Gifts and Bequests

A trust is an arrangement, recognised at law, by which assets are held and managed by one party for:

• the benefit of another party or parties; or
• a specific purpose.

In either case the main responsibilities of a trustee are to:

• carry out the trust terms;
• act in good faith;
• preserve the trust capital by prudent investment;
• exercise reasonable care in the administration of the trust;
• not benefit from the position of trustee, except as provided at law or under the trust terms;
• not put themselves in a position of conflict or compromise; and
• keep proper accounts and records.

In the case of a trust for a specific purpose, the trust purpose is the object (the intended benefit) specified at the time of establishing the trust.

Any asset or money donated or bequeathed to the University for charitable purposes is 'trust property'. Where a donor makes a gift to the University to provide income to be used for a specified charitable purpose, the University is the 'trustee' of the trust created by that gift.

In general terms a charitable trust is a trust for one or more of the following purposes:

• the relief of poverty;
• the advancement of religion;
• the advancement of education; or
• other purposes beneficial to the community.

A central feature of a charitable trust is the continuity and indefinite period of duration for the trust. A charitable trust operates for so long as there is trust capital or income, often in perpetuity.

The trust terms of a charitable trust are specified by the donor at the time the donor makes the gift that establishes the trust.  This means that the trust terms for a charitable trust are 'locked in' at the time the trust is established.  Accordingly, the trust terms can only be changed upon application to the Attorney-General for Victoria or the Supreme Court of Victoria.  These applications, called cy près applications, are made under the Charities Act 1978 (Victoria).

The original gift of cash or assets that establishes a charitable trust is sometimes called the 'endowment'.  The endowment:

• forms the capital base of the charitable trust; and
• generates income which is then applied for the purpose specified by the donor.

A perpetual charitable trust with the University as trustee will finance in perpetuity the purpose specified by the donor.

A donor may decide to create a perpetual charitable trust of  which the University is the trustee because the donor wishes in perpetuity to:

• benefit others, for example needy students, or research to find a cure for a disease, etc;
• specify at the time of making the gift the purpose for which the trust is established; or
• memorialise the donor or another person by requesting that the University name the trust in honour of that individual.

Where a donor wishes by a gift  to create a perpetual charitable trust (which the University then records in a publicly accessible trust instrument), the University requests that such a gift  have a minimum value of $50,000.  Below that amount, it is more practical for the gift to be expended under the direction of the relevant unit of the University, with the approval of the donor.

As the trustee of perpetual charitable trusts established by gifts, the University is very conscious of its obligation to administer each trust in accordance with the trust terms specified by each donor.

Deans and Heads of Departments are accountable for expenditure from trust funds in accordance with the terms of each trust.

The Vice-Chancellor is ultimately responsible for the proper administration and performance of all trusts of which the University is the trustee, and reports annually to the Council of the University regarding the conduct of those trusts.

The effective management and administration of trusts at the University is a collective responsibility, with the Specialist Trusts Lawyer and Specialist Trusts Officer overseeing the conduct of the trusts generally.

The Advancement Office prepares an annual report to donors (summarising the financial status and performance details) on individual trusts.

Section 28 of the University of Melbourne Act 2009 (Victoria) provides that the Council of the University has the power to make and alter statutes with respect to any matter pertaining to the University, including with respect to endowments.

For each trust of which the University is the trustee, the University makes a trust record (also known at a UTR) as a means of recording the trust terms and any administrative arrangements by which the University implements those trust terms.

University trust records relating to trusts are certified by the General Counsel on behalf of the University and are published on the University's website, becoming a public statement of the gift, the trust terms and the administrative arrangements.

Trust terms

When making a gift that establishes a charitable trust at the University, the donor specifies the trust terms, including the purpose of the gift (eg scholarships).  These trust terms are described in the University trust record relating to that trust.

For example, a University trust record may state that the trust terms of the donor's will (the trust terms) stipulated that the gift (or bequest) was for the purpose of funding in perpetuity scholarships in the Faculty of Science.

Administrative arrangements

When making a gift that establishes a perpetual charitable trust at the University, the University puts in place administrative arrangements to implement the trust terms specified by the donor.  These administrative arrangements are described in the University trust record relating to that trust.

For example, where a donor’s will stipulates that a bequest was for the purpose of funding in perpetuity scholarships in the Faculty of Science (trust terms), the University trust record may state that two scholarships are awarded annually for students studying Physics in the Faculty of Science, and the process to be followed in making such awards (administrative arrangements).

Where a perpetual charitable trust is established by a gift to the University, the trust capital is invested by the University, and the net annual income of the trust is applied by the University for the purpose specified by the donor.

