Charitable Trust Loses Appeal over Legacy Dispute

The Woodland Trust has lost its appeal in a dispute regarding a legacy from the Estate of Valerie Smith, who died in 2001.

The Deceased made her Will in 2001 before the spouse transferable nil rate band was in force.  Mrs Smith left an amount in her Will "equal to the inheritance tax nil rate band" to her family and the remainder to the Woodland Trust.

Since making her Will in 2001, the spouse transferable nil rate band was introduced, and Mrs Smith did not subsequently review or change her Will.  Mrs Smith's husband predeceased her, leaving his full nil rate band allowance intact. Mrs Smith's family argued that the legacy due to them under her Will which was "equal to the inheritance tax nil rate band" also included Mrs Smith's husband's unused nil rate band allowance of £325,000 therefore, doubling the inheritance due to the family, and vastly reducing the residuary legacy to the Woodland Trust.

The Woodland Trust argued that the spouse nil rate band should not be included in the gift to the family, but its appeal was rejected by the Court of Appeal in October.

The charity is disappointed with the Court of Appeal's decision that the tax free gift in Mrs Smith's Will was worth twice as much as it seemed from the wording of the Will. 

The ruling could mean that charities lose out in the future where they are a beneficiary of a Will containing this type of tax free gift.

Charity trustees are under a duty to safeguard the charity's assets and to ensure that they receive from the deceased person's Estate the benefit that the Testator intended them to receive.

This case highlights the importance of ensuring that Wills are properly drafted to so that the Testator's intentions are accurately reflected.

Posted on: 03/11/2014

This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.

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