In the October 2016 issue of the NSW Law Society Journal, a matter handled by Watkins Tapsell was profiled. The matter, Estate of Polykarpou; Re a Charity [2016] NSWSC 409, dealt with the issue of what happens when a charitable gift within a Will fails because the charity receiving the gift no longer exists.
The facts of the matter were as follows. The deceased left her entire estate valued at approximately $1.4 million to charitable causes. Exactly half of the estate was specifically gifted to Oprah's Angel Network, which was a charity founded and managed by American entertainer Oprah Winfrey. Oprah's Angel Network was a charity in operation from 1998 to 2010 that provided charitable donations to a variety of causes and focused its donations to causes which promoted the education and advancement of women.
At the time that the deceased made her Will in 2004, Oprah's Angel Network was operating as a charity. The deceased passed away in 2015. At the time that the deceased passed away, Oprah's Angel Network had ceased operation for 5 years. The result of the Will was the gift to Oprah's Angel Network failed – there was no organisation in existence to accept the gift.
Generally, in circumstances when a specific gift within a Will fails, and there is no provision in the Will for dealing with the residue of the estate, that portion of the Will is considered "void" and treated as if it did not exist. If a gift within a Will is void, then the assets which are the subject of that specific gift (in this case, one half of the estate) are no longer controlled by the Will. In that situation, those assets would be distributed as if the deceased died "intestate" (without a Will). In circumstances where someone dies "intestate" their estate is distributed to their family.
When a specific charitable gift within a Will fails, there are instances where the court can step in and establish a scheme by which a failed gift is distributed to an alternate charitable beneficiary that is as closely aligned to the deceased's intentions as possible. These instances fall under a legal exception known as the cy-prcs doctrine. The cy-prcs doctrine states (in part) that the intended charitable purpose of a gift in a Will or trust can be varied by a court when it is impossible or impractical to carry out the objects of the trust gift in the way that the creator of the trust intended.
In the Polykarpou matter, the Court's analysis first considered whether the failed gift to Oprah's Angel Network was for a charitable purpose. Because the gift was to a charitable institution, the gift was considered prima facie to be for a charitable purpose. The next phase of the Court's analysis considered whether the Will had a general charitable intention which should be administered through a cy-pres scheme. Taking into consideration that the entirety of the Estate was gifted to charity and that the failed gift was to a charitable institution, the Court ruled that the intent of the deceased in her Will was charitable in nature. The Court then ordered that a cy-pres scheme be established to distribute the gift to a similar charitable interest and referred the matter to the Attorney General's office for implementation of the scheme. The lesson to take away from this case is that Estate Planning does not end once you have made your Will. Proper planning also includes ensuring that the beneficiaries of your Estate are still either alive or (in the case of a charity) in existence at all times during your lifetime.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
