Year after year, gifts by bequests have been a major source of funding for many charitable organizations and institutions. Because bequests are such a significant source of charitable gift income, there naturally has been much discussion in the gift planning community about how to encourage them. Less attention, however, has been devoted to what needs to happen after an organization has been notified that it has been included in the will or other estate plans of a donor who has passed away.
Establishing systems and procedures for handling the bequest administration process is an important component of any successful development program. Large or small, each bequest gift represents an expression of a donor’s very personal devotion to your organization. Therefore, each bequest deserves your attention and care to make sure the donor’s wishes are fulfilled. Read on for guidelines about what to do the next time you are notified that your organization has been included in a donor’s will or other long-range plans.
Usually an organization will receive notification by mail that it is the beneficiary of an estate. After you receive such notice, the first step is to determine the nature of the bequest your organization will be receiving. Is the bequest of a specific amount of cash, a particular property, a percentage of the estate, all or part of the residue of the estate, or some combination? In other cases, your organization may actually have been named the beneficiary of a testamentary trust, a retirement plan, life insurance policy, or a life insurance trust.
If your organization is the beneficiary of a life insurance policy or retirement plan, you should contact the appropriate plan administrator or other agent to ensure the smooth transfer of the gift. You may need to include your organization’s CFO or accountant in these discussions to make certain the transfer occurs in a timely fashion.
When you find out the gift has been left from a will or trust, you should contact the attorney for the donor’s estate or, if there is no attorney, the executor for the estate. If you haven’t already received one, request a full copy of the will or trust document. If you are unable to obtain these documents from either the attorney or the executor, you may request them from the local probate court where the donor resided. You may also ask that the executor or attorney for the estate copy your organization on all documents filed with the court by any party. Once the documents are received, they should be reviewed by appropriate persons on your staff and/or outside advisors before proceeding further.
Connecting with the executor
Once you are in touch with the attorney or executor of a donor’s estate, remember you are initiating a relationship that may last for a significant period of time and can be critical to receiving the full intended bequest. During the estate administration process, the executor can be your ally, keeping you apprised of important dates and deadlines such as the last date for creditors to make claims against the estate, timing for the spouse’s distribution, and when to expect partial or full distributions of the amount of your bequest. The executor can let you know whether to expect potential problems with the estate administration process, and he or she can often offer invaluable advice about the donor’s surviving loved ones, family dynamics, and the family’s feelings about their loved one’s charitable bequest. Whether or not there is an interest in your organization on the part of the other family members is important to ascertain, and you can often discover this during an initial contact with the executor.
It is thus important for your organization to remain on good terms with the executor or attorney for the estate. Regular and courteous contact with the executor can also make it clear that your organization is monitoring the estate and the promptness of the proceedings, which could lead to your receiving the intended bequest in a more timely manner.
Reaching out to family
Oftentimes you may have no prior knowledge of a particular bequest or the donor who made it. In this case, in order to express your organization’s gratitude to the proper persons, ask the executor or attorney who should be thanked. The executor may be a family member who can be very helpful in this regard.
In most cases, thank you’s should be sent to the surviving spouse and children of the donor, or, if none, the next closest relative. You may want to include a letter from the chief executive officer, board chair, and/or other appropriate persons thanking the family for their loved one’s generous gift, as well as offering information explaining your organization and its mission.
Be sensitive to the fact that some family members may feel that their loved one’s bequest to your organization may have deprived them of some of the assets they could have inherited. In the minds of such persons, they are the ones who, in effect, are making the charitable gift. As such, consider treating surviving family members much like you would major donors to your organization. Thank them appropriately for their loved one’s gift, and, if they are open to it, get to know them better. Sometimes a bequest can be the beginning of a long relationship with surviving family members that can result in their continued support of an organization their loved one cared about deeply. Don’t forget to offer to memorialize the loved one under appropriate circumstances.
Check for restrictions
When your organization receives notification of a bequest, you also need to determine if any restrictions have been placed on the use of the funds. For example, is the bequest designated to endow scholarships, research, or another aspect of your mission? Or is the gift earmarked to fulfill an outstanding campaign pledge? If so, does the bequest amount match the amount that was originally pledged? Is there language referring to “endowment”? If so, it is important to take steps to determine what expectations may have been raised in the mind of the donor during his or her lifetime in this regard. Make certain that terms of the estate documents are in keeping with any memoranda of agreement that may exist.
When problems arise
As you continue to monitor the estate and review the documents filed in probate court, you may discover problems surrounding settlement of an estate over time. At the first sign of any trouble, you should contact your counsel with your concerns. If your regular counsel is not familiar with charitable estate settlement issues, you may find it wise to engage specialized outside counsel to protect your interests in the estate.
With problem estates, whether outside counsel has been hired or not, an organization should closely monitor the situation and decide now who will make the final decisions regarding litigation should that become necessary. Oftentimes the decision maker in this regard is the president, vice president, or board of trustees. It may be prudent to include guidance in such matters in your institutional gift acceptance policies.
After you receive the funds left to your organization, take the opportunity to once again thank the surviving family members. The type of thanks should be appropriate for the size of the gift and may include a handwritten letter from the president, your most recent annual report or other information about your organization, or an invitation to a special event. You may also want to add these family members to your list of prospective donors, but give careful thought to the amount and timing of communications with this group. Such ongoing stewardship of surviving family members can result in tremendous long-term benefits for your organization.
Faithful oversight and effective management of the estate settlement process following a benefactor’s passing is the last and perhaps most challenging phase of your fund development efforts. Always keep in mind that you may be the person responsible for concluding a relationship that spanned decades and involved many predecessors in your role. When successfully completed, the rewards inherent in careful estate administration are worth the time and effort both now and in the future.
Dawn Myers Slawson is an attorney practicing in Illinois and presently acts as special counsel to The Sharpe Group.