DIY Wills Pose Dangers for NFPs

Many Not for Profits rely heavily on bequests left from supporters, but an emergence of wills created online and through mobile apps could significantly damage this source of income, experts have warned.

Only 7.5 per cent of wills have a charitable bequest and half of this number are from will-kits that haven’t been seen by a lawyer or financial advisor, a panel discussion in Melbourne hosted by Perpetual as part of Include a Charity Week was told.

The Stroke Foundation National Gifts in Wills Manager, Ross Anderson, said the promotion of do-it-yourself wills is worrying.

“As a sector, it’s estimated that about a quarter of the community income we get comes from bequest gifts,” Anderson said.

“But for some charities it’s far more significant than that. For charities like the Heart Foundation and the Cancer Council about half the money they get is from gifts in wills from their supporters, so without them they face very big challenges, they’d literally be able to do half the amount of work and research they do now.

“For others it’s more than half. For organisations like the RSPCA and a lot of animal charities, more than half the income they get is from gifts in wills.

“If there’s a shift in the amount of money that’s left in wills some charities could lose out very significantly, it’s a bit of a worry.”

Andrew Simpson, Principal Lawyer at Maurice Blackburn, told Pro Bono Australia News that it’s easy to make mistakes in a will created without proper advice.

“The challenge for Not for Profits is ultimately when someone tries to do their own will they get it wrong,” Simpson said.

“They might fail to comply with formalities, they might not get it properly witnessed which means the whole will falls over which means any gift to a charity would fail.

“Sometimes the will contains ambiguities. One of the most common examples is when they describe a Not for Profit but they get the name wrong and then there’s a dispute about whether it’s supposed to be paid to organisation A or Organisation B and that results in the need to apply to the court for an application to construe what the intentions were and that might compromise the gift.

“Sometimes will makers, because they’re not getting advice, give a gift to a Not for Profit that’s completely unworkable and I know Not for Profits hate getting gifts they just can’t use. They might give a gift with a particular limitation for how it can be used and that purpose is no longer able to be implemented by the organisation and it’s really a useless gift.

There has also been a recent increase in the number of challenges made to wills, the majority of which are in the family provision area. Anderson said the pitfalls of online wills could perpetuate this trend.

“You’re missing that professional advice, so it might be that people write wills that are actually inappropriate. They might miss out family members or decide to cut out people from a will and that will might well be faced with challenges down the track,” Anderson said.

“You go online you write a will you’ve got no one saying, hang on a minute what about your middle child what about your grandchildren. You actually need to leave a provision there for them.

“People with really complex estates might end up going online and writing a will that’s totally inappropriate and probably isn’t valid and there will be a lot more challenges and charities will probably miss out, and we see when challenges are made to estates families are the winners and charities tend to be the losers.”

However, Anderson said that online wills can also provide opportunities for charities which should be harnessed at the beginning of what is the largest intergenerational transfer of wealth to date. According to the Wealth X report, $12 trillion will be transferring hands globally in the next 10 to 15 years.

“People will write wills early on – they’re online, they’re accessible, they’re low cost so you’ll actually see a higher proportion of younger Australians writing wills than we’ve seen previously because that’s their domain, that’s the environment they’re comfortable in,” he said.

“It will be pretty standard practice for most online wills to include questions about charitable giving, so we suspect that question will be asked at a younger age and more people will have wills and more of those wills will have charities in them.”

While more people will leave money to charities, Anderson also said younger people are less likely to leave charities large gifts.

“I think the challenges are going to be around behavioural mindset. It might be when you’re younger you want include charities and you might think of a notional figure, so it’s like an extended donation, and that figure is probably not going to be very significant,” he said.

“When you’re young you look at your wealth relatively and it’s not the wealth you’re going to end up with when you pass away. There will probably be an awful lot of wills written at that young age with a lot of low value gifts included in them.

“And that might be hard to shift, you might always want to associate a value you want to give to a charity rather than think about your estate in proportional terms, so leaving 90 per cent to family and 10 per cent to charities.

“If you’re used to updating and changing your will online that mindset might perpetuate and you might end up with a lot of small cash gifts given to charities.”

Simpson said negating the challenges of online wills is a matter of NFPs communicating with potential donors.

“If a Not for Profit is approached by a potential donor who is wanting to create a will, I think the message the Not for Profit should deliver to their donor is that while preparing a will now might save you money it might end up flouting the implementation of your testamentary wishes,” he said.

“You might have good intentions now, you might thing you’ve done a good job of preparing the document, but ultimately it might all fall over because you haven't done the right thing.”