Bequests and Gifts to Charity in Your Will

Have you considered what will happen to your loved ones and the causes you care about after you’re gone? Did you know, you can direct gifts and distributions to your family whilst still making provision for charities you care about in your Will? In this way, your Will is much more than just a legal document, it is a way to protect and provide for your loved ones, and to leave a lasting impact.

Why having a Will matters

Having a Will is essential, as it ensures your wishes are carried out after you pass away. Your Will provides instructions on how your property, assets, and belongings should be distributed, making it easier for your loved ones and legal representatives to manage your estate.

If you pass away without a Will (known as “dying intestate”) and have assets worth more than $15,000, your estate will be distributed according to the Administration Act 1969. This means your assets may not be distributed how you intended and the process can be more costly and time-consuming for your loved ones. Creating a Will helps minimise stress, legal complications, and unnecessary expenses for your loved ones.

Key Components of a Will

The following should be covered in your Will:

• At least one executor, preferably two, who live in New Zealand. Executors are responsible for ensuring your wishes are carried out and handle the legal and financial matters, like ensuring your debts are paid and assets are distributed according to your instructions.
• Instructions for paying debts and liabilities.
• Adequate provisions for your partner and children.
• Clear instructions on who will inherit your property and possessions.
• Guardianship arrangements for any minor children (if applicable).
• Funeral wishes (not legally binding but should be considered by the executors).
• Bequests or gifts to charity.

Leaving a Gift to Charity

If you have regularly supported a cause during your lifetime then you may want to continue that generosity by leaving a gift to charity in your Will. Regardless of the amount, your gift can make a lasting impact. However, there are a few important considerations:

Types of Charitable Bequests

• Residuary Bequest – A percentage of your remaining estate after other gifts and expenses have been completed.
• Pecuniary Bequest – A fixed sum of money or cash gift.

Choosing Between a Fixed Amount or a Percentage of Your Estate

• Percentage-based bequest:  This is the recommended approach for charitable giving, as it ensures the gift remains proportional as the value of your estate might change over time, maintaining fairness among beneficiaries and prevents unintended financial imbalances.
• Fixed amount bequest:  This is a set amount of money you wish to donate. However, changes in your estate’s value over time could result in the amount being larger or smaller than originally intended. If choosing this option, consider setting the funds aside in a separate bank account to prevent potential disputes or the money passing by survivorship if you currently have joint accounts with another person.

Balancing charitable giving with family needs

While charitable giving is admirable, it is crucial to ensure your estate can still provide for your loved ones. Leaving an excessive gift could lead to legal challenges under the Family Protection Act 1955, which allows family members to contest a Will if they believe they have not been adequately provided for. Additionally, it is important to assess whether the amount you plan to donate will be financially feasible as an unrealistic or excessive gift may fail and could create legal complications for your loved ones.

Seeking legal advice can help you balance your wishes with your family’s financial security.

Ensuring your gift reaches the right charity

To prevent confusion and ensure your gift goes to the right place:

• Confirm the charity’s full legal name and registration number through the Charities Register. This helps verify the charity’s legitimacy and ensures your gift is directed correctly.
• Consider including a discretionary substitution clause in your Will, which allows your executor or trustee to redirect your gift to a similar charity if your charity no longer exists, has changed its name or has merged with another charity.  This ensures your gift remains aligned with your intentions.

Keeping your Will updated

Your circumstances may change over time, potentially affecting the validity of your Will. You will need to review and update your Will from time to time, especially around key life events such as:

• Marriage, civil union, or separation/divorce.
• Changes in your financial circumstances.
• The birth or death of family members.
• Buying or selling significant assets, such as property which might be listed in your Will.

Seeking professional advice

To ensure the validity of your Will and that your charitable bequest is properly structured, consult with a legal professional. A well-drafted Will reduces the risk of disputes and ensures your bequest benefits both your loved ones and the causes you support.