Charitable Bequests (WA)
When someone makes out a will, they must choose who will receive the assets of the estate. A testator typically leaves bequests to family members and friends, but some also like to leave a last gift to their favoured charity. These charitable bequests range from relatively small donations given as absolute gifts to sizable bequests held in perpetual trust. This article defines the role of charitable bequests in estate planning in Western Australia and highlights some commonly made mistakes that a testator should avoid when creating a charitable bequest.
How To Leave A Charitable Bequest
A testator can make a charitable bequest in his or her will to leave a posthumous donation to charity. Common law precedent has established the definition of charity, beginning with the Special Commissioners of Income Tax v Pemsel . This British case legally recognised four charitable purposes that are colloquially known as the “Four Heads of Charity”.
- The relief of poverty;
- The advancement of religion;
- The advancement of education; and
- A different purpose that benefits the broader community.
Charitable Bequests Held In Perpetual Trust
A testator might choose to leave a larger bequest in perpetual trust, with the capital held in trust while the income is distributed for charitable purposes. This is only possible if there are sufficient funds available to maintain a trust, including paying for management fees, without fully depleting the capital. An experienced solicitor can advise on whether a perpetual trust is the right choice for a charitable bequest.
Correctly Identifying the Charity
A testator must take extreme care when wording a charitable bequest to avoid ambiguity or misidentification. While a testator will typically know the name and details of family and friends very well, it is not uncommon for a testator to wrongly identify a charitable organisation. In that case, an executor will have to obtain a judicial order in order to clarify the intention behind a charitable bequest that misidentifies an organisation or benefits a charity that is no longer in operation. In the event that a testator makes an error in their charitable bequest, the Supreme Court of Western Australia has authority to rectify a gift that is at risk of lapsing. The court does this by applying the gift cy-près (“as nearly”).
The best place to find accurate information on a charity is usually the organisation itself. Many charities publish information on their website for this exact purpose, with the legal name and contact details of the charity and suggested wording for a bequest. There are also government registers that hold records of registered charities in Australia, with information on the charity’s stated purpose and history of compliance with statutory regulations.
In the recent case of Jeffery Lin as Executor of the Estate of Emerald Cynthia Wolff Michaelson v Schubert , the court considered a case concerning a failed charitable bequest. The will bequeathed 60% of the residue of the estate to the Jewish Community Appeal of Western Australia (JCAWA). There is no legal entity registered under that name, as the JCAWA was part of the Jewish Community Appeal Inc (JCA).
The plaintiff, who was also the testator’s solicitor and executor of the will, deposed that many Jewish people living in Perth knew the charity as JCAWA. The plaintiff claimed that in his discussions with the deceased, she expressed a clear understanding of the operational practices of the JCAWA charity, and was particularly interested in their Jewish youth and student activity groups.
The court was convinced that the charity was misdescribed because of accident or oversight, and the deceased would have amended her will to benefit JCA if she had been aware of the error. However, even if this were the case, the gift would have failed because the organisation JCA was not registered as a charitable organisation, and it had, in any case, disbanded less than a month before the testator’s death.
As the charitable gift had failed, the court was faced with two options: first, to have the gift revert back to the residual beneficiary of the will, or second, to order that the bequest be directed for another charitable purpose in line with statutory provisions. The plaintiff filed an application requesting that the court sanction the re-direction of the gift to another charity with similar charitable intents as the JCA. The court ultimately found that there was clear charitable intent in the testator’s will and that it was therefore most appropriate for the bequest to be directed to another charity for the benefit of the Jewish community.
The contested wills team at Armstrong Legal is ready and waiting to assist you with any questions about making a charitable bequest, or rectifying a failed charitable bequest. Please contact or call 1300 038 223 to make an appointment with one of our friendly and experienced team.