Posted May 1st, 2014

Estate Settlement Dos and Don’ts

96940224By: Tamara Lane-Wilson

Estate settlement can be a tricky business. Ensuring the donor’s wishes are respected and carried out can require careful management by the charities involved.

A case in point

I recently returned to Sharpe Group after more than five years working in estate administration at two different national organizations. In that time, I encountered a variety of estates—some simple, some complex, some small and some substantial. Unfortunately, some were also contentious.

Consider the following estate. A couple that married later in life created a trust intended to provide income for their lifetimes and then generate gifts for multiple charities and for their children from their previous marriages upon the death of the second spouse.

The husband passed away first. Soon after his death, we received notification that one of his children was undertaking legal action to terminate the trust prematurely. He was hoping to gain immediate access to his inheritance and to ultimately reduce the amount designated for charity.

How can sticky situations like that be handled? While avoiding problems such as this is not always possible, here are best practices that can help minimize your chance of finding yourself in an unfortunate position.

Get organized.

Having organized and complete files for every estate is critical for a number of reasons. Often, those in estate settlement are responsible for handling many pending estates at once. At one point, I was responsible for settling more than 400 estates per year. Staying organized is the only way to ensure important deadlines do not slip through the cracks.

It is helpful to keep a master list of estates in progress as well as a separate list of contested estates that may require special action on the charity’s behalf. Any expenses incurred should be noted as well.

The estate files should contain all correspondence or documentation received that pertains to the estate, and such documents should be organized chronologically, noting dates received. Any digital databases should be regularly updated as well with names, dates and other pertinent information.

Interactions with other institutional partners will also require you to stay organized. For example, the files you keep maybe needed for annual audits. Make sure you have a mutual understanding of the procedures your finance office uses for processing estate distributions.

In addition, keep records in an organized format that clearly communicates both current and historical revenue. Such data will help senior management appreciate and better understand the correlation between planned giving marketing efforts and the estate gifts that result from them.

Create and adhere to standard procedures for responding to notifications.

How you respond to a gift notification will vary depending on the situation. Interactions with friends or family of the deceased will obviously require a different tone than conversations with a professional, such as an attorney or financial advisor. All  interactions, from initial notification through distribution and closing and beyond, should follow generally agreed-upon procedures and timelines.

Know the charity’s rights.

Some estates, such as the one mentioned earlier, are contested by family members or others, while others suffer from unreasonable delays. Don’t be shy about requesting information you are entitled to by law. If a document or other item is overdue and estate administrators are unresponsive, don’t hesitate to contact the executor. It is not inappropriate in some cases to indicate that your next step will regrettably be to involve the state attorney general’s office. In most cases, you will receive the requested documentation before that step becomes necessary.

In the final analysis, you have a fiduciary responsibility to your organization to make sure that the donor’s intended gift is received and a moral obligation to ensure that his or her wishes are carried out.

Build good relationships.

Take the time to establish respectful working relationships with key internal departments and staff, such as those responsible for finance, legal matters and internal and external communications. Sharing stories about how their work helped make particular estate gifts possible will make them more interested in helping you in the future.

When I learned of an interesting story behind an estate gift, I would often share it with other staff in internal staff newsletters, at a development or all-staff meeting or in some other information platform. Sharing relevant information can go a long way toward educating other departments and staff about the importance of estate gifts in supporting the organization. I have always been a firm believer that everyone who works at a nonprofit, regardless of the department or specific role, is a fundraiser. Everyone should get to see the results of their hard work.

Maintain good working relationships with outside resources as well, such as investment managers, advisors, consultants and other key institutional partners.

Get to know colleagues at other institutions.

If you examine your estates, you will likely find that there are a handful of other nonprofits that are often listed as beneficiaries alongside your charity. Make the time to get to know your colleagues at these organizations. Having good working relationships with these individuals can be a great advantage and a wonderful resource, especially when challenges arise and there is the potential for litigation. The donor’s philanthropic intent to make a final gift or create a lasting legacy is a great common bond. You may have to be the first one to make contact, but once the relationship is established, it can be almost like having an extension of your own department.

In the estate settlement case I mentioned earlier, I reached out to my peers at the other charitable beneficiaries. We decided to take legal action to protect the donors’ wishes and the charities’ interests. A judge ultimately ruled in our favor.

The key to effective estate settlement is to handle estates in a proactive, responsible manner. By staying organized, maintaining good working relationships and adhering to prescribed policies and procedures, you can help your donors’ intended legacy become a reality.

Read part two.

The publisher of Give & Take is not engaged in rendering legal or tax advisory service. For advice and assistance in specific cases, the services of your own counsel should be obtained. Articles in Give & Take may generally be reprinted for distribution to board members and staff of nonprofit institutions and other non-donor groups. Proper credit must be given. Call for details.

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