Legacies

It is a fact of life for many charities that their principal source of income is from legacies. These generally take the form of specific gifts in a Will but there can be occasions where charities are faced with objections to the Will.

Charitable gifts and ex-gratia payments

Although probably rare there will be circumstances where charitable trustees may find themselves with a moral obligation to transfer all or part of a charitable gift to a person who is neither a beneficiary under the Will nor a potential beneficiary of charitable funds. In theory such an ex-gratia payment should not be made as the trustees are under a duty to maximise the assets of the charity.

However, there is legislative authority to enable trustees to do this subject to certain safeguards.

It is not clear when such payments can be made and what the criteria are for the authorisation of the payment. Plainly there are obvious occasions such as where someone has devotedly cared for the testator for many years as is not recognised in the Will but each circumstance will depend on its merits.

Any application for

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All in? Court confirms when a settlement is 'made' for the purposes of excluded property (Accuro Trust (Switzerland) SA v The Commissioners for HMRC)

Private Client analysis: This case considered the meaning of 'relevant property' under the settlements regime of the Inheritance Tax Act 1984 (IHTA 1984) and, in particular, the time at which this definition is to be tested. The question arose as to whether the trustees of an offshore trust established by a non-UK domiciled settlor were subject to the UK settlements regime in respect of property added to the trust after the settlor became deemed domiciled in the UK, or whether they were exempt from such charges as the trust consisted solely of excluded property. The First-tier Tribunal (FTT) held that whether trust property is excluded property is based on the status of the trust at the time that it was established, not at the time that the property in question was added to the settlement. As a result, the trust in this case did consist solely of excluded property and no inheritance tax (IHT) charges arose as a result of either the ten-year anniversary or capital distributions. The FTT was also asked to consider whether their jurisdiction was appellate, or supervisory only. The FTT held that, while their jurisdiction was supervisory, the questions raised by the trustees were relevant in establishing whether HMRC had acted reasonably and that the outcome (ie that the paid IHT should be refunded and that no further IHT was due) would be the same in either case. Written by Katherine Willmott, senior associate solicitor at Foot Anstey LLP.

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