Charities face a bizarre challenge when administering gifts by will. It should be simple. After the donor’s death, a charity named as a recipient of an estate donation becomes the beneficiary of a trust. The money is owed to the charity and the interest in the trust is legally enforceable. Charities, however, are often considered to be second-class beneficiaries.
What does it mean to be a “second-class beneficiary”? The idea is a cultural construct and expressed as a preconceived notion about the way a “grateful” charity should behave. I have seen this bias articulated as follows:
- Executors. The estate trustee, especially lay and family trustees, may treat the charity beneficiary with expedience or as an after -thought. For example, a charity may receive notifications and statements after family beneficiaries. Or an executor may expect the charities to be silent on fees and sign releases without amendments. Sometimes this approach is tactical or lazy, but it may reflect an underlying belief that charities should not have the temerity to assert themselves.
- Other Beneficiaries. Other beneficiaries, especially family members, are more likely to seek obvious signs of gratitude from the charity. “They are lucky to get anything.” Especially resented is the failure to provide concessions on personal effects and the insistence upon professionally prepared estate accounts.
- Charities. This is the most surprising. Inexperienced charities sometimes act as if they are undeserving. In a rush to be grateful, they are reluctant to exercise their legal rights. They are afraid of negative publicity that may come from litigation. They may even relinquish property in the face of bullying or simply due to their own timidity.
It should be said that charities that regularly receive estate donations typically have excellent systems in place to manage the estate administration process. Large organizations have a dedicated professional on staff with a clear understanding of legal rights and processes. They understand executor fees, estate accounts and the implication of releases. Moreover they consult with other charities that are named in a will. These sophisticated charities regularly ask tough questions and engage legal counsel.
The concept of testamentary freedom may be well enshrined in most provinces, but there is a lack of emotional acceptance of non-family beneficiaries. Charities need to understand that they not only have a legal right to the gift, but a moral obligation to uphold the wishes of their deceased donor and a fiduciary duty to manage resources for their charitable purpose.