Estates & Wills & Trusts

Seek legal guidance before leaving bequests to charity

By AdvocateDaily.com Staff

Making a bequest to charity can create a meaningful legacy, but there are potential pitfalls that a good lawyer can help you avoid, Windsor trusts and estates lawyer Laura Stairs tells AdvocateDaily.com.

Generosity in death is something expressed by people from all walks of life, says Stairs, an associate at Shibley Righton LLP.

“While testators are still living, they might be concerned about resources, or perhaps it’s prohibitive to give to charity while they’re retired and don’t know how much money they’re going to need,” she says. “But upon death, you have an opportunity to give something back to an organization that matters to you.”

Stairs describes some common issues in charitable giving that require a lawyer’s help.

Attaching conditions. She says clients frequently want to put conditions on their charitable bequests. They may have volunteered or worked for an organization doing specific projects, so they allocate their gift on the basis of that work continuing, she says.

“When conditions like that are put on a gift it creates the risk of the charity not being able to accept it if they’re unable to meet that condition, for example, if that project is no longer in operation,” Stairs says.

A lawyer can add language to the will to reflect your wish for the gift to go to a specific project, but if for some reason this condition cannot be met, the charity’s board of directors can still accept it and make a determination as to how to spend it, she says.

Wrong name. “You might have some familiarity with an organization, but if you use a name that’s not correct, it could result in issues,” Stairs says, adding that in some cases, people may not be aware that the recipient of their gift isn’t actually constituted as a charity.

“This has an impact on the tax benefits your estate receives by leaving a gift to charity in your will, and a lawyer will help determine the type of organization it is and ensure you’re using its proper legal name,” Stairs says.

Insufficient funds. People often create wills many years before they die, and if they haven’t updated it to reflect changes in their circumstances there’s a risk there won’t be enough money to fulfil their bequests, she says.

“Let’s say you have one main asset — your home — that you’re leaving to your child, but you’re also making a $10,000 bequest to charity,” Stairs says. “If there are no additional assets beyond the home to satisfy that bequest, your estate trustee is left in this pickle of how do they give money that doesn’t exist.

"It’s important to consider what your assets are and how they’re going to be distributed, which means reviewing your will at regular intervals to ensure it still aligns with your wishes.”

You should make it easy for the estate trustee to administer and distribute the funds, and there are ways a lawyer can structure the will to achieve this, Stairs says. For example, benefactors can earmark a life-insurance payout for charity, or structure the will so that certain percentages go to specific people and organizations.

“You could say 50 per cent of whatever is left goes to my child, the other half to the charity,” she says.

Talk to the recipient. Stairs recently worked with a client who wanted to make a donation to an academic institution, which for tax purposes are classified as charities.

“We looked at his entire estate to identify the best option for him to have a positive impact on the school,” she says. As a result, he decided to leave a significant book collection to the university’s library and is working on setting up a specific fellowship, Stairs says.

“When you leave money for a particular purpose, it’s important to work with that institution to make sure the terms you are setting align with the organization's purpose and mandate,” she says.

Stairs also recommends reaching out to tax advisers and accountants.

“If you have a large estate it may be wise not to wait until after your death to make the entire bequest, based on your personal tax rating,” she says.

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