What happens if your will leaves money to a place that doesn’t exist?

by Mandy Hicks

By Nathan Vinson, Attorney
English, Lucas, Priest and Owsley, LLP

oopsIn fundraising and higher education circles, the imminent closure of Sweet Briar College in rural Central Virginia has been much-discussed. This small, women-only college has existed for nearly a century and has educated generations of women. But enrollment has declined and school’s board of trustees announced that this year’s graduating class in May will be its last.

One alumnae, Teresa Tomlinson, the mayor of Columbus, Georgia, noted that she had told college officials she was going to leave $1 million to Sweet Briar in her estate, and they greeted her news graciously and pleasantly, full of thank you’s and personal notes — and then announced two weeks later the school was closing. The mayor said she was baffled why school officials didn’t disclose this to her when she told them about the gift.

Even if the school changes course again and decides to remain open, those who were going to leave money to the college are probably going to be reluctant to do so again. But what would happen if Sweet Briar College was to receive a gift but then the college closed and the will could not be changed?

This happens from time to time with colleges, non-profits and other organizations that are likely to receive bequests from alumni and supporters. The foundation you wanted to support could have merged, changed its goals, re-branded as something else entirely or simply shut its doors. Then what?

There are a lot of different ways such a scenario could play out, but for the most part, the decision of where to send the money will be up to the court. The court will then have to decide what your intention was.

Did you:

  • want to fund education at a female-only school?
  • have a love of small colleges with 1,000 students or less enrolled?
  • want to fund a scholarship for a disadvantaged student attending anywhere?
  • have a strong, sentimental attachment to the school?

The court can then decide where that money should go, and will be left to try to guess what you had in mind. This, of course, is tricky. However, the alternative would be what traditionally happens to a gift to a non-existent beneficiary – the gift “lapses” and goes to the person(s) entitled to your residuary estate.  Therefore, the courts try hard to find a “replacement” beneficiary for your charitable gift.

The better situation is to avoid giving funds to a defunct organization altogether, and that’s where a diligent estate attorney comes in. An estate attorney helps you write your will, estate and trusts documents and helps you keep an eye out for potential problems down the road.

You can avoid giving funds to groups that no longer exist by being specific about which organization is to receive the gift. Include a physical address in the text of your will for any organization that is to receive a bequest. A vague reference can lead to confusion after your death. For example, leaving money to disaster relief could mean any one of hundreds of organizations. Do you mean the American Red Cross? Do you want the local chapter or national, or one in your hometown? Or perhaps you want the money to go to The Salvation Army, or another religious organization, such as Presbyterian Disaster Assistance? Your intentions may not be known if you weren’t specific.

The next step is to review your will often and ensure that the organizations designated to receive your gift still exist and still serve the same purposes. If this is a significant gift, or an extremely important gift to you, contact the organization and ask to speak to someone who handles charitable gifts. Ask to see any annual reports or other information they can provide that spells out their mission and programs. Google the organization. See what pops up. If you still have questions, ask to meet with representatives from the organization. Tell them what your hopes and dreams are for your gift to make sure they’ll use them in the ways you intend.

You shouldn’t expect for an organization to create an entirely new program that is not part of their mission to accommodate your gift. Instead, find an organization that does what you think is needed and make your gift to that organization.

You can include a contingency in your will, such as giving it to a school or organization only if it meets certain conditions, such as, “I, Joan Smith, bequeath $500,000 to Sweet Briar College, Sweet Briar, Virginia, on the condition that it maintains its women-only admissions policy. If Sweet Briar College admits men into its student population, I, Joan Smith, instead bequeath the funds to the University of Virginia Jeffersonian Restoration endowment, Charlottesville, Virginia.”

How often should you review your will? At least once a year, or after any significant life change, such as the birth of a child or grandchild, a divorce or even the divorce of an heir. If you have children who are to receive funds from your estate, including their home addresses in the will is a good idea, and those may need to be updated. You may also want to update any list of belongings that indicates who is to receive what items.

Keeping an eye on any organizations you’ve named as beneficiaries can keep you and your executors from being the victims of an unpleasant surprise.