Charitable Pledges and Contractual Pitfalls

August 27, 2021 David M Smith Estate Planning Tags: , , 0 Comments

Planning one’s estate raises the question of what you want your legacy to be. It is a highly personal decision that does not have a correct answer. For some individuals, this can mean ensuring causes that are close and dear to their heart receive support from their estate. To this end, donations and charitable gifting are a common practice in wills.

In planning such gifts, it is important to ensure that the gifts are valid and enforceable. The testator’s best intentions can be undermined by the failure to comply with legal technicalities.

Testators may make gifts bearing certain conditions, such as having something named after them. Where these conditions are important to the testator, they should: (i) be communicated to the recipient of the gift to ensure they are willing and able to comply with the conditions, and (ii) set them out explicitly in the will.

The case of Brantford General Hospital Foundation v. Marquis Estate is an excellent example where a gift, with good intentions, ran afoul of contract law.

The testatrix and her deceased husband had been long time and generous donors to the Brantford General Hospital Foundation.

The testatrix had pledged, prior to her death, to donate $1,000,000.00  over a five year period. As part of this pledge, a facility was to be named after her family. However, she passed away shortly after the first instalment was paid, leaving $800,000.00 of the pledge unpaid. Her estate refused to pay out the remainder of the pledged funds and the Hospital initiated litigation.

Justice Milanetti ruled against the plaintiff, stating that a promise to subscribe to a charity is not enforceable in the absence of consideration. The promise to name a facility after the family was considered ancillary to the donation of $1,000,000.00  and not of vital importance, and as such, invalid as consideration.

Central to this determination, was that the idea for naming the facility originated from the Plaintiff and was subject to board approval.  The pledge was deemed unenforceable.

Where a testator has ongoing chartable intentions that they wish honored by their estate, it would be wise to review  the enforceability of these plans after their passing.

Thank you for reading and have a great day!

David M. Smith and Raphael Leitz

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