Charitable Bequests (NSW)
When a testator makes a will, they must choose who will inherit the assets of the deceased estate. While it is typical for testators to leave the bulk of their estates to family members and close friends, many testators will leave a bequest to their favourite charitable organisation. These charitable bequests may be nominal, or they may be sizable gifts or even instructions to establish perpetual foundations. This article outlines the purpose of charitable bequests and highlights some potential missteps to avoid when a testator drafts such a bequest in their will.
What Is A Charitable Bequest?
A testator makes a charitable bequest in their will to benefit their wider community after their death. In Australia, a long history of common law precedent informs the current legal definition of charity. The Four Heads of Charity was established in the case of Special Commissioners of Income Tax v Pemsel [1891] to recognise the charitable categories of:
- Relief of poverty;
- Advancement of education;
- Advancement of religion; and
- Another purpose beneficial to the wider community.
Perpetual Charitable Trust
A will can establish a perpetual charitable trust to benefit a given charitable organisation as long as sufficient funds are available to maintain the trust. For a perpetual trust to be effective, there must be enough money to pay for all costs associated with administrating the trust, including management fees, without depleting the capital. An experienced solicitor can advise a testator on the establishment of such a trust.
Mistakes To Avoid When Drafting A Charitable Bequest
A charitable bequest must be carefully drafted in order to avoid ambiguity or inaccuracies. Whenever a bequest is left to a charity, it is essential to accurately identify the chosen charity, and also to explain the specific charitable purpose of a bequest. If a charity is misidentified then the executor will have to obtain a court order to administrate those clauses in the will, and the bequest may even fail. If a charitable gift is in danger of lapsing, the Supreme Court can order an alteration to the gift to enable the funds to be used cy-près (“as nearly”). This is typically applied when a charity is misnamed or has ceased operating before the distribution of the deceased estate. In order to avoid mistakes, a testator should obtain the full details of a charity from their own publicly available information. Most charities include information on their website about how to leave them a bequest, and may even include suggested wording for inclusion in a will.
Exclusive Charitable Purpose
A testator intending to leave a bequest for charity also needs to be careful that the bequest is worded for a charitable purpose. For example, a gift to an organisation that has both religious and community activities should specify the charitable purpose to which the gift should be applied. There is legislation in many states, including NSW, to salvage a gift that combines charitable and non-charitable purpose, but this would also require time-consuming and expensive judicial intervention.
Case Study
The importance of clarifying ambiguity in charitable bequests was examined in the 2020 NSW Supreme Court case Re Estate of the Late Stasha Berger. In that case, the testator left 80% of their estate (some $7.5 million) to the “Shrine of Saint Anthony of Padua Capuchin Friars Minor Hawthorn – Melbourne, Australia”.
The Shrine is dedicated to the Patron Saint Anthony of Padua. The Order of Friars runs the Shrine and it is administered under the Roman Catholic Church Communities’ Lands Act 1942. The Shrine itself is not a registered charity, although the Order conducts charitable work for the homeless from the location.
The ambiguous wording of the bequest meant that it was not clear whether the bequest was intended solely for the maintenance and upkeep of the Shrine, or was intended to be an absolute gift to the Order. The executors asked that the court determine the meaning of the bequest pursuant to s63 of the Trustee Act 1925 so as to avoid intestacy. The executors argued that a reading of the will with extrinsic evidence supported a finding that the deceased intended to make an unconditional charitable bequest to the Trustees of the Order of the Capuchin Friars minor as the owners of the Shrine, to undertake charitable work from the Shrine, and not solely for the maintenance of the Shrine.
The court found that notwithstanding the difference in names between the Order’s name and the wording of the bequest, the testator’s meaning was clear and giving the money to the Order would satisfy the bequest. However, the court also found that the inclusion and prominence of the word “Shrine” in the bequest indicated that the gift was for the upkeep of the Shrine and for other charitable activities conducted from the Shrine, but not for the order’s other endeavours.
It is best to consult a solicitor before making a charitable bequest in your will. An experienced wills and estates solicitor can help you avoid common missteps in drafting charitable gifts. Please contact or call our team on 1300 038 223 for assistance and advice on any succession matter.
This article was written by Dr Nicola Bowes
Dr Nicola Bowes holds a Bachelor of Arts with first class honours from the University of Tasmania, a Bachelor of Laws with first class honours from the Queensland University of Technology, and a PhD from The University of Queensland. After a decade working in higher education, Nicola joined Armstrong Legal in 2020.