Conditional gifts are now a safer bet for charities to accept according to Norman v. Watch Tower Bible and Tract Society of Canada. Madam Justice Warren decided that Mr. and Mrs. Norman’s conditional donation to the Watch Tower Bible and Tract Society (“Watch Tower”), the registered charity that represents Jehovah’s Witnesses in Canada, was valid since it was not a testamentary document and thus did not have to abide by strict statutory requirements.
In 2000, the Normans donated $200,000 to Watch Tower and signed a Conditional Donation Agreement (“Agreement”). The Agreement stated that the donated money was for the use and benefit of Watch Tower at their sole discretion, but the Normans could request a donation refund during their lifetime. Upon their death, any non-refunded amount would remain the property of Watch Tower.
Justice Warren applied the following factors in deciding that the Agreement was not testamentary:
- The intention of the donor is an important consideration that can be determined through both the document and extrinsic evidence.
- If the document is intended to and does transfer some interest in property before the donor’s death, it is not testamentary. The document must not be intended to have any operation until the donor’s death.
- An agreement that reserves the right to revoke the transfer or bring the trust to a close is not necessarily testamentary.
Justice Warren found that the Agreement clearly illustrated the Normans’ intention to create a trust and that Watch Tower had immediate rights in the donated property. Since the Normans’ right to a refund existed subject to the Agreement, the Agreement immediately changed the positions of the parties. In other cases, a lack of consideration has been indicative of a testamentary document. However, since the Agreement was with respect to a gift, there is an inherent lack of consideration that is not problematic.
Collecting donations through conditional agreements can be risky for charitable organizations because there are strict statutory requirements if the gifts are found to be testamentary in nature. However, this case makes it clear that if a conditional agreement is drafted properly, even if the donor retains the right to a refund during their lifetime, the charitable gift may be able to succeed.