Conserving Good Will: Cy-Près Schemes and the Protection of Testamentary Charitable Dispositions

Testamentary bequests are the lifeblood of many of Australia’s charities – but what can we do when these gifts go wrong?

Leaving a gift to charity has been a frequent feature in Wills for centuries at the least. Australians are regarded as being particularly generous to those in need. Many people use their Wills as an opportunity to leave behind a social legacy, providing gifts to carry out various benevolent services such as to encourage medical research or to support community animal shelters. Charitable bequests range significantly in size and form, from nominal gifts of cash to more substantial bequests of property, shares, large sums of money and the establishment of philanthropic trusts.

A ‘charitable’ gift, essentially, is a gift made for a charitable purpose which serves to benefit the public (or a substantial or particularly disadvantaged portion of it). As with many legal concepts, the line between charitable and non-charitable purposes is not always clear and elucidating the ins-and-outs of charitable trusts is far beyond the scope of this article. This makes it critical to seek specialist legal advice when considering making a gift to charity through your Will.

Unfortunately, many charitable bequests fail. Even where a gift under a Will is considered legally ‘charitable’, this is still no guarantee of its eventual success. Charitable gifts may fail for many reasons, such as where fulfilling the purposes of the gift are impossible, impractical or illegal at the time of the Will maker’s passing. For instance, it may be that a gift fails because funds were left to an organisation that no longer exists – or, in some cases, never existed at all.

The failure of a charitable gift is a situation the Courts quite understandably prefer to avoid. Where possible, the law ensures that charitable gifts are upheld and protected from failure to a greater extent than ordinary gifts. This preference for preserving such bequests led to the creation of cy-près(‘so near’) schemes. Through these schemes, the Courts are able to preserve failed charitable gifts by applying them to an alternate beneficiary, carefully chosen to still closely reflect the testator’s original intention.

Cy-près schemes can be thought of as preserving the main charitable intention of a gift without the original specifications of it. In one case, funds left to a nursing centre which had closed prior to the Testator’s death were given to a different organisation which took over the original centre’s functions.[1] In another, a gift to a non-existent regional ambulance committee was instead given to the State of Queensland to provide ambulance services in the area.[2]

To qualify for this process, the failed gift generally must have a ‘general charitable intention’. This means that the charitable purpose of the gift must be general enough to allow it to be fulfilled through alternate methods. This is not always a simple distinction, and the more specific and precise a failed gift is, the less likely the Courts will be able to apply it cy-près. A failed gift of funds to a charity ‘for the relief of poverty’ will be more capable of being upheld via such a scheme than a gift of specific goods to a specific institution for a specific purpose in a specific location.

Applying for a cy-près order can be an expensive process, and cost considerations must be weighed against the relative size of the gift in question. It is however important to note that these schemes are exclusively a power of the Courts, and Trustees are not protected against claims for breach of trust if they choose to apply a failed charitable gift differently without the Courts’ express approval.

Leaving a charitable bequest in one’s Will remains a common and important choice for many Australians.

Before making such a gift, it is critical to discuss your particular wishes with a succession lawyer (and in some cases the gift’s intended recipients) to best ensure your intentions can be achieved.

If you would like to make an appointment to discuss your estate planning matters with our specialist team of succession lawyers, please contact our office on (07) 4760 0100.

[1] Re Tyrie (No. 1) [1972] VR 162.

[2] Public Trustee of Queensland v State of Queensland [2004] QSC 360.