What happens when I leave a gift to a charity and the charity later doesn’t exist?

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What happens when I leave a gift to a charity and the charity no longer exists after my death?

Many people generously leave gifts to charities in their Wills to support the community or important causes. Unfortunately, these gifts sometimes run into issues when the charities named in the Will amalgamate with other charities, are wound up, or where the charity isn’t described correctly.

It is possible for these charitable gifts to still take effect, however it depends on why the gift lapsed, as well as the gift’s wording.

Ideally, the will should contain a clause giving the executor the power to select a similar charity, avoiding the estate from incurring expenses trying to resolve the issue.

Where the Will does not contain a clause giving the executor the power to select a similar charity the executor may need to make a cy-pres (“sigh pray”) application. This is a request to the Attorney-General or Supreme Court requesting they intervene and redirect the gift to an appropriate charity.

(a) How can a gift to a charity fail?

There are several ways a gift to a charity may fail or lapse. These include:

  • The charity named in the will has amalgamated, and is now a new entity;
  • The charity named in the will has wound up, and no longer exists; and
  • The charity was named or described incorrectly in the will.

Because the charity no longer exists (at least in the same form), or ‘never’ existed if it was incorrectly named, the gift needs to be able to pass to someone else.

An example of this is demonstrated in Gray v Australian Cancer Foundation for Medical Research [1999] NSWSC 492. The deceased left most of his estate to ‘the Cancer Research Foundation’. His Will was made in 1984, with a gift to the same charity also appearing in his previous 1979 Will.

An issue arose because no charity existed known as ‘the Cancer Research Foundation’. Three charities claimed they were entitled to the gift:

  • The Australian Cancer Foundation for Medical Research, which incorporated in 1984, and later changed its name to the Australian Cancer Research Foundation;
  • The University of Sydney, as the Melanoma Foundation; and
  • The Cancer Council.

The Supreme Court found that the history of the charities’ names, community awareness of the charities, and the history of the deceased’s previous Wills, meant that none of those claimant charities were whom the deceased was referring to when he named ‘the Cancer Foundation’. The Court then distributed the gift by cy-pres.

(b) What can happen when a gift to a charity fails?

Depending on the circumstances, there are two ways a charitable gift can be dealt with when the charity no longer exists or has been described incorrectly.
Where the gift was made to a charity in its own right, and not for its charitable purposes, the gift will fail and the funds dealt with through the residuary estate. If the gift to a charity was as part of the residuary estate, the funds will instead be dealt with through intestacy.
Where the gift was made to a charity for its charitable purposes, the gift will be dealt with by cy-pres. This allows the gift to be ‘redirected’ towards another charity with similar purposes as that named in the Will.

(c) What is cy-pres?

Cy-pres is, in effect, a legal safety net to ensure a charitable gift doesn’t fail just because the charity named in the Will no longer exists or (in certain instances) has been incorrectly named. Cy-pres allows either the Attorney-General or Supreme Court to intervene to direct the charitable gift towards a charity with a similar purpose to that named in the Will.

In other words, to quote the High Court, cy-pres permits the charitable gift to “carry out the general paramount intention in some way as nearly as possible the same as that which the testator has particularly indicated without which his intention itself cannot be effectuated”[1].

In NSW, to be eligible for cy-pres, a gift to a charity must have been given with a general charitable intention, as opposed to having been given to the charity in its own right[2].

For example, if a gift is given to the Australian Cancer Foundation, that gift is given with a charitable intention if it was for the purpose of the Cancer Foundation using the money for cancer research. This is in contrast to a situation to whether the gift is given to benefit the Cancer Foundation in its own right, separate from its role in cancer research.
There is a presumption in NSW that any gift made to a charity is made with a general charitable intention[3].

The Attorney-General has jurisdiction over cy-pres applications in NSW up to gifts of $500,000[4]. Amounts exceeding that threshold, or complex estates, are referred to the Supreme Court for resolution[5].

 (d) What precautions should I take?

If you leave a gift to a charity in your Will, it is important that the Will contains a savings provision for incorrect or defunct charities. This allows your executor to select a substitute charity with similar purposes to the charity named in your Will.

In effect, this sort of savings provision acts as an in-built cy-pres mechanism and saves your executor, and your estate, from the expense of applying for a cy-pres scheme from the Attorney-General or Supreme Court.

At Elringtons Lawyers our Estate Planning team has experience in preparing Wills with bequests to charity and would happy to discuss your Will with you. Please do not hesitate to phone reception to make an appointment.

Further Information:

Leaving a charitable gift in your Will

[1] Attorney-General (NSW) v Adams (1908) 7 CLR 100, 125

[2] Charitable Trusts Act 1993 (NSW) s 10(1).

[3] Ibid s 10(2).

[4] Ibid s 14(1)(a).

[5] Ibid s 14(1)(b).

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