When a testator writes their will, they must choose who will receive the assets of their deceased estate. In addition to making bequests for the usual beneficiaries, such as a spouse, children, grandchildren and friends, many testators also leave some provision for a cause, community group or charitable organisation. Some testators make relatively small charitable bequests to established organisations in their will, while others leave sizable bequests to establish charitable foundations to act in perpetuity. This article explains the nature of charitable bequests and some potential pitfalls that a testator should avoid when drafting such a bequest in their will.
What Is A Charitable Bequest?
A charitable bequest is a gift in a will that is designated for charitable purpose. The legal definition of “charity” is based on centuries of common law precedent. The Special Commissioners of Income Tax v Pemsel  established the “Four Heads of Charity” to identify recognisable categories of charity, namely: 1) for the relief of poverty; 2) for the advancement of education; 3) for the advancement of religion, and 4) for another purpose that is beneficial to the community. In other words, a charitable bequest is only valid if it benefits an organisation that was established to provide help or fundraise for those in need.
Perpetual Charitable Trusts
A charitable testamentary trust can be created to endure in perpetuity. This is only possible, however, if the testator can apportion sufficient funds to sustain the trust, including management fees, without depleting the capital. The testator should name a corporate trustee or several trustees to oversee the management of the trust, with plans in place for succession, to ensure that the trust can continue beyond the working life of the original trustees. The charitable trust should give the trustee sufficient powers to enable operation through different circumstances, otherwise, the charity may become stymied by a constant need to obtain a court order to make necessary operational changes. The wording of the trust should also grant power to the trustee to use up the capital from the trust for charitable endeavours in case the administration becomes fiscally unviable.
Issues With Drafting Charitable Bequests
In order to ensure that a charitable bequest is valid, the clause must be carefully drafted to ensure that the gift does not fail. It is particularly important to confirm the name of the charity. There is a danger that a gift will fail (or at least have to be litigated) because of a mistake in the wording of the charitable bequest. For example, in Tantau v McFarlane , the court was forced to rectify a will that contained a gift for the “Art Gallery of Victoria” in order to ensure that it reached the intended recipient, which was the National Gallery of Victoria.
Testators should gather the correct details from the charity’s own published information. Larger charitable organisations will often have a section on their website that deals with donations and bequests, specifying the legal name of the business, ABN and even suggested wording for use in a will. Alternatively, there is a federal government website that lists business details and whether the organisation is set up as a deductible gift recipient and charity for taxation purposes.
Bequests To Overseas Charities
A testator should think carefully before making a bequest to an overseas charity. It can be time-consuming to check the credentials of an overseas charity and it may be difficult for an executor to deliver this type of bequest. Some overseas charities in underdeveloped countries are difficult to locate as they have no email or website. A testator also needs to be aware of any tax implications for charitable organisations located in other countries.
Exclusive Charitable Purpose
Generally, a charitable gift will fail unless the bequest is solely devoted to charitable purposes. However, legislation in some states of Australia (including New South Wales, Victoria, Queensland, South Australia and Tasmania) provides for saving a gift that has both charitable and non-charitable purposes. As such, the non-charitable purpose can be separated out and ignored, allowing the gift to be applied for the charitable purpose.
When a charitable gift is in danger of failing in Australia, the Supreme Courts are empowered to order an alteration to the original purpose of a charitable trust to enable the trust assets to be applied cy-près (as nearly). This can save a bequest to a beneficiary where the charity was named incorrectly, or ceased operations before the testator’s death or before the deceased estate was distributed. This also allows providers to save a bequest where setting up a trust would be impossible given the circumstances. In these cases, the court will look at the charitable object in the will and decide whether the document contains a general charitable intention. For example, in Re Thompson; Lundstrom v AG (VIC) , a gift to the Victorian State Opera would have failed because the opera deregistered, but the court held that the gift had a general charitable intention and the bequest was applied cy-près. A gift may not be saved where the wording of the will is detailed and specific, or so broad as to exclude general charitable intent.
Case Studies Of Failed Charitable Bequests
In the National Trustee Executors and Agency Company of Australasia v Lawler , the court examined whether a bequest to establish a Catholic daily newspaper was a charitable purpose. The court held that the gift was not charitable and could not be severed because confining the publication to the narrow purpose of charitable endeavour would defeat the testator’s intent in making the bequest. Similarly, in AG v Cahill & Ors (NSW) , a legacy for the foundation of a Roman Catholic Boys Club was disallowed as there was no connection between charitable purpose and a “boy’s club”.
The best way to prevent a charitable bequest from failing is to insert a clause in the will that specifies that if the charity ceases to operate or changes its name, the entitlement will not fail but be paid to another organisation that the trustee considers best fulfils the purpose of the bequest. An experienced solicitor can help you draft your will to ensure that your charitable intent does not fail. Please contact or call our team on 1300 038 223 for any advice on estate planning, creating a charitable gift or trust or for any other legal assistance.