Nonprofit gift planners know the value and importance of securing bequests from donors. Smart planners know that securing a bequest is only the beginning of the process and that the real job comes in managing the receipt of bequest income when an estate is being settled. In this regard, charities must conduct themselves as any business would and make sure the money makes it through the door. This is no time to be shy; the job involves asking for money that your organization is entitled to and needs in order to continue operations.

Difficulties can arise when the executor is inexperienced, unprepared, or unwilling to deal with estate administration. A good planned giving officer acts as a resource and guide for the executor rather than as an adversary. The gift planner can point the executor in the right direction in terms of their responsibilities but also inform them of the nonprofits’ rights, responsibilities and expectations.

Keep the lines of communication open

Establish good communication with the executor to help resolve most problems at the outset. Remember that while your main concern is obtaining the funds promised to you by your donor, but the executor may have very different issues to deal with. He or she may have decades of accumulated possessions to sort through or family members who felt they were unfairly treated in the will. The executor may also be dealing with their own grief around the death of friend or family member.

Make personal contact with the executor; thank him or her as the deceased’s representative and offer condolences when appropriate. This initial contact forms the basis of the relationship with the executor and can open the door to future conversations about the nonprofit’s expectations, without seeming confrontational. This personal contact also puts a face to the charity, which may not otherwise be familiar to the executor. It is also an opportunity for you to assess the skills and outlook of the executor.

For simple estates, plan for a one-year timeline

The executor of a will is expected to administer the estate in a timely fashion, according to the terms of the will. Of course, what may be considered a timely fashion to the executor may seem like a painstakingly slow process to a nonprofit waiting to receive money.

Under normal circumstances, a planned giving officer can plot contacts with an executor over a one-year period. For an uncomplicated estate, you can usually expect to receive 80% of your organization’s gift within one year. This calculation is based on two months to receive probate; another six months waiting for the Wills Variation Act (WVA) period (British Columnia only) to expire and a few months to prepare accounts and have them approved.

Contact the executor at two months to see if probate has been applied for and again within six months of receiving probate to get an update of how the estate is progressing. Once the WVA period is over, contact the executor to determine when they expect the distribution of the estate to take place.

The executor’s role

The executor must work through a range of tasks:

• Obtain probate
• Call in and convert the assets
• Provide the beneficiaries with an accounting
• Distribute the assets
• Obtain clearance from the Canada Customs and Revenue Agency
• Provide a final accounting and make a final distribution

 

Obtaining probate

Obtaining probate is the executor’s first responsibility. This process can involve doing a wills search, providing a copy of the will to beneficiaries, locating heirs, compiling a list of assets and liabilities and filing the proper paperwork with the courts. At this point, an executor may benefit from some professional assistance to avoid delays and complications in handling the bureaucracy and paperwork involved. Have a list of contacts available or refer them to a legal help line, but avoid recommending a particular lawyer or firm.

Converting assets

Following the grant of letters probate, assets should ideally be converted within the next six months. If the executor experiences difficulty in disposing of the assets, this may be another instance when professional help is warranted. If real estate is involved, expect delays.

Preparing an accounting for the residuary beneficiaries

An executor will give your organization a copy of the estate accounts. Usually, you should receive the accounts within one to two months after the WVA period. Beware of undue delays in getting a record of accounts from the executor. If appropriate, suggest that the executor hire an accountant to help prepare them.

The accounting records are one of your opportunities to identify any problems with the estate. However, by establishing good communication with the executor at the outset, you may help to identify problems before they become major issues.

Be scrupulous in your follow-up. Identify any problems with the accounts. Has the executor put all of the assets into a chequing account so that it isn’t earning any income? Gift planners, particularly those receiving a residual share of the estate, should keep an eye out for asset sales that are made at less than fair market value, as this will diminish the size of the gift to your organization.

In a worst case scenario, the executor may be asked to pay back any losses but this is not always the best course of action if the executor believed he or she was acting in good faith.

Dealing with fees and taxes

Most often, executor’s fees are the greatest potential source of problems between a charity and an executor. Five percent of the value of the estate is not an uncommon rate for executor’s fees. Let them know that you want them to be fairly compensated. Encourage the executor to keep a record of action on what he or she has done in managing the estate. Also let them know that hiring professionals, such as lawyers or accountants, may impact their share of the executor’s fees.

If fees are clearly inappropriate and your organization is prepared to follow through, you may need to bring in legal counsel. Wherever possible, try to get your organization’s money before signing off on the executor’s fees.

Handling taxes is also an area where executors may benefit from professional advice. In many cases distribution is delayed because the clearance certificate has not been received from CCRA. Again, compile a list of individuals and firms with expertise in this to share with executors. An experienced professional will make the executor’s job easier but will also make the nonprofit’s job easier by keeping the executor on track.

Tips for coping with a difficult executor

Any number of problems may arise when dealing with a bequest from an estate and they cannot all be resolved through good receivables management. However, a few basic tips can ease many difficult situations.

• Try to resolve issues without getting outside help when possible
• Educate the executor about the work of the nonprofit and express gratitude
• Before calling a lawyer, always ask “Will this make the situation better or worse?”
• Maintain clear, open and ongoing communication and good follow-up
• Be clear about expectations but be patient and understanding as well

 

Based on a presentation by Sherry McNamara from St. Paul’s Hospital Foundation for the Canadian Association of Gift Planners Vancouver Round Table. For more information contact the CAGP at www.cagp-acpdp.org or call 1-888-430-9494. Leave a Legacy has published a booklet addressing this issue entitled “An Executor’s Guide to Probate and Estate Administration. It is available for purchase by contacting Glen Mitchell at (604)708-1492.