Charitable Bequests (Qld)
A testator chooses who will receive their assets after their death and writes these bequests out in their will. Gifts are typically left to family members and close friends, but many testators also choose to leave a bequest to their preferred charitable organisation. These charitable bequests range from nominal amounts left as absolute gifts to more sizable bequests that create a perpetual trust. This article outlines the nature of charitable bequests in Queensland and explains some potential mistakes to avoid when drafting a charitable bequest.
What Is A Charitable Bequest?
A testator leaves a charitable bequest in their will to make a posthumous donation to a charity after their death. The legal meaning of “charity” in Australia is codified by a long history of common law precedent, starting with the Special Commissioners of Income Tax v Pemsel . This case found that there are four recognised charitable purposes, known collectively as the “Four Heads of Charity”:
- Relief of Poverty;
- Advancement of Religion;
- Advancement of Education; and
- Another purpose recognised as beneficial to the wider community.
Creating A Perpetual Charitable Trust
A testator can leave instructions in their will for the creation of a perpetual charitable trust if sufficient funds are available to support such a structure. This means that the capital bequest is kept in trust, while the income from the capital is used for a charitable purpose. A perpetual trust is only feasible if there is enough money to pay for the myriad costs related to running a trust (such as management fees) without draining the capital. It is best to consult an experienced solicitor before making such provision in a will to ensure that a perpetual trust is the appropriate choice in the circumstances.
Charitable Bequests: Common Mistakes
Care must be taken when drafting a charitable bequest to avoid inaccuracy and ambiguity. A bequest to a charity must correctly identify the charity and specify the charitable purpose of the gift. If the charity is not identified properly then the bequest may fail unless the executor is able to obtain a court order rectifying the mistake.
A testator should endeavour to provide the full and accurate details of a charity, sourced from the organisation’s own published information. Many charities post their details on their websites with instructions on how to word a bequest for inclusion in a will. Alternatively, there are government websites that maintain records of registered charities in Australia with information on the charity’s purpose and any history of non-compliance with statutory obligations. If a mistake is found in a charitable bequest, the Supreme Court has the power to alter a gift that is in danger of lapsing to allow the funds to be applied cy-près or “as nearly”.
Exclusive Charitable Purpose
It is important that a charitable bequest is worded to express the purpose behind the gift. Some organisations, particularly those founded by religious orders, carry out both charitable and non-charitable activities, and it is necessary that a testator specify their testamentary intention. There is legal recourse to save a gift that has an unclear purpose, but this would expose the deceased estate to needlessly time-consuming and expensive litigation.
In Banwell v Attorney-General , the Supreme Court examined the will of Marie Cruice, which left $450,000 in trust for various named charities. The charitable bequests were in danger of lapsing because of mistakes in identification and changes to the names of charitable organisations. Generally, a gift will lapse if the entity no longer exists when the testator passes away, except when the gift is for a charitable purpose.
In this case, the administrator of the estate petitioned for resolution of the mistakes in naming the institutions. The court had to assess whether the testator had demonstrated a general charitable intention in making the gift or intended the bequest only to support one charity to the exclusion of any other. In this case, the court ruled that although some clauses of the will demonstrated a specific charitable purpose, such as those for the support of a particular boys’ home, the sheer number of charitable bequests within the will indicated a general charitable intention. It was also important that under the terms of the will each charity could utilise the funds for any of its charitable purposes, as this further indicated a general charitable intent rather than a desire to support any particular charitable endeavour. The court took note that there was no evidence in the will itself or presented extrinsic evidence to suggest that the deceased had specific confidence or personal connection with any organisation that would preclude redirecting the charitable bequest.
The court addressed each bequest separately, looking at the wording of the original gift for guidance on the testator’s intention. For example, a bequest for the Princess Alexandra Hospital (PA) could not be administered because there was no such legal entity: the PA was a part of Metro South Hospital and Health Service. The court was convinced that the testator had a general charitable intent to fund medical research carried out at the PA. The court found that the reference to the PA should be construed as meaning Metro South Hospital and Health Service and ordered that the administrator pay the gift to that entity for its charitable purpose.
The experienced wills and estates solicitors at Armstrong Legal are available to answer any questions you may have about making a charitable bequest in your will. Engaging a solicitor to help you draft this type of bequest will ensure that your charitable intent is clear and unambiguous. Please get in touch today on 1300 038 223 to talk about your legal needs, or make an appointment to start drawing up your will.