All About Estates

Estate Donations for Charities Not Yet Registered

The 2018 Federal Budget hinted that Canadian newspapers may be able to receive charitable status in the future.  As I’ve previously written, making non-profit and local journalism an eligible charitable purpose is a timely idea — and it has implications for donor planning their estates.  The Federal Budget got me thinking of a charitable planning conundrum: donors who wish to support a cause that is not yet charitable at law and therefore not yet advanced by a registered charity.

To put the challenge in an idealistic way, how does a donor make a gift by will to create a different future?  An estate donation is a forward-looking act.  At the time of drafting a will, however, a donor is limited to using existing law and the current list of registered charities.

An Example

So, let’s explore an example.  We have an individual who is passionate about public interest journalism and in despair about the collapse of newspapers. Let’s also say that this individual is updating her will and does not have long to live.  She would like to make a significant estate donation to support investigative journalism at Canadian newspapers, but has no idea when the government will finish its policy metaphysics and enable charities with this purpose to be registered. What does she do?

The intent is clear but the charitable system lags or, perhaps the right charity has not been created.  The donor understandably wishes to name a registered charity as beneficiary to produce tax credits for the estate.  A solution is to structure the gift using a donor advised fund at a public foundation. This assumes the public foundation allows its funds to have purposes, not just named charities.

The result?  The legal beneficiary is a registered charity.  Check.  But the primary purpose of the fund is not, at least at the time of drafting, a charitable purpose.  No matter.

Contingent Primary Purpose

The non-charitable purpose can be contingent.  If public interest investigative journalism becomes a charitable purpose in the future, the foundation would use its discretion to make grants to qualifying registered charities. But the fund also needs to have a charitable purpose – often closely related to the non-charitable purpose — that would be primary until the contingent purpose becomes charitable.  It’s drafting in anticipation of future legal changes.

Contingent purposes enable the donor to state a future goal that currently seems impossible to fulfill and trusts the host public foundation with carrying it out.  It’s true, the purpose may never become charitable.  But it’s also true that a solution may emerge in the future that is not present at time of drafting.  Charitable journalism is a valid example, but there are many others.

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


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