Articles & Cases
Leaving a Bequest to a Charity - How a little legal advice can go a long way.
September 14, 2005
There are many circumstances when in preparing a will that includes a bequest to a charity that one should seek legal advice. What does a lawyer add to the equation?
1) Clarity. The lawyer ensures that the will is clearly drafted to avoid subsequent confusion or conflict.
2) Validity. The lawyer ensures that the will is properly executed in accordance with the provincial requirements which are quite complicated and if they are not strictly followed can invalidate the will or certain parts of it.
3) Capacity. The lawyer can be a witness as to the testamentary capacity of the deceased at the time of making the will. If the will is set aside either because it was not executed properly (point 2 above), or the testator did not have the mental capacity to make a will, then either a previous will would be effective, or if there is no previous valid will then there would be an intestate succession ie. no will. In the case of an intestacy (no valid will) the charity would not receive any of the bequests as none of the provinces intestate succession legislation, such the Ontario Succession Law Reform Act, provide for charities to receive funds on intestate succession.
4) Correct Name of Charity. A lawyer would conduct corporate searches on the proper legal name of the charity to ensure the correct name is used and that it is clear which charity is receiving the amount and avoid a conflict later between similarly named charities. For example there are about 160 registered charities that have the term “cancer” in their name. Furthermore the lawyer would ensure that the charity is currently an active corporation and has not been dissolved. It is unfortunate but many charities do not have their correct legal name on their website or in their promotional material!
5) Charitable Status. A lawyer can ensure that the “charity” is currently a registered charity with the Canada Revenue Agency. There are many worthy non-profit organizations that are not registered charities and a gift to them by an individual will not result in a tax credit.
6) Acceptability of Bequest or restrictions. Many well meaning donors place conditions or restrictions in their legacies without fully understanding the effect of such conditions or restrictions. A lawyer can make inquiries to a charity with respect to whether the proposed bequest is within the objects of the charity to ensure that the legacy is not ultra vires the objects of the charity. A lawyer can discuss with the charity whether any restrictions contemplated in the legacy are appropriate and whether the gift would be accepted by the charity. Many charities have gift acceptance policies – some of which limit who can give to the charity and the types of gifts the charity is prepared to accept. Some individuals place requirements in the legacy that leave the charity with little choice but to refuse the gift, which is a very unfortunate result. For example some charities will not accept real property, such as a building or your house (because of the concern, however small, of potential environmental problems). Some charities are not equipped to deal with certain complicated or long term gifts and they may decline the gift if they consider it to be burdensome. Some of the conditions or restrictions may be vague and difficult for the charity to implement creating an unintended headache for the charity. It is important to specify whether a restriction is to be a legally enforceable trust or a precatory (unenforceable) wish. Furthermore, a large legacy with restrictions on when the funds can be used may in certain circumstances create problems for a charity and its disbursement quota. If thought is given to this issue ahead of time a testator’s intentions can be respected and alternatives can be found.
7) Avoiding the "Dissappearing Will". Having a lawyer keep a will in a "wills safe", or at least a copy in the lawyer's file, will reduce the likelihood that the will does not just “disappear” when other beneficiaries would receive a greater benefit if there were no will and one dies “intestate”. Another way to ensure that your wishes are respected is to inform the charity of the gift and perhaps even provide the charity with a copy of your will, although some people for reasons of modesty or flexibility or otherwise do not wish to advise the charity.
8) Other Planned Giving Ideas. There are times when a legacy may not be appropriate and a major gift during the lifetime of the testator or another type of planned gift (such as gift of life insurance or marketable securities, setting up an annuity) is more suited to the donor's individual situation.
9) Estate Planning. A lawyer can assist with many aspects of estate planning including wills, powers of attorney for property, powers of attorney for personal care, trusts and other matters. Lawyers typically work with other professionals such as accountants, insurance agents, financial planners to ensure a coherent estate plan. A legacy left in a will should be properly integrated with your estate plan.
If you have any questions about including a legacy or bequest in your will please contact Mark Blumberg at 416-361-1982 or mark@blumbergs.ca