Making a bequest to a charity
Posted: 6 March 2024
For many charities, gifts in wills (bequests) are a significant source of funding. Sometimes, however, charitable bequests cannot take effect when wills are not carefully drafted. There can be considerable time and cost associated with addressing that situation and trying to ensure the bequest can go to the charity you intended. This article looks at ways your wishes for a charitable bequest have the best prospect of being fulfilled.
Careful will drafting is essential
Most of the time, bequests to charities fail (and cannot take effect) because there are changes in charitable organisations over time, the will is not updated for many years and/or the will does not contain a suitable power for the executors to address these situations.
Changes in charities over time
It is common for charities to restructure. Many charities once had a number of local branches, which were all registered as individual charities, but they have now consolidated into one overall national organisation, and the local branches disestablished. Some organisations may have changed their name or amalgamated with other charities.
Wills frequently misdescribe charities. The name of the charity may not have been checked on the Charities Register to ensure it was correctly described or the organisation may have restructured since the will was prepared. Wills commonly leave bequests to charities that no longer exist. This can mean the bequest fails.
Wills can include special clauses
In some cases, these problems can be addressed by careful will drafting. Wills can include clauses addressing the potential for charitable organisations to be misdescribed or to change over time. Also, many wills contain a power for an executor to pay funds to the trustees or officers of a charitable organisation without being required to follow up on how the gift is then used. For example:
- A power could be included providing that if a charitable organisation has been misdescribed, the executor of the will may pay the gift, at their discretion, to what they consider to be the correct organisation, and
- A power could be included that says that if a particular charitable organisation no longer exists in the form described, the gift may be paid to:
- Any successor organisation
- Any amalgamated organisation which the named organisation became a part of or its assets were transferred to, or
- If the organisation has entirely ceased to exist, to such charitable organisation as the trustees, at their discretion, consider most closely carries out the same charitable purposes.
Where wills do not contain clauses to this effect, the High Court may be able to assist, although this can be very expensive.
An example
In a recent case[1], Margaret Barrow’s will (which was drafted in 2000) left funds to the Medical Research Council of New Zealand (MRC). The MRC existed until 1990 when it was dissolved by Parliament, and a new Crown entity, the Health Research Council of New Zealand (HRC), was created in its place.
Ms Barrow’s executor applied to the High Court to interpret the reference to the MRC as referring to the HRC.
Despite the fact that the MRC had not existed for 10 years when the will was drafted, it appeared that neither Ms Barrow nor her lawyer had realised that the MRC had been succeeded by the HRC. The will file, which was more than 20 years old, had been destroyed, so there was no record of Ms Barrow’s instructions to her lawyer. Evidence was given, however, that in 2000, there was no online register of charities, and it is possible that this was the reason for the misdescription.
The High Court noted that the assets and liabilities of the MRC had become the assets and liabilities of the HRC, and the HRC was clearly the successor organisation. It ordered that Ms Barrow’s will should be interpreted as referring to the HRC rather than the MRC.
If the High Court had not been able to interpret Ms Barrow’s will to refer to the HRC, the next step may have been to prepare a scheme under the Charitable Trusts Act 1957. That process is time-consuming and often more expensive than applying to the High Court to interpret a will. If an application to interpret the will is an option, it will usually be faster and less expensive. However, it is best if an application to the High Court can be avoided entirely.
Check the Charities Register
When making bequests to a charity, it is prudent to check the Charities Register here to ensure that charity still exists. It is also useful to include clauses in wills that address the possibility of the charity being restructured or disestablished. This can save time and cost, and help carry out a will-maker’s intentions more effectively.
[1] Re Barrow [2023] NZHC 1146.
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