Charities could be missing out on up to £1bn in legacy income, an analysis by economists has suggested.
Legacy Foresight looked at the number of registered deaths in the UK and the number of charitable gifts in relation to those deaths over the past few years.
It found that if the correlation between the two had followed historical patterns, charities should have received an extra 30,000-40,000 gifts, worth between £800m and £1bn of legacy income.
The consortium was unable to pinpoint a distinct cause for the shortfall in bequests but suggested that delays at probate might “provide part of the explanation”.
Up to £1bn missing
Jon Franklin, economist at Legacy Foresight, said that despite growth in the legacy market in recent years, “charities have seen fewer gifts in wills arriving with them than we would have expected given the high number of deaths”.
He added: “If the relationship between the number of deaths and the number of legacies had followed historical patterns, then we would have anticipated an additional 30,000-40,000 gifts to have arrived with charities compared to what we have seen. This would be the equivalent of around £800m-£1bn of additional legacy income.
“Whilst there is significant uncertainty about what has caused this shortfall in bequests and whether charities will ultimately ever receive this additional income, we do know that delays at probate over recent years provide part of the explanation.”
Franklin said that the 30,000-40,000 gifts relate to about 9,000-12,000 charitable wills that contain at least one charitable gift.
“This means that 9,000-12,000 deaths are directly responsible for those gifts we would have expected to have arrived with charities. However, typically we would need around 170,000-230,000 deaths to get that many charitable wills.”
He explained that it is quite difficult to say when the deaths occurred for those gifts but estimates that they were primarily spread out between 2019 and 2020.
Situation at probate is improving
According to Legacy Foresight, the backlog of probate cases at HM Courts and Tribunals Service (HMCTS) stood at around 24,000 at the end of June.
Franklin said that “some progress has been made” to reduce the backlog. “Clearing this backlog could potentially result in an additional 11,000 charitable bequests – around one third of the potential shortfall in gifts that charities have experienced in recent years. This is the equivalent of around £300m of income, which could be supporting beneficiaries at a time when they need it most.
“But with deaths set to increase, and bequests projected to rise by 11% over the next five years, it’s essential that more resilient systems are put in place to ensure the administration system can keep on top of the additional workload.
“The donor’s wishes, the charity’s income and the beneficiaries’ needs are reliant on this income, and by moving the backlog through the system faster, we can help more people.”
Remember A Charity argued that HMCTS has maintained a “strong level of grants issued throughout the course of this year”.
A spokesperson said: “HMCTS have been working really hard to make sure they maintain a strong level of grants issued. We’ve seen this mix of things where they’ve had a higher-than-expected level of applications but it’s not necessarily been at the same percentage you would expect when you look at the percentage of deaths overall.
“There’s no doubt that there’s been an ongoing issue with the probate backlog but the output level is still staying strong.”
They continued: “Certainly, we saw back in 2020-21 a disproportionate number of cases that were adversely affected, which were eligible for inheritance tax. A lot of those issues have now been resolved. When we think about charitable estates, they’re not all equal.”
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