Your Wishes, Your Way: Charitable Giving In Estate Planning

EBubble Life 

Did you know that when you are planning your Estate, you can leave a gift to charity?

Supporting charities plays an important role in many people’s lives.  If you are a charitable person and want to leave something behind for a charity when you die, you can leave a gift for that organisation in your Will. In legal terms, this is known as ‘freedom of testation’, meaning you are free to divide your belongings as you please. [1]However, before making such a decision, there are a few considerations to be made to ensure your requests remain legally valid after you die. These considerations include the type of gift you want to leave, whether your charity still exists and moral obligations for family members and loved ones.

The following information examines the steps you need to take in order to leave some of your Estate to your favourite charity.

Types of gifts you can leave for charity

There are four different types of gifts you can leave to charity, the differences between them are how much you will leave to charity and what portion of your Estate it will make up.

1. Residual gift

the remainder of your Estate which can be gifted to charity after gifting your loved ones and settling your debts. This is the most common type of gifting to charities.

 

2. Specific gift

the donation you want to make to charity, where it be through money, shares or property, is specified.  

3. Percentage of Estate

the gift you leave will take into account the changing value of your Estate due to economic conditions such as inflation and fluctuations in the value of your Estate.
 

4. Whole Estate

you may leave your entire Estate to charity if you do not wish to gift any of your families or other beneficiaries.[2]
 

Does This Charity Still Exist?

During Estate Planning, you need to consider the longevity of a charity and whether it will exist when you die. One example of a charitable gift not going as planned is the case of Estate Polykarpou.[3] Euphemia Polykarpu, who was the deceased, left her entire Estate (value of $1.4 million adjusted for inflation) to charity. Half of this amount was gifted to Oprah’s Angel Network (OAN). This charity was operating as a not-for-profit, charitable organisation when Euphemia had made her Will in 2004. By the time of her passing in 2015, OAN was no longer in existence.[4]
 

When a charitable gift within a Will fails, the Court may establish a scheme known as ‘cy pres’, to distribute the failed gift to a similar charitable organisation. To do this, the Court must find that the deceased had a charitable intention to administer the gift to charity.
 

In Polykarpou, the Court decided upon two issues: whether the gift was for charitable purposes and if so, whether a general charitable intention was captured within the Will which would allow the donation to be administered cy pres.[5] The Court held that the gift would fail and be held on trust by the Executor for the deceased person’s parents if either of the questions were answered negatively.[6] With regards to the first question, the gift was for a charitable purpose as it was a gift to a charitable organisation.[7] The Court was also satisfied that there was a charitable intention by the deceased because her entire Estate was gifted to charity, including the failed gift. As a result, a cy pres scheme was adopted to distribute the failed gift to an alternative charitable interest.[8]
 

The outcome of this case demonstrates the importance of planning your Will effectively and ensuring that if you are intending on gifting to a specific charity, it is still in existence in your lifetime. 

Have you fulfilled your moral duties to your family and loved ones? 

In order to ensure the charitable gift request is not contested after death, you must consider all of the family provisions stipulated in succession law. Family and loved ones must be adequately provided for before a charitable organisation. The following example demonstrates how a Will can be contested if you don’t follow your moral duty.
 

In Stejskal v Hely & Ors [2019] NSWSC 1417 (‘Stejskal’),[9] a father in NSW left his only adult son, Tomas, a small pecuniary gift and gifted the remainder of his Estate to charities.[10] Tomas sought further provision from his father’s Estate arguing that his father failed to make sufficient provision to him so he could meet his accommodation needs.[11] The issue for the Supreme Court to determine was whether the deceased had a moral duty to provide his son with a sufficient sum to enable him to meet his accommodation needs and necessary expenses.[12] Tomas lived in rented accommodation, had very little assets and cash in the bank, and could not reasonably be expected to work full-time because of his age and health.[13]


The Court was satisfied that a moral duty was owed to Tomas, and an order for additional provision was made.[14] To exercise the deceased’s freedom of testation, the Court gave appropriate weight to the charities which he elected after Tomas receives an adequate provision from the Estate.[15]


This case illustrates the importance of fulfilling your moral duty to your beneficiaries in your Will so that your freedom of testation can be exercised.  

Jurisdiction

The ‘freedom of testation’ is a principle which is upheld Australia-wide. The general consensus is that only you can decide how to distribute your Estate in your Will.[16] However, as each State has their own succession law, your best chances in fulfilling your wishes is by contacting a succession lawyer for legal advice about your personal situation.

References

[1] Goodsell v Wellington [2011] NSWSC 1232, per Hallen J.

[2] ‘How to Leave a Gift to Charity’, Include a Charity (Web Page) .

[3] Estate Polykarpou; Re a charity [2016] NSWSC 409 (‘Polykarpou’).

[4] Ibid [9].

[5] Ibid [1].

[6] Ibid [2].

[7] Ibid [94]—[100].

[8] Ibid [101]—[114].

[9]Stejskal v Hely & Ors [2019] NSWSC 1417 (‘Stejskal’).

[10] Ibid [3].

[11] Ibid [49].

[12] Ibid [65].

[13] Ibid [8].

[14] Ibid [10].

[15] Ibid [73].

[16] ‘Fact Sheet 3 – Testamentary Freedom’, University of Adelaide (Web Page, 2017) https://law.adelaide.edu.au/system/files/media/documents/2019-01/ifpa_fact_sheet_3_testamentary_freedom.pdf



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