Court Finds Bequest to Unformed Charity Lapsed

Muhammed Belal Hussain died on March 10, 2013 with a will, which left 50% of the residuary estate to the Hussain Family Foundation, 25% to the decedent’s surviving brothers, and 25% to the decedent’s surviving nieces and nephew. The Foundation did not exist at the time of the decedent’s death. The attorney who drafted the will advised the decedent that if the Foundation was not formed, the gift would lapse and the intended bequest would pass to the other beneficiaries. Subsequent to the decedent’s death, the Foundation was incorporated and the executor of the estate admitted that he expected to run and be paid by the Foundation. The petitioner, the decedent’s brother, asked the Court to find that the residuary bequest to the Foundation failed because the decedent never established the Foundation.

Cy pres is an equitable legal doctrine under which a court may reform a written instrument with a gift to a charity as closely to the donor’s intention as possible so that the gift does not fail. The petitioner argued that the doctrine of cy pres was inapplicable because such doctrine only should be invoked to modify the exact terms of a will to effectuate a general charitable purpose. Petitioner further argued that the will did not have a general charitable purpose, and even if the will had such purpose, the extrinsic evidence indicated that the decedent changed his mind.

The respondent executor argued that the Court could glean charitable intent from the will as a whole, the decedent’s visits to an orphanage in Bangladesh, and an earlier holographic will from 2006 which included charitable benefit wishes.

In light of the extrinsic evidence, the Court could not find a general charitable purpose, and instead found the cy pres doctrine to be inapplicable. In making its determination, the Court cited the fact that the decedent knew that the gift to the Foundation would lapse if the Foundation was not formed. The decedent was aware of this fact for four years and chose to not take action. In further support of its holding, the Court noted that the decedent only participated in modest charitable giving during his lifetime, but never enough to deduct the amounts from his tax returns. The Court explained the result may have been different had the will included more specifics as to the charity. Because the gift failed, the bequest to the Foundation passed to the other residuary beneficiaries. Thus, it is important that clients understand the implications of naming an unformed charity in their estate planning documents.

 

Questions regarding this article may be sent to Publications@Capehart.com.

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