Estate Planning and Philanthropy

Estate Planning and Philanthropy

Philanthropy features in estate planning in a number of ways.

1.  Provisions in a will

There is an increased willingness and capacity of our clients to make provision for charities in their wills. Often the charity will be one which has assisted the family in the past or one which is meeting a society need dear to the heart of the will maker.

Ensuring the provision is appropriately drafted requires more than a simple naming of the charity and sum to be given to it. Information that needs to be checked includes:

  • The correct name and address of the charity. The charity may have changed its name, amalgamated with another charity or ceased to exist altogether; and
  • The charity’s preferred form of the bequest to it. This information may be obtained from the charity’s website, assuming that it has one. Additionally, the charity may prefer that a bequest is to a particular fund maintained by the charity. For example, it may be seeking to direct donors to its investment fund where it proposes that only the income will be applied for its purposes.

The importance of communicating with the charity regarding an intended bequest was highlighted to the writer in the case of a client’s proposed gift to a hospital. The hospital was particularly grateful for the inquiry because they had seen hundreds of thousands of dollars in bequests that did not provide any added benefit to the hospital because of the way they were worded.

Bequests simply in favour of the hospital were paid to consolidated revenue and made no difference to the allocation the hospital received each year. However, where the bequest left funds to be used to purchase equipment for the hospital at the discretion of the hospital’s manager, the funds augmented the allocation from consolidated revenue, which was the intention of the client.

The preferred form of the bequest normally identifies the officer of the organisation whose receipt shall be a sufficient discharge to the executor.

As a failsafe against a charity ceasing to exist, it is usual to express a general charitable intent so that the bequest can be applied for charitable purposes of the type the charity had provided. (These applications are known as Cy Pres Applications).

2.  Establishing a private charitable foundation

These foundations are known as Prescribed Ancillary Funds (PAFs).

They are subject to a high degree of government regulation and, because of the administration costs associated with them, a substantial sum is normally required to constitute the fund. There is also a minimum percentage of the fund that must be distributed each year to prescribed charities.

3.  Establishing a sub fund of certain charitable foundations

Establishing such a sub fund requires a much smaller investment than is required for a viable PAF, usually in the range of $25-$50,000. As you would expect, the investment in the sub fund can be added to over time.

A number of public trustee companies offer this sub fund option as does, for example, the Queensland Community Foundation.

In addition to the pleasure people derive from charitable giving, the latter two options for philanthropy can have a profound effect on a family as a whole. They provide the opportunity for a family to come together to determine the charities they wish to support and can also have the affect of emphasising for the family, the spirit of giving, which in turn enriches the values of a family.

While these COVID-19 times are extremely difficult for all of us, they are certainly bringing to the fore the spirit of mutual support and philanthropy in the Australian community. These qualities have never been more in evidence and are informing the estate planning for many clients.

If you would like to know more about how you can include a charity in your will, please contact de Groots wills and estate lawyers by telephone on (07) 3221 9744 or visit our website to get started online. Our experienced team of lawyers are ready to assist you with your estate planning needs.

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