The Scenario of Arthur Wilson Who Wanted to Leave Some Charitable Gifts - Case Study Example

CHARITABLE GIFTS Charitable Gifts In general terms, charitable gifts can be defined as gifts that are given by legal or physical person(s) to benefit a particular cause, what is typically known as charitable purposes. Charitable gifts take several dimensions such as offering services, giving used or new goods like vehicles, toys and clothing, or giving cash (Colliton, 1999, p. 6). Normally, charitable gifts are given with no consideration for return. Legally, that implies that an agreement to make charitable giving does not include return consideration. It should be noted that donations, under common law, acquire legal status of “charitable gifts” after they have been transferred (Volkmer, 2010, p. 39). However, under civil law, charitable gifts are already legally valid even though they may require other formalities such as the contract for charitable giving being done in writing (Domen, 2009, p. 79). Also, it is worth noting that charitable gifts are tax deductible; a situation informed by the view that they result to reducing the income tax of the state. PricewaterhouseCoopers LLP (2002, p. 21) explains that before charitable gifts are executed, the validity of the provisions for such charitable gifts should be established. This paper will focus on the scenario of Arthur Wilson who wanted to leave some charitable gifts after being satisfied that he had provided for his family sufficiently. The paper will advise Arthur’s executors as to the validity of his provisions regarding charitable gifts he had intended to leave. Advice to the executors will be based on the English Law provisions and common law rulings that relate to charitable gifts. According to Hughes and Klein (2007, p. 14), most charitable givers usually employ the services of executors to execute their charitable cause. Executors are defined as the persons who have fiduciary duty of property administration and should discharge the duty in accordance with the grantor’s/ testator’s wishes expressed in his or her will (Englebrecht, and Anderson, 2005, p. 1). Arthur’s executors should be in a better position, legally, to make charitable gifts. As such, it is important that they be conversant with the criterion of determining the validity of the Arthur’s provisions regarding charitable gifts. Although Arthur in his will had provided the provisions for charitable gifts, the executors can determine their validity and determine whether to make some changes or execute them as provided by Arthur. Therefore, what advice is appropriate to Arthur’s executors in regard to the validity of each of the following provisions in Arthur’s will on charitable gifts? a) I give £50,000 to promote the music of the famous composer Benjamin Britten and to fund research into what links, if any, there are between his music and the great composers of the past. The provision is valid as it falls under one of the four main divisions that charitable gifts are considered valid- education. It should be noted that, under the English Law, the notion of charitable gifts being geared towards charity purposes found its basis in the Charitable Uses Act 1601 preamble (Hopkins, 2006, p. 38). Charitable purpose found its standard categorisation in the ruling by Lord Macnaghten in decision on IRC v Pemsel.1 Lord Macnaghten noted that in the legal sense, charity comprised of four main divisions namely: charity purporting to benefit the community; charity that seeks to advance education; charity that aims at reduce poverty; and charity that intends to advance religion. According to the Charitable Uses Act 1601 preamble, education is considered as one of valid charitable gifts thus making this provision valid as it intends not only to promote the music of the famous Benjamin Britten but also to fund research relating to his music and the great composers of the past.2 Lord Hailsham in IRC v McMullen describes education as covering a wider area including practice and training process, as well as mental, moral, physical, and spiritual elements.3 The Act’s preamble also defines education as including research which is useful and the charitable gift relating to the same should ensure that the research is disseminated and made available to others. Borrowing from Re Hopkins where a gift was granted to Francis Bacon society to research to proof that the plays of William Shakespeare were written by Bacon, Arthur’s provision on Benjamin Britten is a valid gift as the findings of the research will have high value to not only music but also literature and history.4 In McGovern v Attorney General, Slade J observed that for education to be considered valid as a charitable gift it has to be used in a wider sense.5 Along with that, research should also have educational value for it to be considered as a valid charitable gift (Hughes and Klein, 2007, p. 75). b) I give £500,000 to my trustees to apply for the relief of ex-employees of Swallow‘s Bank and their families who may have come upon financial hard times. This provision is a valid charitable gift as it falls under the main divisions of charities that are considered as legally valid. Under the main divisions, the 1601 Act provides that such a gift should be provided to alleviate poverty; that is, to benefit the poor. As noted in Re Coulthurst, the term poverty is a subjective word; Sir Raymond Evershed suggested that the term should not just be used to mean destitution, but can also be used to mean that a person or a family has “gone short” due to some factors of life.6 This suggestion was further strengthened in IRC v Baddeley when Lord Simmonds explained that charitable gifts should not necessarily be given to people who grinding to utter destitution, instead, it can be given to a home or persons in order to provide some necessity or relief.7 It