Return a gift: how charities can make moral (ex gratia) payments
How your charity can make a moral ('ex-gratia') payment which does not support its aims.
About moral (ex gratia) payments
Charities can only spend their money on projects or activities that support the aims stated in their governing documents. But there may be times when trustees feel they should make a payment out of a moral obligation.
If the payment is not allowed by your charity’s governing document or the law, and is not strictly in the best interests of the charity, it’s known as a moral or ‘ex gratia’ payment.
This situation can arise if your charity receives a legacy but there’s evidence that the person who died had changed their mind since making the will.
Your charity is legally required to keep everything it receives as a legacy. But you can pay a person out of the charity’s share of the legacy, so that he or she receives what the deceased intended them to have, if:
- there is suitable evidence, and
- the trustees feel morally obliged to make the payment
For example, someone leaves money in their will to their grandchildren and a charity. They change their will to include a new grandchild but die before signing it. The charity wants to honour the will-maker’s intention by giving some money back.
You need to ask the commission to approve any ‘moral’ payment which either:
- you have no legal obligation to make
- your governing document does not allow you to make
- you cannot justify as being in your charity’s best interests
How to decide if you have a moral obligation
You and the other trustees must decide if you are morally obliged to make the payment, bearing in mind that:
- anyone who makes a will has the right to give away their money or possessions to whoever they want to
- if relatives are disappointed, this is not enough on its own to justify an ex gratia payment
- making an ex gratia payment may affect your beneficiaries, as your charity will not be able to use the bequeathed money or property any more
You’ll need to prove to the Charity Commission that ‘if the charity were an individual it would be morally wrong to refuse to make the payment.’
Only apply to the commission for permission if you:
- feel you have a moral obligation to make the payment
- can provide clear evidence to support your decision
Apply for Charity Commission permission
Complete the commission’s online form and set out the facts of the case as clearly as possible. You’ll also need clear and impartial evidence to support your decision.
The commission only accepts applications from charity trustees or their representatives. It can’t accept applications from anyone who would benefit from the proposed payment.
What information to provide in the form
It is an offence under section 60(1)(b) of the Charities Act 2011 to knowingly or recklessly provide false or misleading information.
You’ll need to provide:
- details of the payment(s) and full name(s) of the person(s) to be paid
- if applicable, a copy of the will and proof that it is legally valid (probate) as PDF files
- evidence that the will doesn’t account for the deceased person’s intentions
- evidence showing why the wishes of the deceased person couldn’t be carried out
- copies of any legal advice you have taken (as PDF files)
You should also provide any other evidence which supports your decision, such as the minutes of the meeting where you decided the charity had a moral obligation to make the payment.
A statement from someone claiming to be entitled to a payment is not impartial and is not enough evidence on its own. A draft (unexecuted) will is an example of acceptable evidence.