What happens if a will leaves money to a charity that was never a registered charity in the first place?

This depends on the specifics, and the outcome isn't automatic either way. If the named organization is a legitimate legal entity, such as an incorporated non-profit, that simply never registered as a charity with the CRA, the gift may still be legally valid and payable to that organization. Registration with the CRA generally matters most for whether a donor or estate can claim a charitable tax credit, not necessarily for whether the gift itself is legally effective. If, on the other hand, the named organization doesn't actually exist, or existed only informally with no legal structure capable of receiving property, the gift can fail for lack of a valid recipient.

Where a gift like this raises real uncertainty, the estate trustee may need legal advice, and sometimes a court's guidance, to determine whether the gift can be paid, to whom, and whether the estate can claim any donation tax credit for it given the recipient's registration status.

Because this kind of issue is entirely avoidable, the better practice going forward is to confirm a charity's current legal and registration status before finalizing a will, and to periodically re-check named organizations, since names and registration status can change over the years between drafting a will and death.