In the third article in this series, Sharpe Consultant Aviva Shiff Boedecker explains the basics of estate administration from notification of the bequest to making sure the funds reach your organization or institution, including a number of steps you should take and how to ensure you dot your i’s and cross your t’s.
It’s a wonderful thing to get bequest commitments and expectancies. Now you have to make sure the money actually arrives!
Probate is a court-supervised process, which has as its ultimate goal the transfer of property from an individual who has passed away to the beneficiaries who are identified in that person’s will. A revocable inter vivos trust is often used as a will substitute, both to bypass probate and for other reasons, such as providing for management of assets in case of the trustor’s incapacity.
The estate’s administrator is responsible for insuring that the decedent’s wishes, as expressed in the will or trust, are fully implemented. Although the executor of a will is generally subject to direct court supervision and the trustee of a trust is not, executors and trustees have similar duties and fiduciary responsibilities.
As you communicate with the executor/trustee, keep in mind that he or she may not be experienced, may be grieving, is very likely overwhelmed, may not be familiar with your organization and in many cases charitable distributions are not their top priority.
Charitable beneficiary rights and responsibilities
Boards of directors of nonprofit organizations have a fiduciary duty to protect the organization’s interests, and it is the staff’s responsibility to insure that the full amount of any testamentary gift is actually received. The organization also has a responsibility to make sure that its donors’ intentions are carried out.
When your organization receives its initial gift notification from the estate, express appreciation for the gift and thank the administrator for his or her work, ask what they need besides your tax ID number and 501(c)(3) letter, request the names of the persons who should be thanked and ask to be kept informed of the progress of the estate’s administration.
It is reasonable to ask how long the estate administrator expects the process of settling the estate to take, and when your organization can expect to receive the gift. Check back periodically to see how the process is coming along, and if there is an updated estimate of the distribution date.
Good rapport helps
If you are able to develop a good rapport with the administrator, and it is appropriate in the circumstances, consider suggesting that the gift be fulfilled with Income with Respect to a Decedent (IRD) assets, as it could result in a tax savings for the estate and the other beneficiaries. As a representative of the charity, of course you cannot give legal advice, but it is perfectly acceptable to raise the point and suggest that it be discussed with the attorney for the estate.
This may also be the time to notify the estate administrator in writing that if the estate includes real estate or tangible personal property that may be part of your organization’s gift, your appropriate representative should be consulted prior to any sale. You may prefer to liquidate the property independently, or even choose to retain ownership of the property in question. Even if you ultimately decide that it would be best if the property were liquidated within the estate, you will need to be aware of the transaction in order to be sure that the property is sold for fair market value and that fees related to management and sale of the property are reasonable.
Do not be shy about asking for a copy of the will or trust agreement and account/distribution statements as soon as you are notified of the bequest. This is a fiduciary responsibility of the charity. Irrevocable beneficiaries of trusts are entitled to a copy of the trust accounting in all states; the laws vary from state to state as to whether contingent beneficiaries are entitled to accountings.
Trustees are typically required to provide an accounting at least annually, at termination of the trust and upon a change of trustee to each beneficiary to whom current distribution of income or principal is authorized.
Experienced attorneys and estate administrators will expect to provide documents. Others may need to be educated.
Occasionally, out of ignorance, inexperience or, unfortunately, something worse, an estate administrator will fail to distribute the full amount to which the charity is entitled. Some seem to believe that charities should be grateful for whatever they get or that nonprofits will not contest a distribution for fear of “how it would look.” However, representatives of the charity cannot be “nice” and agree to take a lesser distribution or fail to protect the organization’s rights. It is not their money or their choice. It is a legal, fiduciary obligation for nonprofit entities not to waste the charity’s assets either by mismanagement or through failure to assert its rights. The organization should also feel some responsibility for insuring that what the donor wanted and directed actually occurs.
In Part 2, we discussed what to say to whom—and when—about memorial gifts
In Part 4 of this series, find out exactly why you need to pay close attention to certain major items in the bequest process.