Woodland Trust loses appeal over 'double nil rate' legacy dispute

The Court of Appeal rejects the charity's contention that a will made by a supporter in 2001 should not be subject to subsequent changes in inheritance tax law

Woodland Trust
Woodland Trust

The Woodland Trust has lost an appeal in a legacy dispute about £325,000 of a deceased supporter’s money, in a case it said would have ramifications for other charities.

The case centred on the £680,000 estate of Valerie Smith, who died in 2011, whose will said that her family would inherit an amount equal to the inheritance tax nil rate band, which is £325,000 for a single person, and the remainder would go to the charity.

But since Smith made her will in 2001, the law on the nil rate band had changed, and the High Court ruled in November that her two sons could combine her tax-free allowance with that of her husband, who died before her, giving an allowance of £650,000, which would go to the family, leaving £30,805 for the charity.

The Woodland Trust contended that combining the allowances should not be allowed, but its appeal was rejected by the Court of Appeal this month.

"We are disappointed that the court decided that the tax-free gift in Mrs Smith’s will is worth twice as much as it seemed from the wording of the will," a spokesman for the charity said in a statement. "This was always a legal challenge to the technical application of the law.

"This ruling could mean charities losing out in the future where they are a beneficiary of a will containing this type of tax-free gift."

In a blog post for Baker Tilly, George Bull, senior tax partner at the accountancy firm, said: "Some will observe that legal challenges by powerful charities intent on maximising their inheritance are distressing for the other beneficiaries, costly and go against the spirit of charity in which the donor included the testamentary provision in their will in the first place.

"Of course, charity trustees have a duty to protect charity assets and to ensure that they receive from the deceased person’s estate the benefit that their supporter intended them to get while he or she was alive."

Bull said disputes between charities and the families of legators could be avoided if people left only fixed amounts to charities in their wills, if they ensured they were kept up to date to reflect changes in tax law and practices, and if charities were given a copy of wills after their execution.

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