All About Estates

Protecting Charitable Interests

Charities may struggle with a lack of resources and expertise when defending an interest in an estate.

Are charities in a will easier to challenge when there are more than five entities named?   This topic came up at a recent lunch with estate planning and litigation colleagues.  One told a cautionary tale of a large estate that was litigated away from a dozen named charities.  The charities lacked the will and coordination to uphold the testator’s clear charitable intent.

Casting charities as undeserving estate beneficiaries that “should be grateful” is nothing new.  In addition to societal bias about the legitimacy of charities as estate beneficiaries, charities face a tactical and legal disadvantage when confronted with litigious claimants.  Charities are hampered by lack of resources, fear appearing aggressive, and failure to coordinate.

Let me elaborate.

  1. Resources:  Only the top one or two percent of Canada’s 86,000 registered charities have sufficient resources to manage bequest administration in-house or consistently consult with legal counsel. It’s not just a lack of funds.  Expert staff and clear processes are at a premium among charities.
  2. Timidity: Charities may fear negative publicity arising from the defense of an estate donation.  Will the action harm public trust or dampen the generosity of other donors?  I don’t believe so.  While there a couple of large charities that have a reputation for being assertive about fees or administrative issues, I don’t know of any Canadian charity that has loss donations over the long-term due to acting on good legal advice in an estate matter.
  3. Coordination: Charities named in a will often work together to defend their mutual interests, often lead by the experienced staffer of a large charity.  A flock of charities, however, may be meek and difficult to coordinate.  It can be easy for a plaintiff with belligerent legal counsel to divide and conquer.

What are possible planning and governance solutions?

  • A gift is strengthened if the donor informs a charitable beneficiary of their estate plans.
  • If the testator’s goal is to support a number of smaller charities use a public foundation with donor advised funds. The public foundation is more likely to have the resources, expertise and will to protect the charitable interest.
  • Charity boards should develop an estate administration and litigation policy to prepare for the inevitable. Consult with legal counsel.
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About Malcolm Burrows

Malcolm is a philanthropic advisor with 25+ years of experience. He is head, philanthropic advisory services at Scotia Wealth Management and founder of Aqueduct Foundation. malcolm.burrows@scotiawealth.com

1 Comment

  1. L. Desharnais

    October 5, 2017 - 9:07 pm
    Reply

    To your point, I noticed the following Seminar being offered and solicitors in the Victoria vicinity solicited for their input:

    FYI – Ken Walton, Counsel for Constance Isherwood on the Le Galais file, is advertising as hosting the following seminar this fall in The Praecipe a local newsletter circulated among Victoria’s legal community.

    DEALING WITH DIFFICULT CHARITABLE BENEFICIARIES
    It appears that certain beneficiaries who are residual legatees are grinding lawyers about
    their fees, executors about their fees and sometimes, executors about their lawyer’s fees, as
    a matter of course. This is done on the basis that the charity must maximize the amount of
    money it is getting from whatever benefit is left to it under the will.
    This is causing unnecessary work to be done, in terms of passing accounts and justifying
    legal accounts.
    If you have had an experience of that nature, I would like to hear from you. Please contact
    F. Kenneth Walton, QC at 250-595-5368 or kfwalton@telsu.net. Ken is proposing a seminar
    on these matters in the fall.

    http://www.vicbar.com/images/praecipes/Praecipe_2017-05.pdf (page 6)

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