Strangers in Family Foundations
Family charitable foundations are often equally about the family working together as they are about charity. While the purpose of a foundation must be exclusively charitable, the founders’ hope is that future generations of family will have a place to work together and act on their values. But how, particularly in an estate plan, do founders keep a family foundation on course? One strategy is an independent director or trustee.
When Charities Die
Contrary to public perception, it is quite common for charities to die. The majority of charities are small, volunteer-run entities and some run out of steam and are deregistered. Since 2011, over 7,536 charities have had their status revoked by Canada Revenue Agency for reasons ranging from exhaustion and mergers (which produce voluntary revocations), failure to file the annual return, or cause. What happens when there is a gift by will to one of these deregistered entities?
Serving the Charitable Purpose
I want to float a trial balloon about charitable trusts. A clause stipulating that a trust should be limited to using income for charitable purposes, meaning that capital is untouchable, should be viewed as an administrative clause and not part of the charitable objects. The charitable purposes of the trust may be perpetual, but making the trust “income only” is a historical drafting convention that no longer serves the charitable purposes. “Income only” is a scheme that is a means to an end (i.e. the charitable purpose) that is no longer serving the end.
A Case of Mission Drift
The WE Charity’s story should be a business school case study. Young, idealistic founders. Growth and acclaim. Complexity, political scandal, and collapse.
But is WE Charity a case that can teach charities and donors, or is it an outlier?