All About Estates

Discretionary Estate Donations

The following post is by guest blogger Sally Lee, LLB, an Estate and Trust Consultant at Scotia Wealth Management in Toronto.

What happens when a testator, under her will, grants her executor unfettered discretion to gift a share of the residue of her estate to a charity or charities?

The gift of a residue of an estate to a charity or charities creates a charitable trust.  Ordinarily, a trust must have three certainties:  the certainty of intention; the certainty of subject matter; and the certainty of objects.  A charitable trust is different as the third certainty is dispensed with.  In other words, there is no requirement that a charity or charities be named under a will.  However, this creates an undesirable situation for the executor of the estate as it effectively creates uncertainty.

For example, if the will provides that the executor is to give one share of the residue to a post-secondary institution for the advancement of feminist studies, which educational institution did the testator intend to gift?  As well, other beneficiaries who are family members of the testator may not agree with the selection of charity made by the executor, and disagreements may arise as a result of the executor exercising this unfettered discretion. The executor has a difficult undertaking in the administration of an estate, and the addition of this uncertainty can complicate matters further.

Then why would a testator not want to name a charity under her will?  Practically speaking, gifting habits and worthy causes an individual cares about may change with time.  As well, the existence of certain charitable organizations may cease as years go by.  And realistically, no individual wants to vary their will year after year based on these types of changes.

One way to eliminate this type of uncertainty while providing flexibility around updates is to set-up of a donor advised fund with a public foundation, such as a community foundation or Aqueduct Foundation.   This option enables the donor to tailor and achieve her philanthropic goals during life.  Multiple charities can be selected and there will be no confusion or ambiguity as to who is entitled to receive grants under the foundation.  Perhaps the individual who would be most relieved is the executor whose burden is already challenging enough.

 

About Malcolm Burrows
Malcolm is a philanthropic advisor with 30 years of experience. He is head, philanthropic advisory services at Scotia Wealth Management and founder of Aqueduct Foundation. Views are his own. malcolm.burrows@scotiawealth.com

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