By MAUREEN KOEGEL
Are These Your 5 Major Challenges in Charity Estate Administration?
If bequest income is an important source of revenue for your charity these issues may resonate. Below are five of the major issues your charity may face when administering incoming bequests and how you might tackle these.
Difficulty Receiving the Documents That Define Your Bequest
It is satisfying when you receive a notification that your charity has been remembered through a bequest and will receive a portion of the estate assets. Hopefully, the Executor / Solicitor has provided documents (the Will and the Asset & Liability Statement), which specifies the gift to your charity and how it must be used.
Unfortunately, the Executor / Solicitor is sometimes resistant to provide copies of the Will and Asset list (probate documents you as a beneficiary are usually entitled to). Without information, how do you determine what your charity is entitled to receive? Is it a percentage of the residue of the estate, a pecuniary gift (specific cash amount), real estate, or shares? Does the Will specify how your organisation may use the gift? These are questions that must be answered with proper documentation if you are to uphold your duty to the bequestor to realise their final wishes by putting the gift in their will to the purpose they intended.
Executors /Solicitors that take the attitude that charities should “count themselves fortunate to be receiving a bequest” must understand that professional behaviour dictates that charities follow business standard operating procedures. Correctly understanding the type and terms of the gift helps the charity to effectively plan, communicate with the solicitor and budget the correct amount and timing of the distribution.
Takeaway #1
Always get the documents you are entitled to, so you understand what you are to receive. Ask politely once. Ask firmly a second time. Ask a third time with “legal implications”. Have a friendly solicitor send a request on your behalf. Reach out to other charity beneficiaries. Purchase the probate documents. Do not be bullied by uncooperative solicitors that suggest that you are the only charity asking for documents or that they will not recommend your charity for future bequests if you ask for documents.
Solicitors / Executors Who Claim Excessive Legal Fees and Commissions
The good news is there are guidelines for charges and fees within state legislation for the executorial function. Executor commissions not specified in the will must be approved by beneficiaries and/or the Supreme Court. Executor commissions vary based on “pains and troubles” and typically range from 0% to 5% of the estate and should typically be at the lower end of this range. Allowances for additional fees may be made when difficult or unusual circumstances are encountered during the estate administration.
The bad news is that, while most solicitors and executors behave honourably and charge fairly for the work they perform, you will occasionally find an Executor / Solicitor who is confused over what is appropriate to charge in legal fees or commissions.
The final Statement of accounts (another document a residuary beneficiary is entitled to) is usually the first time that beneficiaries see the legal charges. Issues related to fees can sometimes be answered by requesting an itemised billing. If there is a discrepancy or issue with the final statement, it is always acceptable to request additional information or clarification.
Takeaway #2
Familiarise yourself with the laws around commissions and legal fees. You must examine the documents (Will, Asset and Liability Statement, Final Statement) to understand why the commission and legal fees are being charged at a certain level. Ask questions about the work performed, calculate the percent cost on the estate value and compare to similar estates.
Other Charities Agree to Excessive Legal Fees/ Commissions and Indemnities
When 75% of the estates left to charities have multiple charity co-beneficiaries you will see different approaches to working on the administration of an Estate. Charities sometimes sit back and cash bequest cheques, not requesting documentation, signing every document that the solicitor requests because they are not properly resourced (either time, knowledge, or legal advice) to do otherwise.
When a charity does question a commission, ask for additional documents and/or refuses to sign an indemnity, solicitors are quick to point out that charities A, B and C did not object. So, what happens in the Estate when all the charity co-beneficiaries agree that the commission or legal fees are excessive? The solicitor must look at the request with a new perspective and reach a compromise.
It is not uncommon for a solicitor to ask for a release or indemnity on the estate payment when they have not provided documents for the beneficiary to review if an estate was correctly administered. Even with all the documents, (Will, Inventory, Final Statement) unless you are an accountant capable of doing a complete audit of the Estate it is unlikely that you can uncover fraud or wrongdoing.
Takeaway #3
Understand when commissions, legal fees, releases, and indemnities are inappropriate. Reach out to other charity beneficiaries when there are questions that suggest a united front would be helpful. Ask for legal advice if you think something is irregular.
Contested Estates – Challenges to Your Supporter’s Last Wishes
Receiving a bequest is wonderful news and makes you happy that the supporter was so committed to your charity that they left their “treasure” to your cause. No wonder the news of an estate being contested or challenged is disappointing. Affidavits produced prior to court or mediation usually bear witness to the tricky nature of families and human relationships. As a charity you owe your allegiance to the supporter that used their will to state their final wishes.
Australian state laws limit the individuals that may contest the will. Focus on the fact that less than 5-10% of estates are contested and work to receive a fair outcome. Working with charity co-beneficiaries is again one of the best methods to obtain a good result (assuming there is no conflict of interest between charity co-beneficiaries). Hiring a solicitor to defend all beneficiaries may be a reasonable avenue to keep costs low since legal fees usually reduce the value of the estate.
Takeaway #4
Accept that contested estates are part of the process of charities receiving bequest income. Reach out to other charity beneficiaries and hire legal assistance. Attend mediation to show the charity’s interest is strong.
No software system to manage incoming Estates
Without a system to guide you through the estate administration process, capture data, store documents, calculate your entitlement, keep track of payments received and amounts expected, list tasks to do and already done – it is impossible to keep track of more than a few Bequests. Most Bequest Managers must also perform the tasks of Estate Administrators and need software that will ease the burden of estate management ensuring that all payments on a Bequest are received in a timely manner. A shared database of Probate documents, solicitor contact details and charity contacts provides a significant time savings. Additionally, the ability to track Bequest Trusts, Life Estates, and report on all aspects of income and bequestor details is important.
Takeaway #5
Bequest Assist Estate Management Software is designed to improve the process and assist you with the challenges presented above. Visit our website www.bequestassist.com.au and call for an online demonstration of how your charity’s subscription to the software will save you time, money and improve your process of estate administration.
Finally, Charitable bequests are a growing and necessary source of funding for non-profits and charities. It is imperative that you are diligent and knowledgeable about managing your organisation’s bequests and take steps to future proof the growth in realised Gifts In Wills.