Risk management

Uncharitable dispositionsTimothy had two passions in life - family and religion.

When his wife died, he drew up a will dividing the bulk of his large estate three ways: one-third to each of his two daughters, Faith and Hope, and the last third to a charity campaigning for Third World debt relief.Timothy died last year.

Alan, the solicitor for his personal representatives, decided to hand conduct of the administration to Simon, a bright young lawyer who had recently qualified and was keen to make his mark in the firm's private client department.Simon read the provisions of the will with great care.

There were some minor legacies, which were straightforward.

The residuary clause was also clearly drafted: it provided for distribution to the beneficiaries after payment of taxes.Simon collated the assets to value the estate, calculated the inheritance tax liability and paid it.

He obtained the grant of probate, collected in the assets, paid outstanding bills and legacies.

Then he sent out three cheques, each for a third of the residue, to Faith, Hope and the charity.

With client account at nil and the beneficiaries paid, he waited for their acknowledgement of the estate accounts as drawn.Next day Alan opened the post to find an angry letter from the charity demanding its rightful share of Timothy's estate.

It insisted that its charitable status exempted it from inheritance tax and demanded that the tax liability be reapportioned.

Faith and Hope would have to account for the sum wrongly deducted from the charity's share of the estate.Alan told Simon what had happened.

To his credit, Simon kept his cool.

He explained he had followed the will's provisions, and admitted his mistake in ignoring the charity's statutory exemption from the tax.Simon wrote to Faith and Hope, explaining his mistake and requesting return of the overpayment.

He is still waiting for a charitable response.

Alan notified SIF of the potential claim.

He is addressing Simon's training needs...

and his own supervision skills.

X For information on claims prevention, contact your claims handler at the Solicitors Indemnity Fund or the Risk Improvement Unit; tel: 0171 566 6000.