In good economic times, it may make relatively little difference if an estate or trust distribution takes 12 months, 24 months, or even somewhat longer. In lean times, however, when funding may be harder to come by, the process of making certain estate gifts are distributed in their totality and in a reasonable amount of time should receive extra emphasis.
When there is general economic expansion, growth in asset values can sometimes make it possible to actually distribute more than an estate was worth at the death of a donor. In such cases, dividends or interest income can also be more than sufficient to cover the expenses of administration. In times of low interest rates and slower or no growth in asset values, however, estates tend to stay open longer, and fees and expenses are more likely to reduce the amounts finally distributed from an estate. This can have an especially significant impact on residuary bequests—often the largest ones received by charities—as the growth or reduction in asset values may be more fully reflected in those bequests (see article 1).
In the current environment, when other gift sources may not be as certain, it is more important than ever that gifts from estates be received as quickly as possible. As the saying goes, “time is money,” and that is certainly true when it comes to the oversight of estate administration where charitable dispositions are included. Experience shows that organizations with systems in place to monitor the estate settlement process will tend to receive full or partial distributions sooner than those that do not.
While a complete discussion of the steps involved in the effective administration of estates is beyond the scope of this article, here are a few tips that may help speed up the distribution and maximize the amounts received:
- Pay special attention to residuary bequests, i.e. those that leave amounts to charity after leaving specific amounts to others. As these bequests cannot be received until all expenses are paid and the estate is otherwise ready to close, these often take the longest time to settle. After a reasonable time period, 18 months for example, it may be wise to begin making increasingly frequent inquiries as to the status of the bequest.
- Review settlement sheets. If your bequest comes from the residue, pay special attention to sales of real estate and other assets that are not sold on public exchanges. Remember that every dollar that is not received because of a “below market” sale price reduces a residual charitable bequest.
- Monitor legal and executor fees. Again, if the charitable bequest comes from the residue and other heirs receive specific amounts, only the charitable legatees may have a monetary interest in making sure fees are reasonable. Statutory fees that a court will regularly allow without question can be out of proportion in some cases to the amount of work actually performed.
- Make calls to executors of all estates that have been pending for a period of time near the end of your fiscal year. It may be possible to receive a partial distribution, particularly if you previously established a good working relationship with the executor.
These steps can help minimize problems with estate settlement and may serve to speed up the process as well.