If you have been appointed as an executor for an estate that includes a charitable gift, there is a particular process you should follow to ensure that the legacy is handled properly.
Charities often rely heavily on funds left to them through Wills, and your loved one likely chose to include a charity because it was a cause close to their heart or one that provided significant support to them or their family at some point.
Notify the charity
Once you have seen the Will and discovered that one or more charities have been named, you should contact the charity to let them know about the gift.
The charity trustees have a legal responsibility to act in the best interests of the charity, so they will need a certain amount of information from you, including the following:
- 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) the charity should also be provided 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 is acceptable to simply send a notification at first, as some of the other documentation will not be available until later on in the administration process.
Gifts of specified sums or items – pecuniary legacies and specific legacies
If the charity is left a fixed amount of money, such as £5,000, this is known as a pecuniary legacy. The bequest of a specific item, like a piece of jewellery or artwork, is referred to as a specific legacy. Charity trustees will need a valuation of any specific legacy and information on how and when the asset 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, then they will have more interest in the winding up process, to include issues such as property sale and the agreed price for items that are being sold.
Providing updates
Charities will appreciate updates as to progress and estimates of when certain steps will be reached, such as when probate has been applied for, when a property is put on the market and a sale agreed and the anticipated timeline for distributing funds.
If multiple charities are named in the Will, they often cooperate to share updates, meaning the executor might only need to communicate with one charity, which will then relay information to the others. This can create an efficient chain of communication.
Inheritance Tax
Executors need to take care to deal correctly with Inheritance Tax when distributing an estate that includes a residuary gift to charities. Charities are typically exempt from Inheritance Tax, so money left to them should not have any deduction made. This can make matters complicated if other residuary beneficiaries are not exempt from Inheritance Tax and it may be advisable to speak to an expert probate lawyer to ensure the issue is dealt with correctly in the estate accounts.
If 10% or more of the estate has been left to charity, the estate might qualify for a reduced IHT rate of 36% on the taxable portion.
Paying a legacy to a charity
Once the estate administration has been completed, the charity should be sent the final accounts for approval if they have been left a residuary gift. They will also wish 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.
Contact us
If you are an executor of someone’s Will or are dealing with the estate of someone who died without having made a Will and would like assistance with the estate administration or advice upon your role, and what you are required to do, please get in touch with us. You can contact our Probate and Estate Administration team by email at privateclient@baker-law.co.uk or by telephone on 01252 733 770. We will be happy to provide you with details of the next steps in the process and arrange an appointment for you to meet with one of our expert probate lawyers at our Farnham office.
This blog is provided for informational purposes only and does not constitute legal advice. Readers are encouraged to consult with a qualified lawyer for personalised guidance tailored to their individual circumstances.
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