A Lesson in Creating Charitable Trusts
Many Wills often include provision for a particular charitable organisation or society. Like all provisions under a Will, however, they can be seriously undermined by poor drafting or a failure to anticipate certain contingencies.
A great case study in demonstrating the need for clear drafting and an eye for contingencies is a recent decision of the Supreme Court of South Australia[1], in which a charitable trust made under a Will was almost overturned for these very reasons.
The Background to the Case
In 1971, the Will-maker (‘Testatrix’) made a Will which, amongst other things, granted a life interest in her property, including its’ household items, to her son. The Will also held that upon the death of her son, the remainder of the Estate should be bequeathed to the ‘Hospitals Department’ – a department of the South Australian government at the time.
Clause 8 of the Testatrix’s Will stated that the manner in which the gift to the Hospitals Department was to be used ought to be determined by the “Director General of Medical Services… for the benefit of sufferers from kidney diseases or complaints.”
On 15 October 2009, the trustee of the Testatrix’s Estate forwarded a cheque for approximately $270,000, the residue of her Estate, to the “SA Health Commission”. Unfortunately, both this commission and the ‘Hospitals Department’ had ceased to exist since 1971. The Chief Executive of SA Health (the commission and the Hospital Department’s successor) sought an order from the Court to interpret clause 8 as establishing a charitable trust – this was in turn supported in applications made by the Testatrix’s surviving family members.
The Decision of the Court
Of principle concern to the Court was establishing that:
1. The Testatrix had intended to create a charitable disposition; and
2. That it would not fail if the intended recipient ceased to exist.
The Court ultimately held that a there was an unambiguous intention of the part of the Testatrix in wanting to bequeath the residue of her Estate in a charitable manner. While the ‘Hospitals Department’ had since ceased to exist, its contemporary analogue did, and it could be reasonably inferred that she would have wanted the gift to be passed on to them.
In reaching these conclusions, the Court drew on the Testatrix’s particular reference to the gift being of benefit to sufferers of kidney disorders. In applying this reference, the Court was able to ‘look beyond’ the words of the Will and at the intentions underlying it. An absence of these words may have proved fatal to the success of the charitable trust.
What Can We Take Away from this Case?
While this case had the benefit of a happy ending, the process that led to it would have undoubtedly been costly and stressful. When including charitable bequeaths in your Will, it is essential that they be drafted in a manner which effectively ‘future-proofs’ them. This can be done in a number of ways, including (but by no means limited to) describing, as in the case of the Testatrix above, the intention behind the charitable gift.
Going a step beyond our Testatrix, a well-drafted charitable provision would also include wording that explicitly states a desire that the gift be of a charitable nature, including an option for the trustee to exercise reasonable discretion in bestowing the gift in the event your nominated charity or organisation ceases to exist.
For more information regarding charitable trusts, contact our expert Estate Lawyers today. At Hentys Lawyers, we can also provide you with professional assistance in Challenging or Contesting a Will.
[1]In the Matter of David Wayne Swan[2014] SASC 65.