to provide resources and background information. The Cancer Society of New Zealand has a special "Wills Kit", and the websites of many others give information on how to make a bequest.
Support programmes have also been developed to assist and recognise those who make bequests. The New Zealand Breast Cancer Foundation's Pink Ribbon Bequest Society has been established to recognise, honour and personally thank those who remember the Foundation in their will. An advertisement for the Wellington Division of the Cancer Society in the NZLS Wellington branch publication Council Brief offered anyone making the Cancer Society a beneficiary of their estate "no matter how small or large", a contribution of $250 plus GST towards the cost of preparation of a will and/or codicil or Memorandum of Wishes for a trust. This offer was only for donors from the Wellington Division's area.
Precision is needed
Many charities provide suggested wording to assist anyone who might want to include them in a will. For some charities which have multiple branches around the country, it is important to identify the intended use or destination of a bequest.
"We're actually 46 separate organisations because of the federated structure," the SPCA National Marketing and Fundraising Manager Rona Booth says. "If people want to leave their bequest to the national body of the SPCA for them to spend, then they need to leave it to the Royal New Zealand SPCA; if they want it to go to a specific region, then they need to write in their will the name of the local SPCA they want it to go to."
Directions on use of the bequest also need some thought.
"Obviously we don't want people to restrict the purpose too much because sometimes it isn't a viable project for the SPCA to run," Ms Booth says. "But I think the individual needs to decide do they want the money to go to the national umbrella organisation for them to use or do they want it to go to the local branch."
The Neurological Foundation is a national organisation and does not have the problem of location, but it does encourage testators to specify if they want to assist a particular area.
"We ask people to specify if they wish to support a specific area of neurological research," Sue Giddens says. "They might have had a family member with dementia so they might want the estate to be left for dementia research."
Like many of the charities which provide suggested wording for bequests, St John provides a bulletproof clause:
"I give and bequeath the sum of $…… (or) ……% of my estate, (or) residue of my estate, (or) property or assets as follows …… free of all charges, to The Order of St John. The official receipt of the Chief Executive or other authorised officer of the Trustee is an absolute discharge to my executors."
A potential pitfall lies in bequests which leave the residue of an estate to a charity – particularly if circumstances cause the value of the estate to rise quickly.
Leaving the residue to a charity is an attractive option. In its guidance to would-be testators, the Royal New Zealand Foundation of the Blind says the very best way in which they can help the Foundation is to leave a residuary legacy, "that is, to leave whatever is left, or a percentage or fraction of whatever is left, after your dependents have been provided for and your debts and cash legacies have been paid."
This type of legacy is inflation-proof, the Foundation says, maintaining its value over time, and the testator will never have to alter their will to account for inflation.
One problem impacting on the testator's intention could arise when the main asset is a house valued at, say $200,000 when the will is made. The three children are each left $50,000 and a grandchild $20,000. The residue, after funeral and other costs, is left to a charity. Time passes but the will is never reviewed. House prices rocket. On the testator's death the house is worth $600,000. The charity may now be the unintended recipient of well over half the value of the estate. Worth pondering.
Bequests as a source of income
Information from the Charities Register shows that some charities derive a very high proportion of their income from bequests. The 10 largest are:
Total Gross Income
Salvation Army New Zealand Group
Woolf Fisher Trust
Royal NZ Foundation of the Blind
Priory in NZ of St John
National Heart Foundation of NZ
Room-Simmonds Charitable Trust
Auckland Presbyterian Hospital Trustees
Canterbury Medical Research Foundation
Diocesan School for Girls
Last updated on the 3rd November 2015