Charitable Bequests (NSW)

Charitable bequests in a will are a powerful way to leave a lasting legacy, allowing a testator to support causes and organisations that reflect their values and passions. In New South Wales (NSW), the Succession Act 2006 provides the legal framework for including charitable gifts in a will. While bequests to charities are generally straightforward, it is essential to take some steps to ensure that the gifts are legally valid, practical, and unambiguous to avoid disputes and administrative complications. This article looks at charitable bequests in NSW, including different types of charitable gifts, legal considerations, tax implications, potential challenges, and practical advice for creating effective charitable bequests.

What is a charitable bequest?

A charitable bequest is a gift left in a will to benefit a charity, non-profit organisation, or cause. Many charities rely heavily on bequests for their financial sustainability, making these gifts a vital source of funding. Charities use bequests to fund various initiatives, including ongoing programs, research, scholarships, grants and the building of new facilities. Such gifts can take various forms, including cash, property, shares, or specific items. Charitable bequests are governed by the same general legal principles as other gifts in a will. As such, the gift must align with the testator’s intentions and be legally enforceable.

One of the key benefits of charitable bequests is their favourable tax treatment. Gifts of property, shares, or other assets to charities are generally exempt from Capital Gains Tax. This ensures that the full value of the asset benefits the charity. Charitable bequests can also be an effective estate planning tool, potentially reducing the taxable value of an estate. While there is no inheritance tax in Australia, this can be relevant in cases involving income-generating assets. However, it is best to consult an accountant for more specific taxation advice.

Nature of the charitable bequest

Charitable bequests can be categorised into several types:

Specific bequests

A specific bequest is a gift of a particular item or asset to a charity. Examples include:

• A specific piece of property, such as real estate
• Antiques or collections of artworks
• Shares or investments.

Residuary bequests

Alternatively, a testator may leave a residuary charitable bequest that gives a percentage of the remaining estate to a charity after other bequests, debts, and expenses are paid. For example, a will may include the provision “I leave 50% of the residue of my estate to Charity B”.

Pecuniary bequests

A pecuniary bequest is a fixed monetary amount left to a charity. Unlike a residuary bequest, its value does not depend on the size of the estate after debts and expenses.

Contingent bequests

A contingent bequest takes effect only if certain conditions are met. For instance, a will may include the provision “If my spouse predeceases me, I leave my estate to Charity C”.

Conditional Bequests

A conditional bequest is dependent on a specific condition being fulfilled. For example, a will may include a provision such as “I leave $50,000 to Charity D if it continues to operate a particular program”.

Legal considerations for charitable Bequests

The following are some legal considerations to bear in mind when dealing with charitable bequests in New South Wales.

Testamentary Capacity

In order for a charitable bequest to be valid, the testator must have testamentary capacity at the time that they created the will, meaning that they understood the nature of making a will, the extent of their property, and the potential claims on their estate.

Clarity and specificity

A charitable bequest must clearly identify the intended beneficiary to avoid ambiguity. This includes:

• naming the charity correctly, including its legal name and Australian Business Number (ABN)
• specifying the purpose of the gift (if it is for a particular program or initiative).

Cy-près doctrine

When a testator uses ambiguous language when making a charitable provision in a will, there can be confusion over the purpose of the bequest and the identity of the intended charity. For example, using a colloquial name instead of the charity’s legal name may create confusion. Even when legal names are used, over time charities merge, change names, and cease operations. This can complicate the administration of the bequest unless provisions are included to address such situations.

If the intended charity ceases to operate or the executor otherwise cannot fulfill the terms of the bequest, then the cy-pres doctrine may apply. The term “cy-pres” derives from the French for “as near as possible”. Under this equitable doctrine, the Supreme Court of NSW can vary the original terms of a charitable bequest if the original purpose is exhausted or cannot be carried out as intended. This legal principle allows the court to redirect the gift to a similar charitable organisation, ensuring the testator’s intentions are honoured as closely as possible.

Legal disputes over charitable bequests

Despite their positive intentions, charitable bequests are sometimes the subject of disputes. Eligible people, such as spouses, children and dependents can contest a will if they believe they have not received a fair provision from the estate. A large charitable bequest may be reduced if the court determines that more provision for eligible claimants is necessary.

The best way to avoid disputes over charitable bequests is to take note of the following:

• all testators should review their wills regularly to account for organisational and personal changes in circumstances
• provide within the will alternative provisions for distribution of the bequests to account for potential changes in a charity’s legal name and operations
• discuss the possible bequest with the charity to ensure it aligns with their needs and capabilities and
• discuss the charitable intention with family members to reduce the likelihood of later disputes.

Charitable bequests are a meaningful way to leave a legacy and support causes that matter most to you. In NSW, careful planning, legal advice, and clear instructions can ensure that your charitable intentions are honoured while minimising the risk of disputes or complications. To ensure your charitable bequest is effective and legally sound, it is best to consult an experienced wills and estates lawyer on 1300 636 846. The solicitors at Go To Court Lawyers can draft or update your will to reflect your wishes while complying with NSW law.