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What’s in a name?

Many a school established a foundation in the 1970s and 1980s ostensibly for the purpose of fundraising for the school’s benefit but with the helpful side effect of keeping funds off the school’s balance sheet. This in turn maximised the Commonwealth financial assistance received. The funding formula has long since changed and a good number of schools have wound up their foundations and brought their fundraising in-house.

An unintended consequence of this is that bequests made by school supporters in their Wills when the school foundation still existed may fail if the foundation ceases to exist before the supporter dies.

The problems that can arise are well illustrated by a case brought by the executors of a Will made by Duncan in 2011 in which a share of the estate was left to the Avondale College Foundation, an unincorporated association established in 1978 to support and assist Avondale College. The Avondale College Foundation changed its name to the Avondale Foundation in 2004. For various reasons, the Avondale Foundation stopped engaging in any activity from 2009 and was dissolved sometime after Duncan’s death in 2013 but no later than 16 April 2014.

The end result of Supreme Court proceedings was that the reference in the Will to the Avondale College Foundation was found to be a reference to the Avondale Foundation. Although it had been dissolved, the gift, being for a charitable purpose, did not fail. However, the Court had to decide who should receive the gift under what is known as a cy-pres scheme. Fortunately for Avondale College, the Court decided that it should receive the gift.

While the outcome was no doubt consistent with Duncan’s wishes, it took five years after his death to determine the position. The no doubt considerable costs of going to Court were paid out of Duncan’s estate with the result that the many charitable organisations which were the residuary beneficiaries all received less than they should have and much later than if there had been no litigation.

While there is nothing that can be done to guarantee such situations will not arise in relation to your school, the risk can be minimised by regular communication with the school’s supporters alerting them to any changes of name or structure among the school’s entities and asking them to check that the correct names are used in their Wills. For many schools, there is merit in encouraging supporters to make bequests in favour of the school itself and not to any associated entity.

Please contact David Ford or Stephanie McLuckie for help in drafting your bequest brochures or in dealing with the executors of an estate where the school is a potential beneficiary.

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