Charities Should Think Twice Before Serving as Executor

In a more extensive blog a while back, CCK discussed the charity-as-executor issue. A recent article in The Wall Street Journal on the burdens of executorship got us thinking about the issue on a more granular level.

If we had to make a list of ten reasons why charities might want to avoid executor status, these would make the list. Think of the time, expense, and frustration of undertaking these tasks, usually long-distance:

• Making or implementing funeral and burial arrangements
• Filing many, maybe dozens, of required documents with the court
• Notifying all beneficiaries of each and every development
• Identifying all the decedent’s property, real, personal, tangible, intangible, digital
• Locating all financial accounts and dealing with beneficiary designations and/or transfer of assets to the estate
• Determining, evaluating, and paying all the decedent’s debts
• Resolving claims against the estate and keeping a meticulous account of every penny
• Satisfying pleasant heirs, angry heirs, irrational heirs, disinherited heirs, questionable heirs
• Keeping records of all executor-related expenses incurred and seeking reimbursement from the estate
• Spending up to three years and hundreds of hours of time doing the above (even though non-executor charities may have already received their distributions)

Sound difficult? There is more. Although uncommon, executors are sometimes the targets of lawsuits by beneficiaries and others. The estate may pay the expense, but litigation may well reduce your organization’s bequest (if it is a percentage or residuary gift).

No personnel to execute all these tasks? Hire a firm, you say? And who is going to supervise that firm? Correct. The charity. Will the estate pay for that service? Typically, yes, but the other beneficiaries will scrutinize those payments. (And how does hiring a paid surrogate for the named executor square with the decedent’s assumption that appointing the charity is cost-free?)

Finally, consider whether the dedication of personnel to executor-related duties is the best use of a charity’s resources. Some might say that providing these services to the estate at no charge amounts to a significant “private benefit” for donors, frequently those leaving a large bequest. On that count, consider the implications of Christian Stewardship Assistance v. Commissioner of Internal Revenue, 70 T.C. 1037 (1978) (offering free financial planning services to wealthy donor prospects not an exempt charitable purpose). Like financial advice, professional fiduciary services are available for a fee in the marketplace. A charity may wish to think twice before veering so substantially from its established purpose.

This article was originally posted to our LinkedIn on August 15, 2024.