Liz Parry, Legacy Manager for the National Osteoporosis Society – a charity which helps people affected by the often debilitating bone condition osteoporosis – explains the incredible importance of legacies to charities, why charities need a Legacy Department and why Legacy Officers request the information they do.
Why do charities need a Legacy Officer or Legacy Manager you might ask? Shouldn’t the charity just bank and thank when they receive legacies?
I would like to take this opportunity explain the incredible importance of legacies to charities, why charities need a Legacy Department and why Legacy Officers or Managers request the information they do when a legacy is bequeathed to their organisation.
As a Legacy Manager I am solely responsible for ensuring the National Osteoporosis Society receives, maximises and protects over 30% of its total voluntary income, which equates to around £1.8m. For some charities, legacy income can be as much as 50% of all voluntary funds received!
The average bequest value of a residuary notification for the National Osteoporosis Society equates to around £25,700. A drop of only one or two notifications a month, can mean a drop of £300,000 to over £600,000 a year!
As you can see, Legacy income is vital for the survival of our charity and for the people we help and support.
So what is a Legacy Manager/Officer?
A Legacy Manager or Officer has to wear numerous hats, including being a lawyer, an administrator, counsellor, fundraiser, estate agent, auctioneer, property developer, negotiator, arbitrator, forecaster and stock broker to name just a few.
I am legally qualified and am also a member of the Institute of Legacy Management (the ILM).
So what does a Legacy Manager do?
A Legacy Manager has to be very proactive, to ensure all legacies bequeathed to their organisation are safely received and maximised where possible.
Number Crunching
One of the main jobs I undertake is checking Estate Accounts. The things I am looking for are ensuring that charitable exemption has been claimed and that Inheritance Tax has been apportioned correctly.
Both lay and professional Executors do sometimes get the IHT calculations wrong, which unfortunately happens quite regularly in mixed estates where you have exempt and non-exempt beneficiaries. When spotted this can increase the charitable and in some cases the non-charitable share quite considerably.
Probate Fraud
As part of the process of checking the accounts I keep a keen eye out for any unusual or suspicious entries in a Will or Estate Accounts. Charities are particularly susceptible fraud. In fact, it has been estimated that charities are losing over £40 million a year to this type of fraud!
Within the last five years alone, I have experienced this in three cases with a total value of over £400,000 which, with the help of specialist contentious probate solicitors, has successfully been repaid into the estates.
In one particular case a solicitor had taken over £200,000 from an estate, by sending the residuary charitable beneficiaries different copies of the will and different sets of Estate Accounts. It was only because of the good relationship, regular communication and information sharing that is undertaken between charities that this fraud was uncovered.
Claiming Back Income Tax
As charities are exempt from Income Tax, we can claim back any tax paid on income received during the administration of any estate where the Charity is a residuary beneficiary. We really do appreciate Executors or Administrators taking the time to complete the forms R185s, as this can add up to quite a sizeable amount.
Property Sales
It is important to keep a keen eye on property disposals within an estate to ensure value is maximised wherever possible. It is useful to remember that if there is a property included in a charitable estate, which looks to make a gain which would attract a CGT liability, the property should be appropriated into the charities’ names to avoid this liability.
Once appropriation has taken place, and if all of the residuary beneficiaries are classed as ‘charities’, a Section 119 Surveyor’s Report will be required.
The detailed requirements for the surveyor’s report are set out in the Charities (qualified Surveyors’ Reports) Regulations 1992 and have to comply with Section 117-119 of the Charities Act 2011.
It is also very important to check the value that property is sold for. I have experienced two cases where an Executor has sold the property held in the estate to a ‘friend’ for considerably under value. This is where Zoopla and the HMLR website can be hugely beneficial for providing details of current values and recent sales.
Budgies!
Some of the more unusual tasks I have undertaken during my time as a Legacy Manager are having to dig up a rhubarb patch to try and locate a missing £4,000 (which a neighbour had advised was buried there), to retrieving a frozen dead budgie called ‘Snowie’ from a freezer to ensure he was buried with his owner, who kindly left her whole estate to charity.
Defending Claims on an Estate
Contentious cases are on the rise. Since 2006 the number of all probate claims (contested wills) here in the UK has risen by 700 per cent. The rise is due to various factors – complex family structures, economic hardship and a culture that is increasingly litigious.
The strict legal position with regards to charities is that the Trustees of a charity have a duty to protect the assets of their charity including the charity’s entitlement to any legacy under a will, so the charity must defend the legacy if there is a dispute.
The Charity Commission makes it clear that a charity must take action to receive all gifts to which it has a legal entitlement, the only exceptions being cases where a gift cannot be used for the purpose specified by the donor.
As a charity, we try to prevent these situations from arising by ensuring that legacy donors understand the importance of setting out their wishes clearly in a professionally written will and stressing the importance of communicating those wishes to close family and friends.
Forecasting
With residuary bequests, it is very helpful if the Executors or Administrators can send through a copy of the Assets and Liabilities or a copy of the IHT calcs. This enables charities to spot early in the administration whether charitable exemption has been claimed and whether advice needs to be given with regards to appropriation to avoid any CGT liability. This information also enables the charity to forecast accurately, to help to plan future projects and activities by the organisation.
Good News!
A recent survey undertaken by Remember a Charity shows more solicitors than ever are informing clients of the option of including a charity in their will. This is fantastic news! By raising the awareness of charitable gifts in Wills, it gives people another way to support the charities they love.
Summary
Legacy Administration involves a great deal of PR work. The Legacy Manager deals directly or indirectly with hundreds of bereaved relatives, solicitors and other professionals in the course of a year. By operating pro-actively and behaving with professionalism, sensitivity and absolute integrity a Legacy Manager can enhance both the income and the reputation of the charity.
Legacies are the foundation for our organisation and are vital to enable us to continue, improve and increase the help we are able to give for many years to come.
