Keep it legal: Ex gratia payments

There are times when charity trustees feel morally obliged to give away donations, even though there is no legal compulsion for them to do so.

These kinds of donations are known as ex gratia payments and occasionally arise in the course of legacy matters. For example, a testator might have left his or her estate to a charity in his or her will, but later left a handwritten note that asked for part of it to go to a relative. By law, this note would not be included as part of the will, yet the charity's trustees might feel under a moral obligation to honour the testator's wishes rather than take advantage of his or her ignorance of the law.

The modern approach to ex gratia payments was laid down in the case of Re Snowden in 1969. The judge ruled that charity trustees could make ex gratia payments when it would be morally wrong of them to do otherwise. The decision as to whether trustees are morally obliged to make ex gratia payments is a personal duty for the trustees and cannot be delegated to employees. However, the court also held that trustees can make payments only with the permission of the court or the Attorney General. The Charities Act 1993 authorised the Charity Commission to consent to ex gratia payments and, in practice, all applications regarding such payments are initially made to the regulator.

The trustees must provide the commission with detailed reasons why they feel morally obliged to retrocede part or all of the estate in question. For example, in a legacy situation trustees should send the commission a copy of the will and grant of probate, together with evidence showing that the will does not reflect the testator's intention and why the testator was prevented from giving effect to his or her real intentions. This could include handwritten notes made by the testator together with any supporting witness evidence. If more than one charity is involved in the ex gratia matter, each charity should submit a written statement to the commission giving its reasons for finding that a moral obligation exists.

In order to make ex gratia payments, charity trustees must not only feel they are morally obliged - they must also be able to convince the Charity Commission of this. Giving away a charity's property is not something that can be done lightly.

- Charlotte Watts is an assistant solicitor in the charities department at Wilsons LLP 

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