What happens to a gift in a will to a charity if it has merged with another charity?

• Where a charity transfers all of its property to another charity, and the transferring charity ceases to exist. (This includes the incorporation for a previously unincorporated charity).
• Unincorporated charity where two or more charities create a new charity and transfer all their property to it, and the transferring charities cease to exist.

Under the legislation the Charity Commission has established a register of mergers. The Act also includes new provisions to ensure that, where a legacy has been given to a charity after it has merged and ceased to exist, that gift will be treated as if it had been made to the post-merger charity. There appears to be a potential risk if a donor by Will dies between the transfer of the last asset (required before a merger can be registered) and actual registration. A trust charity will cease to exist when it has no property.

The legislation also makes it possible for mergers that completed before the new Act came into force to be entered in the register. This enables charity trustees to wind up any old, “shell” charities they have kept simply to receive legacies and donations.

However, the new provisions do not apply to any other sorts of merger, for example:

Where only part of a charity merges with another charity.
Where one charity becomes a subsidiary of another charity.
Where a Will specifically names an alternative charity as the recipient of a legacy, if the first-named charity has ceased to exist.

The wording of Section 75F is not considered sufficiently strong to override conditions in a testator’s Will that require a charity to exist at or beyond the testator’s death. Section 75F provides that, “Any gift which is expressed as a gift to the transferor, and takes effect on or after the date of registration of the merger, takes effect as a gift to the transferee . . .”
In addition to naming an alternative charity, a Will may also contain other conditions that attach to a charitable legacy, for example:

• “no person or organisation shall take . . . unless he, she or it survives me by at least 28 days”
• “. . . to the following charities as shall be in existence at the date of my death”

In these circumstances the gift will either fail completely or will involve the charities concerned in what may well turn out to be time consuming and expensive litigation.

In May 2009, the Charity Commission met with the Attorney General to discuss the problem of transferring legacies when charities merge and we await the outcome of that meeting. Until tighter rules are introduced, many are advising merging charities to continue to retain shells of their old organisations to ensure legacies are protected.

This article was written by Jane Whitfield, on behalf of the Wills and Equity Committee, Charity Law Working Party, Law Society, London.

Call us for any aspect of legal advice for your charity on 020 7481 2422 or email enquiries@wellerslawgroup.com

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