Putting the spotlight on discretionary legacies – Part 1

In January, it was announced that Great Ormond Street Hospital Children’s Charity (GOSH Charity) had reported a total income of £108 million in the year to March 2023, up from £74.5m the year before.

It was the second time the charity had surpassed £100m and comes after a fundraising drive led to a sharp rise in donations last year.

Within that record-breaking figure, legacies were the second-largest fundraising income stream – rising by £9m to £31m – and among them were two discretionary legacies, which resulted in gifts of £1m and £1.2m.

To find out more about how the legacy team handles discretionary legacies, we spoke to Richard Pragnell, GOSH Charity’s Head of Legacy Management. In the first of a two-part article, he talks about the importance of being able to demonstrate a legacy will be put to good use, and why there’s a fine line between being ‘persistent and pushy’.

In part two of the article, Richard will be talking more widely about legacy gifts and sharing his top tips.

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ILM: Richard, congratulations on such an amazing achievement. Why do you think there has been such an impressive rise in legacy income?

RP: We had a stellar year for legacies last year, with record levels of both notifications and income – we’ve invested historically in legacy marketing and hopefully this is in part a reflection of that original commitment and the hard work of our Legacy Marketing team now paying dividends. 

We’re also very fortunate to have a Board of Trustees and Senior Leadership Team that recognises the critical value of legacy giving and, when we embarked upon an ambitious new 10-year fundraising strategy three years ago, committed to further substantial investment in our core fundraising streams with legacy giving one of the key priorities. 

However, that significant jump in legacy income was underpinned by an exceptional number of extra-large gifts (we would usually forecast to receive notification of two or possibly three legacies a year with a value of over £500,000). Last year, we had 10 legacies that contributed a combined legacy income of £9m, including two discretionary gifts totalling £2.2m.

ILM: How often do you receive discretionary legacies and are they more time consuming or challenging to deal with?

RP: We currently receive c.600 legacies every year and of that around 20-30 are discretionary gifts, where trustees have broad powers to direct legacies as they see fit or perhaps guided by an accompanying letter of wishes setting out potential beneficiaries. 

I wouldn’t necessarily say that discretionary legacies require case handlers to devote more time or energy than other types of legacies, I think we all know that complex residuary or contentious legacies tend to disproportionately dominate our time (!). However, they definitely need a close eye and a willingness to steward trustees and/or relatives that are more likely to be motivated or concerned that we are able to demonstrate that the legacy will be put to good use.

ILM: How do you persuade the trustees that GOSH Charity is a worthy beneficiary?

RP: We find that whilst there’s generally a high level of public awareness of Great Ormond Street Hospital as a centre for world-class paediatric clinical care, the same doesn’t necessarily apply to the continued need for additional funding through charitable support. 

GOSH Charity exists to help fund four key areas at the hospital that are above and beyond what the NHS can provide; redevelopment of hospital facilities, state-of-the-art medical equipment, pioneering paediatric research and support services for patients, families and staff. As part of our stewardship, we will explore with trustees potential projects or areas of funding that they feel would have resonated with the legator and represent a fitting tribute to their memory. We might provide a portfolio of potential projects with a range of funding levels for consideration and of course a bespoke tour of the hospital always helps bring the case for support to life!

ILM: What are the pitfalls around discretionary legacies, what should legacy officers be worried about, ie: failure to demonstrate something may result in the trustee deciding the money goes to another charity?

RP: Unlike other types of legacy, a charity has no legal right to a discretionary legacy, a trustee is under no obligation to pay over a discretionary legacy even if they’ve indicated that they are considering doing so, so it’s critical that case handlers exercise care and patience when liaising with a discretionary trustee. 

There’s a fine line between being persistent and pushy, and if you are perceived to be stepping over the line, then trustees could well choose to apply the discretionary legacy for another worthy cause. We had one discretionary gift that took four years of gentle stewardship to finally realise and we were very aware that the trustees were actively engaging with other hospitals and research-focused charities throughout that time for suitable alternative projects. Thankfully, our patience paid off, as their initial proposal of a £250,000 discretionary legacy eventually crystalised into £430,000.

ILM: What type of individual is more likely to leave a discretionary legacy and why?

RP: I suspect they would be the type of person who is comfortable in the knowledge that their trustees will make gifts that align with the values or beliefs they held during their lifetimes – or it may well be that they just wanted to be discrete about the causes they cared about and didn’t want them to be publicised in their will.

ILM: When your team is promoting leaving a legacy, are you likely to suggest a discretionary one and what are the advantages/disadvantages?

RP: No, it’s not something we actively promote, but it’s definitely worth keeping an eye out for discretionary legacies and asking trustees if any distributions are comprised of income generated from a discretionary trust – one huge advantage for charities is that these payments attract a significant rate of income tax (45%) which can be reclaimed using an R185 (trust income) tax certificate.