Sunday, November 9, 2008

Australian Charities Lose Bequests After Families Challenge Wills

Australia's Courier-Mail reports that relatives are increasingly challenging wills in court, costing charities millions of dollars in bequests despite the wishes of the deceased. The Brisbane-based Australian Centre for Philanthropy and Nonprofit Studies examined 46 major cases and found that about 1 in 14 Australians leaves a bequest to charity, but their wish is likely to be over-ruled if relatives contest the will. The new report, titled Every Player Wins A Prize, revealed that charities lost the entire bequest in 6 instances and had it substantially reduced in another 35.

Australia is one of only four countries with "family provision laws", introduced to ensure "the proper maintenance and support of a will-maker's spouse and children".

The Centre's director, Professor Myles McGregor-Lowndes, said legal challenges to wills had become more common, and predicted that battles between families and charities would continue to grow as the wealthy generation of baby boomers died over the next few decades. He said that changes to family make-up, attitudes and expectations and a growth in personal wealth had contributed to increasing conflict over bequests. Family factors include: (1) Multiple marriages with partners and children vying for a share of the estate; (2) Rising numbers and legal recognition of de facto and same-sex relationships; (3) Growing numbers of elderly and dependent parents; and (4) Rising numbers of Generation Y living at home into their 20s or 30s who may be classed as "dependent."

The report said changing cultural values meant more people not included as beneficiaries expected a share of the estate as their right, and it was no longer considered inappropriate to challenge a will. Lawyers said an attitude of "entitlement" now pervaded the culture, rather than an inheritance being seen as an unexpected or windfall bonus. Further, increasing wealth had also made it worthwhile to mount a challenge.

Many cases don't even reach the courts, with charities pressured to hand over tens of thousands of dollars in "go-away money" to settle claims quickly, according to the report. It also advises charities to encourage gift-giving through tax-effective mechanisms, such as prescribed private funds, while donors are still alive.

Only 58% of adult Australians have made a will and 7% have bequested a charity.


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