An interesting little case in BC called Bodner Estate.   Irene Bodna died and left about 8m to 24 different registered charities and non-profits that are all interested in animal welfare and the environment.  A small amount was as an outright gift and the rest was a perpetual fund paying out the net income.

The crux of the issue was the part of the will  … “to pay the net income from the Property … to or for any one of more of those charitable organizations listed in the sub-paragraph 9(d) below which are in existence from time to time as my Trustee in its absolute discretion selects and in such proportions as my Trustee may decide”. [my emphasis]  The residue clause also refers to the list – “to pay the balance of the income to or for any one or more of those charitable organizations listed in the preceding sub-paragraph 9(d) which are in existence from time to time as my Trustee in its absolute discretion selects and in such proportions as my Trustee may decide;[my emphasis]

Well, you can probably guess some of the 24 organizations are just non-profits and not “charitable” or registered charities in Canada.  So what does a judge do?   Well with the wisdom of Solomon this judge realizes that most Canadians care about organizations they are involved with and the most important issue is not always whether a group is a charity or a non-profit or the potential tax benefits of giving to one or another.

Should the trustees only give to those groups that are registered charities?

The judge looks at the Income Tax Act, various common law decisions and then notes:

[24]        From their titles, the entities listed in clause 9(d) would appear to concern themselves with animal welfare, as to twenty of them, and the environment, as to the remaining four. Each would fall under the broad fourth category of charity at common law, as objects of general public utility.

[25]        The statutory and common law approaches to “charity” or “charitable organization” are not as important to the application of the four corners approach as is the simple fact that Ms. Bodner appears, in clause 8 of her will, to define “charitable organizations” for the purposes of her will as those entities listed by her in clause 9(d), by the words “those charitable organizations listed in sub‑paragraph 9(d).” [Emphasis added.]

[26]        This interpretation is supported and confirmed by the words of clause 9(e)(ii) and (iii), which repeat that “those charitable organizations,” for the purposes of the charitable trust of residue, are “those charitable organizations” listed in the preceding sub-paragraph 9(d).

[27]        The will-maker is entitled to define her beneficiaries as she chooses, and Ms. Bodner has done so.

[28]        I see no ambiguity in this aspect of the will.

[29]        Had I done so, and had it been necessary to settle into Ms. Bodner’s armchair, the result would have been the same. …

[41]        A question arises whether there is any significance to the fact that some of the organizations listed in paragraph 9(d) have charitable registration numbers while others do not. Counsel questions whether that showed an awareness of the difference between registered charities and other charitable organizations on the part of Ms. Bodner. That may be, but I was told during argument that two of the organizations for which no charitable registration numbers are shown in the will are in fact registered, and were at the time the will was signed.

[42]        That some beneficiaries had registration numbers, and were identified as such in the will while some did not is equally consistent with Ms. Bodner being aware of the difference, and intending to gift them all regardless of registration, or the tax deductibility that comes with donations to registered charities. This is also consistent with Ms. Hartshorne’s recollection of Ms. Bodner’s primary goal set out above.

[43]        Finally, the evidence also shows that Ms. Bodner gave generously to the entities listed in sub-paragraph 9(d), but perhaps more important, was on the board of directors of the first-named, the respondent Animal Defence & Anti-Vivisection Society of B.C. for several years. The Animal Defence & Vivisection Society of B.C. had not, at the time the will was made, applied for or been granted registered charity status. As a former director, Ms. Bodner can be taken to know that. It is improbable that Ms. Bodner would restrict her bequest to this entity to $5,000, while benefitting others through an ongoing bequest of trust income.

So the judge concluded that the “charitable organization” reference is less important than the “listed in the sub-paragraph 9(d)”.

1) If you leave an estate to 24 organizations expect a lot of scrutiny and issues.

2) I am surprised that with a major trust company involved throughout the process that they did not pick up on the issue that a list called “charitable organizations” is a mix of charities and non-charities.  Ok, I am not really that surprised!

3) Make sure that your will is well written and precise.  This whole issue could have been avoided if the organizations were called “organizations” and not “charitable organizations”.  Here are some resources including our directory “Planned Giving and Canadian Charities“, “What is Planned Giving?” “Leaving a Bequest to a Canadian Charity – using a lawyer to avoid legal problems with bequests“.  Also here is an article I wrote for the Ontario Bar Association “Bequests – Avoiding problems with the ultimate planned gift

3) Generally, don’t give the executor the power to make decisions over the proportion give to each organization – it could lead your estate to simply being a slush fund for an executor/trust company and can put the executor in a difficult position with organizations bickering.  It can result in litigation and unhappy groups.

4) When you give most of your estate to charity there is little likelihood in many estates that you will have enough income to use the full tax receipt against.   Therefore one really good time to think about giving to foreign charities directly, or non-profits that are not registered charities, is in your will if you are giving away your whole estate to good organizations.   If you spend 4 months of the year in Arizona and love an organization down there helping the homeless and you are giving your whole estate away to charity why not include them in your will.  It will not cost you a penny more than giving the same amount to a Canadian charity.   Obviously if you are giving say only 5% of your estate to charity you might want to pick registered charities so your estate can get the tax benefits – generally significant estates probably will have enough income so that it equals 5% or 10% of your assets.   Ask a financial planner to do a calculation for you so that you can be more informed.  Also charities should not make incorrect representations to those doing wills about the potential tax benefits – these benefits may be illusory in many instances.   You might also find this article helpful when people are planning on leaving most of their estate to charity – “Why a major gift combined with a bequest to a charity may be more tax effective than just a bequest

5) You are free to set up a perpetual endowment instead of giving the funds directly to a charity or giving the funds to a charity over a 5 or 10 year period.  However, perpetual endowments often fail – they deliver the “income” only and consequently often very little impact.  Yes I can think of a number of people at investment companies and banks who will categorically disagree with that statement. “Perpetual funds” tend to get lost when there is a stock market crash or someone inappropriately “lends” money with the intention of repaying it. They often generate huge fees for trustees and investment advisors – although they may not generate much charitable activity compared to the funds being deployed.  They let problems fester when funds are needed now to address them.  My favourite perpetual endowment is to prevent climate change!  Off course if you really think climate change is an urgent crisis – why are you keeping money back for 16 billion years from now.   You might find this article interesting “The Globe and Mail: ‘Forever’ falls out of fashion in charitable giving“.