Legacies are a vital source of income for many charities but the lack of control over the administration of the estate can leave charities at risk of fraud. I spoke with charity CEO Stuart Craig about his experience of fighting for a £1.5m stolen legacy and asked for his hard-won advice on how charities can mitigate the risk of legacy fraud.
Legacy fraud: a real-life example from the Canon Collins Trust
The Canon Collins Trust, a charity with annual income of around £1m and seven employees, provides educational opportunities for southern Africa through scholarships and community-based projects. Its annual legacy income ranged from £22k to £165k in the years before the stolen funds were recovered and legacies are very important to the charity’s work because they fund about a third of the scholarships awarded by the Trust.
In 2016, the Canon Collins Trust was unexpectedly left an estate worth nearly £1.5m following the death of one of the Trust’s supporters – a transformational gift intended to support the work of two partner organisations in South Africa. However, more than two years had passed before the charity first heard about the bequest. By then, the estate had already been plundered.
The appointed executor of the donor’s Will was a solicitor working for a firm local to her. When the executor became aware of the bequest, it appears that he saw an opportunity to enrich himself. Concealing the legacy from the charity, he used the estate’s assets for his own benefit over several years before the fraud was uncovered. Stuart Craig, CEO of the Canon Collins Trust, explains:
“For example, he purchased a London property for his personal rent-free use and converted the donor’s house into two rental flats, generating a tidy income.”
Craig first became aware of the legacy’s existence in 2019. The charity was contacted by the law firm that had employed the fraudulent solicitor after they became aware of irregularities, and the police got involved. Fortunately, with legal support, the Canon Collins Trust was able to recover most of the legacy’s original value over the following years. Nevertheless, this is a cautionary tale: not only was there a real risk of losing some or all the legacy, but Craig warns that the legal case dominated his workload for three years.
Protecting your charity from legacy fraud
The Canon Collins Trust reported the fraud to the Charity Commission as a serious incident when the fraud was discovered, and reports about the fraud and the efforts to recover the funds have appeared in its annual reports from 2019 onwards. Wondering why the charity was targeted by the executor, Craig thinks that the solicitor “probably thought that he could get away with it because the Canon Collins Trust is quite small” and he warns charities not to always rely on trust even if the executor is a qualified solicitor. “Neither should charities assume the police will recover your funds” says Craig, adding “The Canon Collins Trust went down the civil action route and, after three years, the fraudster has still not been charged by the police despite the overwhelming evidence against him.”
Since then, the Canon Collins Trust has taken action to prevent legacy fraud recurring. The charity now subscribes to Smee & Ford’s notification services which provide timely alerts to charities on forthcoming legacies. Craig advises all charities to use such services if there is any prospect of them receiving a legacy, but he also recommends that charities encourage their existing donors to inform them if they intend to remember the charity in their Will.
While he finds the legacy notifications from Smee & Ford reliable, Craig says that being aware of future bequests not only offers an additional safeguard, “it also gives us an opportunity to thank donors while they are still alive.” In this case, the Canon Collins Trust found out too late to thank the donor during her lifetime, as Craig regrets, “we were never able to acknowledge her generosity.”
Although prevention is better than cure, if fraud occurs, Craig recommends involving a solicitor experienced in dispute resolution and fraud. This proved to be crucial in recovering funds for the charity. “There was a time when we were quite worried that we wouldn’t receive any of the money, or very little of it” and he adds that it required a lot of persistence to get a successful outcome.
Further support to tackle legacy fraud
The Prevent Charity Fraud website describes other types of legacy fraud, including actions of aggrieved family members or carers, or legacy fraud committed by charity staff and volunteers. It reiterates the importance of common fraud preventions, such as segregation of duties, maintaining audit trails of electronic and paper records, and using checklists to ensure consistent application of procedures by an independent person.
In the guidance, you can find common ‘red flags’ that charities should be awake to and receive advice on preventative and reactive actions that charities should consider. This may include seeking independent validation of the estate’s assets and liabilities and liaising with other beneficiaries as appropriate.