Navigation

The trouble with Specific Charitable Gifts

Posted on June 25, 2015

It is always preferable for a Not for Profit Group (NFP) to receive a gift from a deceased estate for their general purposes rather than for a specific purpose. The reason why is because if the NFP cannot carry out the specific purpose as directed by the will, they risk losing the gift altogether. A gift for general purposes allows a NFP to apply the gift in any way they see fit. The following recent case from New South Wales illustrates this issue.

Leslie Morgan died on 12 July 2013. He made a will on 24 August 1999 where he left his house to the Salvation Army on the following provision:

“Provided that the Salvation Army shall demolish the house standing on the property and in its place build a church.”

The problem for the Salvation Army was that a church was not required in the locality, the land was unsuitable for a church and, in any case, the cost of demolishing the house and building a church in its place was prohibitive.

The matter was referred to the Supreme Court of New South Wales where the Judge said there were three ways of interpreting the clause:

  1. The words “Provided that” were not conditional but merely introductory and expressed a desire on behalf of Leslie Morgan as to how the Salvation Army should use the gift.
  1. The gift exhibited a “general charitable intention” so the Salvation Army could use the property for another purpose.
  1. The gift exhibited a “specific charitable intention” so the Salvation Army could use the property only in accordance with the will.

The Judge said the first alternative was an unlikely interpretation. In considering the second and third alternatives the Judge considered the relationship between Leslie Morgan and the Salvation Army.

Leslie Morgan was a lifelong member of the Salvation Army and had raised a large sum of money for the Salvation Army during his lifetime. He desired that his house could be a place of worship for members of the Salvation Army.

The Judge ruled that these factors led him to conclude it was a charitable gift however it was given with a specific intention, not a general intention. In other words, Leslie Morgan gave the Salvation Army his property for the purpose given in the will and no other. Thus, if the Salvation Army could not carry out the gift then the clause failed.

If a clause containing a gift in a will fails then the gift is then distributed via the residuary estate clause in the will. The residuary estate is where the balance of the estate is distributed after any other gifts have been made. (If the residuary estate clause is the clause that fails then the gift is distributed via intestacy ie: to the deceased’s family).

Fortunately, for the Salvation Army, Leslie Morgan had left his residuary estate in his will to the Salvation Army. Thus, the Salvation Army received the house from the residuary estate clause in the will. In addition, the residuary estate clause did not impose any conditions on the Salvation Army as to how they were to use the house.

It is fair to say that the court was influenced by this factor; ie: that the Salvation Army would receive the house via the residuary estate without any conditions attached if the original clause failed.

If the residuary estate was left to another beneficiary and not the Salvation Army, or if it was the residuary estate clause that failed and the house went to Leslie Morgan’s family, (he was not married and had no children) it may have been a different decision, especially considering Leslie Morgan’s history and connection with the Salvation Army.

However, this case illustrates the problems experienced by NFPs who are left a gift in a will to be used for a specific purpose. If a will maker is too specific with their directions and too prescriptive to the NFP then it heightens the likelihood that the gift may fail if the NFP cannot carry out these directions, notwithstanding the degree of connection between the NFP and the will maker as the above case illustrates.

Accordingly, it is always in the interests of the NFP to receive a gift in a will for their general purposes.

View all articles