Organisational changes lead to issues with distributing an estate

Date: Jan 07, 2015

As well as family members, many individuals will bequeath their assets to an organisation, such as a charity, as part of their estate planning. While this is a common step to take, there are also issues that can arise for those who are administering the estate.

Just as changes like divorce can complicate the process of distributing assets to a beneficiary, revisions in the organisational structure of a charity can make it harder to execute the deceased's last wishes.

This was seen in a recent case before the NSW Supreme Court. In the case, the administrator of the estate - the deceased's sister - applied to the Court for guidance on how to manage the distribution of the estate towards a non-profit organisation.

The man's will stipulated that his estate be split into three parts upon his death, after any expenses had been cleared. Each of these parts would then be awarded to a different charitable organisation. The document also outlined that, should any of the organisations cease to exist before he passed away, the estate would be distributed to those that remain in operation.

One of the beneficiaries had ceased to exist - having first moved from being an unincorporated organisation to an incorporated one, and then changing from an independent NSW-based organisation to the local branch of a national organisation.

At this point, the national body took over a number of processes involved in the finances of the previously independent body, including donations to the organisation.

Although the core function of the organisation had not changed, the court was required to judge whether these changes in the legal structure of the non-profit were enough to violate the requirement that the organisation should continue to exist in order to receive these payments.

The Judge acknowledged that these changes to the organisation's structure did mean that the organisation named as the beneficiary had ceased to exist as a unique entity.
However, the Judge also determined that, because the mission and activities of the non-profit remained unchanged, that it could remain as a beneficiary of the estate.

If you are looking to write your own will to benefit a non-profit organisation, or are looking to challenge a will because of changes that have occurred among the beneficiaries, make sure to contact a wills and estates lawyer.