Recognising the University’s role as the trustee of multiple perpetual charitable trusts, section 40 of the University of Melbourne Act 2009 (Victoria) provides that the Council of the University may establish one or more investment pools for the collective investment of any trust funds held by or in the custody of the University.

The Trust Investment Report 2016 can be found here.

All Faculties and Departments that are responsible for trusts are required, on an annual basis, to report to the Specialist Trusts Officer about trust-related decisions and expenditure.

The aim of the compliance program is to ensure each trust is being performed according to the prescribed terms (as stated in the University trust record), and otherwise looks at the accountability framework of Deans and Heads of Departments, as a means of informing the Vice-Chancellor on issues to be reported to the Council of the University.

Where a donor proposes making a gift to the University during his or her lifetime, Advancement staff will liaise with the donor to:

• identify the purpose for which the gift is to be made, taking into account the current needs and priorities of the University, and also taking into account the future plans of the University; and
• prepare a document (usually a Memorandum of Gift) that records the purpose for which the gift is made, in a way that ensures that the donor's wishes can always be implemented by the University, even if there are changes to the content or structure of a particular course, or if there are changes to the research priorities of the University.

The University cannot provide donors with any legal or tax advice in relation to a proposed gift.

Referrals for advice can be obtained from:

• The Law Institute of Victoria
• CPA Australia
• Institute of Chartered Accountants

Before making any gift to the University a donor should, therefore, seek independent advice, including legal advice and taxation advice.

Regardless of the type of gift, a donor must always specify the purpose of the gift, which should preferably be described in broad terms including the benefit the donor wishes to confer.  This ensures that the donor's wishes can always be implemented by the University, even if there are changes to the content or structure of a particular course, or if there are changes to the research priorities of the University.

When proposing a gift to the University, donors might consider the various groups at the University who would particularly benefit from financial support, including students in financial need, disabled students, and indigenous students.

Below are some sample clauses of broad gifts.  Donors should contact the University for assistance in drafting their Gift clause.

Donors should get their own independent legal advice regarding the particular terms of their Gift. If the clauses below do not cover the donor’s intentions, please contact the Advancement team.

A gift for the general purposes of the University

The general purposes of the University include the educational purposes of the University (namely research, learning and teaching, engagement) and also the ancillary functions of the University (including the construction and maintenance of the University buildings and grounds). A gift for the general purposes of the University will most likely need to be reflected in a University trust instrument so that all relevant terms are appropriately recorded.

In this example a perpetual charitable trust is not established, and the University will apply the gift for the projects that have top priority at the time of the gift:

The gift is for the general purposes of the University, and the gift is to be known as ‘The [insert title] Gift’.

A gift for the educational purposes of the University

The University’s educational purposes comprise research, learning and teaching, and engagement.

In this example a perpetual charitable trust is not established, and the University will apply the gift for the educational projects that have top priority at the time of the gift:

The gift is for the educational purposes of the University, and the gift is to be known as ‘The [insert title] Gift’.

A gift for the libraries at the University

In this example a perpetual charitable trust is not established, and the University will apply the gift for the projects at the libraries that have top priority at the time of the gift:

The gift is for the libraries of the University, and the gift is to be called ‘The [insert title] Libraries Gift’.

Gifts to the University from a donor’s estate which are specified in their Will, are called a bequest.

When making a bequest to the University by a Will, there are two types of gift:

• a residuary bequest, where the donor gives a portion of his or her residuary estate; or
• a specific bequest, where the donor bequeaths gives a specified sum (called a legacy) or a specified asset.

Staff will liaise with donors to identify the purpose for which the bequest is to be made, taking into account the current needs and priorities of the University, and also taking into account the future plans of the University.

Donors must then instruct their solicitors to prepare a Will that records the gift and its purpose.

Where an unusual or complex gift is proposed, the Advancement staff will arrange for the Specialist Trusts Lawyer to assist with this process.

The University cannot provide donors with any legal or tax advice regarding a proposed bequest.

Referrals for advice can be obtained from:

• The Law Institute of Victoria
• CPA Australia
• Institute of Chartered Accountants

More information is available on our Bequests website.

A gift made after the donor’s death, as described in the donor’s will, is called a bequest. To assist donors and their solicitors, the University suggests the following will clauses.

These clauses are samples only and may not be suitable for the particular purpose under consideration. Donors should get their own independent legal advice regarding the particular terms of their will. If the clauses below do not cover the donor’s intention, please contact our Bequests team.

Where a donor’s will gives a legacy to the University, the will should state that the specified sum be adjusted for inflation. A sample inflation clause is included for that purpose.

