Testamentary Philanthropy: How to avoid litigation around the charitable gift in your estate plan
Estate planning can be tricky, especially when there is potential for estate litigation. An estate may face litigation from beneficiaries who believe that they haven’t been provided for adequately or have been left out entirely in favour of other beneficiaries, such as charitable organizations.
There are a few ways to ensure that your charitable beneficiary receives the bequest that you intend for it to receive.
- Update your estate plan
It is important to update your estate plan every few years to reflect your most up-to-date intentions. Doing so can be especially useful if you plan to leave percentage shares from your estate and not specific amounts or assets for your beneficiaries, including for any charitable organizations. If the value of your assets changes significantly between the time you prepare your estate plan and the time you pass away, there will be a relatively significant impact on the proportions to which your beneficiaries are entitled.
If, for example, the value of your real estate increases significantly, thereby increasing the proportionate value of your charitable bequest, your non-charitable beneficiaries may later argue that giving away such a large sum to your charitable beneficiary was not your intention. This underscores the significance of periodically updating your estate plan to affirm your current intentions, and therefore reduce the prospect of litigation faced by your estate after your passing.
In the 2021 Supreme Court of BC case of Henderson v Myler, the beneficiaries of Ms. Eleena Murray’s estate unsuccessfully argued that Ms. Murray did not intend to give the remainder of the residue of her estate to the BC SPCA as she had indicated in her 2013 will, which was a revision of her 2010 will. The plaintiffs argued that Ms. Murray meant to make a specific and much smaller cash gift to the BC SPCA as she had indicated in a note that she wrote shortly before her passing in 2017, when she had reduced mental capacity at the age of 99. The Court upheld Ms. Murray’s 2013 will for reasons including that it reflected her most recent and veritable intentions from when she still had mental capacity. This decision is a pertinent reminder to update your will periodically and while you still have mental capacity.
At Bell Alliance, we reach out to our estate planning clients every five years to check if they would like to make any revisions to their plans. Such revisions may contemplate any change in your assets and any change in your intended beneficiaries. Most importantly, doing so helps ensure that your estate will be dealt with according to your wishes.
- Name an alternate beneficiary
If your estate plan includes a gift for a beneficiary that no longer exists at the time of distribution of assets, such as a bygone charitable organization, that gift is considered lapsed. However, the gift will not lapse if an alternative beneficiary is designated in your estate plan.
In another 2021 Supreme Court of BC case, Galloway Estate v BC SPCA, the Court was asked to determine the fate of a gift made in a 2008 will by Ms. Sheila Holland to a charity that was no longer in existence at the time of distribution of assets. Ms. Holland passed away in 2010 at the age of 86. Using the cy-près doctrine, the Court determined that allowing the gift to go to another organization that was now carrying on the work done by the original beneficiary and had a sufficiently similar charitable intent as the original beneficiary would be in accordance with the intention of the deceased. Although Ms. Holland did well by indicating her most up-to-date intentions in a will made just two years before her passing, she would have ideally included an alternative beneficiary for the gift in question.
When Bell Alliance helps you with your estate plan, we specifically enquire about whom you would like to designate as your alternative beneficiaries and possibly even alternatives for your alternatives.
- Consider a Joint Partner Trust or Alter Ego Trust
One way to future-proof your estate plan, and ensure that your charitable beneficiaries receive exactly what you intend for them to receive, is to create a Joint Partner Trust or an Alter Ego Trust. Benefits of creating such a trust include that the assets added to the trust will pass outside your will, and therefore, your estate. This allows assets to be considerably less vulnerable to claims by those whom you do not intend to be beneficiaries of your estate. Another benefit of proceeding with this route is that assets can be added to the trust during your lifetime on a tax-deferred basis. Also, unlike a will, such a trust can provide for privacy by not having to make public any information about assets held in the trust, including those intended for charitable beneficiaries.
Let Bell Alliance help you find the best tools to accomplish your estate planning goals. Our guidance will be based on your unique circumstances and a careful weighing of the advantages and disadvantages of the available options.
Written by: Sunny Sandhu