is against this background that Arthur’s provision to give £500,000 to his trustees to apply for the relief of ex-employees of Swallow‘s Bank and their families who may have come upon financial hard times is considered a valid charitable gift. In Dingle v Turner8, it was decided that allowing such trusts to relief ex- employees to exist is relieving the rest of society, hence public benefit. The fact that these families may come upon hard financial times does not mean that they will be grinding to utter destitution but rather they will be in need to meet some necessity. c) I leave £1m to establish the George Mainwaring Centre for Alternative Medicine, which will provide comfort to patients and ease suffering. Patients should be charged, each according to their means. This provision qualifies as a valid charitable gift; it falls under other community beneficial charities sub- category that seeks to benefit the sick. The sick are considered as valid beneficiaries for a charity. This sub- category includes the old and the impotent (Eric, 2009, p. 31). As decided in Re Resch’s Will Trusts, these valid beneficiaries should be read individually.9 This charitable gift by Arthur aims at alleviating the suffering of the sick and creates an environment of comfort for them. Apart from that, the gift intends to reduce the financial burden on the patients by helping them pay the medical fees that may accrue as a result of services provided to them at the centre. Therefore, the executors should go ahead and discharge the provision in accordance with the Arthur’s wishes expressed in his will in order to benefit the sick. d) I leave a further £500,000 to promote the playing of sport (e.g. cricket, football, snooker) amongst the youth of Walmington-on Sea, so that young people can come together, get fit and find a sense of community. This provision is a valid charitable gift which falls under the sub- category covering benefits of localities, the locality covered in this case is Walmington-on Sea. Edwards (2007, p. 69) notes that for a charitable gift to be considered valid it has to apply to a particular area or locality, like Walmington-on Sea. Also, the money allocated for such a charity should not be spent on purposes that are non- charitable as this will make the charity gift invalid. The validity of this provision is more evident as Goodman v Saltash Corporation indicates; the charity should have an impact within the locality.10 Arthur intended the same as he stated that the young people of Walmington- on Sea should come together, get fit and find a sense of community. However, in an event that this charity is “purely recreational pastime” it can be considered invalid as decided in IRC v City of Glasgow Police Athletic Association.11 The Recreational Charities Act 1958 stipulates that such a gift will be considered valid if the services and facilities it provides are in interest of social welfare, of which Arthur’s charity is (The National Archives, 2011). e) I leave £100,000 to promote and encourage kindness to animals. This provision is contained in the 1601 Act in sub- category that relates to animals. In Re Grove- Grady, it is argued that this charity gift does not necessarily seek to afford animals comfort but rather to acknowledge the indirect moral benefit that are derived by human beings from these animals.12 Therefore, efforts should be made towards promoting and encouraging kindness to animals (McAllister (1998, p. 100). This provision as contained in Arthur’s will is valid and the executors should discharge it. However, they can make some changes regarding the wish without altering the substance of the provision- to encourage and promote animals’ kindness. In conclusion, it is evidently clear that all the provisions that Arthur included in the will are valid as charitable gifts. The charitable gifts that he left were well- intended to benefit the community at large. They all fall under the four main divisions of charitable purposes as outlined in the Charitable Uses Act 1601. Also, none of the provisions fall under invalid purposes as concerns charitable gifts. Just like there are valid charitable purposes, there are invalid purposes. Invalid purposes include; exclusivity, profit- making, and political activism. References Charitable Uses Act 1601 Colliton, J, 1999, Charitable Gifts, McGraw- Hill. Dingle v Turner Domen, B, 2009, “Rethinking the Social and Cultural Dimensions of Charitable Giving,” Consumption, Markets & Culture, Vol. 12, Issue 1, p. 65-84 Edwards, R and Nigel S, 2007, Trusts and Equity, Pearson Longman Englebrecht, T and Anderson, M, 2005, “Charitable Contributions: An Analysis of Estates’ and Trust’s Responsibilities,” The CPA Journal. Eric, M, 2009, “Perfecting Donor Intent on Gifts to Charity: The Gift Agreement,” Journal of Practical Estate Planning; Vol. 11 Issue 1, p31-40. Goodman v Saltash Corporation Hughes, T and Klein, D, 2007, The executor's handbook: a step-by-step guide to settling an estate for executors, administrators, and beneficiaries, InfoBase Publishing. Hopkins, B, 2006, Charitable Giving Law Made Easy, Wiley. IRC v Baddeley IRC v City of Glasgow Police Athletic Association IRC v Pemsel IRC v McMullen McAllister, P, 1998, The Charity's Guide to Charitable Contributions, Conlee-Gibbs Publishing McGovern v Attorney General Olson, M. D, 2003, “Help your clients make the most of their charitable gifts,” National Underwriter. Life & Health, 107(48), 12-14. PricewaterhouseCoopers LLP, 2002, PricewaterhouseCoopers Guide to Charitable Giving, Wiley. Re Hopkins Re Coulthurst Re Grove- Grady Re Resch’s Will Trusts The National Archives, 2011, Recreational Charities Act 1958, Available: http://www.legislation.gov.uk/ukpga/Eliz2/6-7/17/contents (Accessed: February 22, 2012). Volkmer, R. R, 2010, “Issues regarding charitable gifts,” Estate Planning, 37(5), 39-40 Read More