Notes for solicitors/will drafters

As the University is a charitable institution, there is no need for any bequest to the University to:

• state ‘… and I declare that the receipt of the Vice-Chancellor or other proper officer of the University will be a good and sufficient discharge to my trustees and that my trustees will not be obliged to see to the application of the gift’: see section 6 of the Charities Act 1978 (Victoria);
• specify in a donor’s Will a particular manner or form of investment for a bequest to the University, as section 40 of the University of Melbourne Act 2009 (Victoria) permits the University to invest endowment funds in the manner authorised by the Trustee Act 1958 (Victoria); and
• specify that, where a perpetual charitable trust is created, a portion of income be retained to protect against capital depreciation, as section 39(1) of the University of Melbourne Act 2009 (Victoria) permits the addition of a portion of income from an investment pool to be added to the capital of the pool ‘as a provision against depreciation or reduction in income’.

A bequest for general purposes of the University

The general purposes of the University include the educational purposes of the University (namely research, learning and teaching, engagement) and also the ancillary functions of the University (including the construction and maintenance of the University buildings and grounds).

In these examples a perpetual charitable trust is not established, and the University will apply the bequest for the projects that have top priority at the time of the bequest:

Residuary bequest

I give [insert percentage] of my residuary estate ('the bequest') to The University of Melbourne of Grattan Street, Parkville, Victoria ABN 84 002 705 224 ('the University'), for the general purposes of the University, and the bequest is to be known as 'The [insert title] Bequest'.

Specific bequest

I give [insert dollar amount] ('the bequest') to The University of Melbourne of Grattan Street, Parkville, Victoria ABN 84 002 705 224 ('the University'), for the general purposes of the University, and the bequest is to be known as 'The [insert title] Bequest'. Please consider including the Inflation clause.

A bequest for educational purposes of the University

The University’s educational purposes comprise research, learning and teaching, and engagement.

In these examples a perpetual charitable trust is not established, and the University will apply the bequest for the educational projects that have top priority at the time of the bequest:

Residuary bequest

I give [insert percentage] of my residuary estate ('the bequest') to The University of Melbourne of Grattan Street, Parkville, Victoria ABN 84 002 705 224 ('the University') for the educational purposes of the University, and the bequest is to be known as 'The [insert title] Bequest'.

Specific bequest

I give [insert dollar amount] ('the bequest') to The University of Melbourne of Grattan Street, Parkville, Victoria ABN 84 002 705 224 ('the University') for the educational purposes of the University, and the bequest is to be known as 'The [insert title] Bequest'. Please consider including the Inflation clause.

A bequest for the libraries at the University

In these examples a perpetual charitable trust is not established and the University will apply the bequest for the projects at the libraries that have top priority at the time of the bequest:

Residuary bequest

I give [insert percentage] of my residuary estate (‘the bequest’) to The University of Melbourne of Grattan Street, Parkville, Victoria ABN 84 002 705 224 ('the University') for the libraries of the University, and the bequest is to be called ‘The [insert title] Libraries Bequest’.

Specific bequest

I give [insert dollar amount] ('the bequest') to The University of Melbourne of Grattan Street, Parkville, Victoria ABN 84 002 705 224 ('the University') for the libraries of the University, and the bequest is to be called ‘The [insert title] Libraries Bequest’. Please consider including the Inflation clause.

Inflation Clause

The bequest is to be adjusted for inflation by applying the following formula:

N = (S x B) / A

where:

N represents the adjusted amount payable to the University;

S represents the sum stated in this clause;

B represents the Consumer Price Index All Groups, Weighted Average of Eight Capital Cities (‘CPI’) figure published quarterly by the Australian Bureau of Statistics immediately before the date of my death; and

A represents the CPI quarterly figure published immediately before the date of this my will.

If at the time of my death the CPI is no longer calculated and published on a quarterly basis, then I direct my trustees to adjust the bequest for inflation using such other statistic or measure as is chosen by my trustees in their absolute discretion.

In accepting a gift that creates a perpetual charitable trust, the University accepts the responsibility of acting as trustee of that trust in perpetuity.

The University requests that any gift establishing a perpetual charitable trust have a minimum value on acceptance of $50,000.  A gift of this value should generate sufficient income to finance indefinitely the purpose specified by the donor, depending on the trust terms.

Advancement staff at the University will guide donors by explaining:

• current and future teaching, learning and research priorities of the University;
• areas of particular need at the University; and
• areas of study and research that are already well-supported by trusts of which the University is the trustee.

Where a donor proposes making a gift that establishes a charitable trust of which the University is the trustee, Advancement staff will assist the donor regarding the level of income that is required to adequately support a particular purpose, so that the donor may specify a purpose for a gift that makes best use of the income derived from that gift.

It is important that a donor discuss a proposed gift with the University, to ensure that where appropriate or otherwise practical, the proposed value of the gift matches the current and projected costs of the ongoing benefit that the donor wishes to confer.