Managing a Charity Legacy: Navigating Responsibilities

If you are named as an executor to the estate of someone who has died and they have left a gift to charity, there is a particular process you should follow when managing a charity legacy.

Charities depend on money left to them in Wills. When your loved one includes a charity bequest, it’s likely because they believe in the cause or have been helped by it themselves or had a family member who was helped at some point.

Notify the charity

Contact the charity once you’ve seen the Will. The charity trustees have a legal responsibility to act in the charity’s best interests, so they’ll need certain information from you. This includes:

  • The deceased’s name, address, and date of death
  • Details of what the charity has been left

If the charity has been left a share of the residuary estate (rather than a fixed sum of money), provide them with:

  • A copy of the Will
  • A list of the deceased’s assets and liabilities, when available
  • Valuations of expensive assets
  • A copy of the estate accounts, when available
  • Form R185 in respect of the income paid to the estate during the administration period so that the charity can reclaim the tax paid

It’s acceptable to simply send a notification at first. Some of the other documentation will not be available until later in the administration process.

Gifts of specified sums or items – pecuniary legacies and specific legacies

If a charity is left a set amount, such as £5,000, this is referred to as a pecuniary legacy. The gift of a named item is a specific legacy. Charity trustees should be provided with a valuation of a specific legacy and information about how and when it will be transferred to them.

Gifts of a share of the estate – residuary legacies

The gift of a proportion of the estate is referred to as a residuary legacy. If a charity is left a share of the residue, they will have more interest in the winding-up process. This will include issues such as property sale and the agreed price for items being sold.

Providing updates

Charities named in a Will appreciate regular updates on the estate’s progress. This includes key milestones like:

  • Applying for probate
  • Listing a property for sale and finalizing a sale agreement
  • Anticipated timeframe for distributing funds

Simplify communication with multiple charities:

If several charities are named in the Will, they can usually agree to share updates among themselves. This means you, the executor, only need to send progress reports to one organization. The chosen charity will then efficiently distribute the information to all beneficiaries, either directly or through a designated chain of communication.

Inheritance Tax

Executors need to handle Inheritance Tax correctly when distributing an estate that includes a residuary gift to charities. Charities are exempt from Inheritance Tax, so money left to them should not have any deduction made.

If 10% or more of the estate has been left to charity, note that a reduced rate of Inheritance Tax of 36% is payable on the part of the estate liable to tax.

Paying a legacy to a charity

Once the estate administration is completed, send the charity the final accounts for approval if they have been left a residuary gift. They’ll also want to see an income account for the administration period. The charity will approve the accounts, and the sum in question can be sent to them along with a receipt which the trustees will sign and return to the executor.

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