In most situations, it’s clear when a charitable gift takes effect. But in cases where the donor places a condition or restriction on a gift, it can be more difficult to determine when the gift became effective. This was the issue before the British Columbia Court of Appeal in its recently released decision Norman Estate v. Watch Tower Bible and Tract Society of Canada. In the case, the Court had to decide whether a conditional gift made to a registered charity was an inter vivos gift (meaning it took effect during the lifetime of the donors) or whether it was testamentary in nature (meaning the gift was only effective on the death of the donors).
The donors, Lily and Lloyd Norman (the “Normans”), frequently donated money to the Watch Tower Bible and Tract Society of Canada (the “Society”). However, one of their gifts (for $200,000) included a letter referring to the donation as a loan and specifying that all or a portion of the donation should be returned to the Normans, at their request. The letter also provided that after the death of the Normans, the Society would be entitled to keep the funds. The Society confirmed this arrangement with the Normans in writing by sending them a “Conditional Donation Agreement” (the “Agreement”) which was signed by the Normans.
The Normans never requested the return of the donation during their lifetime. After the death of Lloyd (Lily had predeceased him), the Society issued a charitable donation receipt with respect to the donated funds. However, Lloyd’s estate (the “Estate”) claimed that the Society was not entitled to the funds. The Estate argued that since the Normans could compel the Society to return the funds during their lifetimes, the Agreement was testamentary in nature, and therefore had to meet the formal execution requirements in the Wills Act to be valid (which it did not). The Society argued that the Agreement created an inter vivos trust, which provided the Society with an immediate interest in the donation.
The BC Court of Appeal agreed with the trial judge and dismissed the appeal. The gift was not testamentary in nature because the Normans made the gift during their lifetime with the intent that the gift would be effective immediately. The fact that the Normans had the power to require the return of the funds meant the gift was subject to a condition, but the Society still had an immediate interest in the donation. Further, the court noted that since the Normans did not have the power to take back or amend the Agreement itself, any refund request had to be in accordance with the terms of the Agreement, which indicated that the Agreement had immediate effect. Accordingly, the Society was entitled to keep the donation.