Who do you think you are? Charities, mergers and legacies

It may be worthwhile examining a charity’s ‘family tree’ in order to secure future legacy income.

Has your charity ever been part of a merger, restructure or the recipient of the transfer of all assets from another charity? If so, the charity should be identifying key information about that. It may be that a merger or other restructuring moment happened many years ago. Charities should revisit their ‘family tree’ to find out if there has been some from of previous merger activity. 

The record of charity mergers

Why should this be done? To ready the charity to be able to submit information to OSCR for the ‘record of charity mergers’. This new process will give protection for legacies in wills destined for a charity that has been the subject of a merger or similar. 

Lost legacies

If the charity does not take this action, a legacy might fall. Whether or not it falls will depend on the random and uncontrollable issue of how the will has been drafted. The default law in this area can seem quite harsh and result in charitable legacies being ‘lost’. Lost in the sense they cannot pass to the defunct charity and will not transfer to the successor charity. The legacy will fall to the residuary beneficiaries or even fall to distributed according to the rules of intestacy. 

To help avoid disappointment (from beyond) and to protect legacy income, charities should put this issue on the ‘to do’ list for this year. It would also seem to be a topic that auditors/independent examiners and other advisers could usefully put on the agenda when next discussing financial matters with charities with which they work.

Closing legacy charities?

Once the record of charity mergers comes onstream, charities who have retained an ‘old’ charity to help capture any stray legacies may wish to decide to close off the old charity for good. That will help bring a bit of streamlining with not having an essentially dormant charity continue in existence.

The power of legacies: opening the conversation

These helpful new rules also underline the importance of legacies as an income stream. For charities with existing legacy programmes, this will help secure legacies that are ‘already out there’. For charities that do not have a legacy campaign, they should perhaps consider how they might engage in the legacy conversation. And it is, we think, just that: the opening of a conversation. It is conversation topic that all charities can have. It is not, bluntly, the preserve of charities that might be viewed as having a connection to the issue of death. Charities should consider how they might benefit from human desire to support good causes and a desire that appears to continue to be strong in terms of overall legacy income year on year and anticipated for the future.

 

For help and advice on Scottish charity law issues including legacies, get in touch with Alan Eccles: alaneccles@bkf.co.uk / 07359001038.

“Alan is highly experienced in advising third sector organisations on governance and constitutional issues, including charity establishment and modernisation… He blends excellent technical advice with both pragmatism and plain communication.” Chambers and Partners 2023

“Alan advises on a range of issues and has particular experience in charities work. A source notes: “Alan is a professional, dedicated and passionate private client lawyer.” Another interviewee enthuses: “Alan has excellent experience and technical knowledge, and he is very generous with his time.” Chambers High Net Worth 2022