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WE Charity scandal highlights potential confusion about two-part structure of charities: advisor

Estate donors should avoid making assumptions about which charity to name in will, says estates blog

WE Charity scandal highlights potential confusion about two-part structure of charities: advisor

The WE Charity controversy calls attention to the possible uncertainty that an estate donor and their lawyer may encounter when naming a charitable entity in a will.

A post by blog All About Estates explores this issue. The post authored by Malcolm Burrows, head, philanthropic advisory services at Scotia Wealth Management, explains the two-part structure commonly used by entities in the charitable or nonprofit sector, such as hospitals, schools and social service or art organizations. There is typically a charitable organization, which runs the charitable programs and handles operations, and a separately registered parallel public foundation, which may hold the assets or engage in fundraising, but which is generally not considered a “doing” entity.

In the case of WE Charity and its sister entity, WE Charity Foundation, WE Charity engages in the fundraising activities and transfers assets such as real estate to WE Charity Foundation for holding, stated the blog post.

Burrows considered the question of why an agreement worth over $900 million relating to the proposed Canada Student Service Grant program had been awarded to the foundation, which had no employees and no power to conduct its own charitable activities, which had not filed its first charity return and which had been, until recently, intended to function as a charitable holding company.

“[T]he two-charity structure was confusing, it seems, to Federal Government,” wrote Burrows. “It may also pose challenges for estate donors and lawyers.”

Estate donors and their lawyers should avoid making assumptions and should reach out to the charitable organization and to the foundation to ask which of these registered charities should be named in the will, wrote Burrows.

Prime Minister Justin Trudeau’s involvement in this recent political scandal has been well-documented by the media. The controversy involved the awarding of a federal government contract to the charity to administer the Canada Student Service Grant program, which aimed to provide students with volunteer opportunities amid the COVID-19 pandemic.

It was later found that members of Trudeau’s family had spoken at charity events, that Trudeau himself had made appearances at such events and that his wife had hosted a podcast for the charity.

Minister of Finance Bill Morneau has also been questioned because of his family’s connections, with two of his daughters having worked for the charity and with his family having attended two overseas trips to look at the charity’s work.

Neither Trudeau nor Morneau recused themselves from Cabinet discussions on whether to grant the contract. Both have since apologized for this. They are both subject to an ethics investigation.

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