Appointing a Charity as Executor: The Gift Planner’s Dilemma
The Gift Planner’s Dilemma: “I Want You To Be My Personal Representative”
The following is a fictionalized version of an awkward telephone conversation that occurs almost every day in the gift planning office of some charitable organization in our great nation:
JULIE (the Gift Planner): And believe me, the generous gifts that you have been sending for fourteen years have really made a difference. The Nickelhoffer’s Disease Foundation would not have such a great record of life-saving achievements were it not for you.
IDA (the Donor): Hearing you say that warms my heart, Julie. I mentioned to you a few months back that I was working on my will. I won’t live forever, you know! (Both people chuckle.) And I am so happy to tell you that I have instructed my lawyer to leave half the residue of my estate to Nickelhoffer’s! We estimate that it will be about six hundred thousand dollars. The rest will go to relatives.
JULIE: Ida, I am overwhelmed. I hoped that you would remember us in your last wishes, but never dreamed of that level of generosity. People that you will never meet will benefit from your goodness for decades to come.
IDA: I hope so, dear. And I knew you wouldn’t mind, so I instructed the lawyer to name you as my executor. You’ve been so good, [choking up] almost like my own daughter. I know my estate will be safe in your hands and that you’ll be happy to do it for free so that everyone – including your wonderful organization – gets the maximum amount possible. This is such a load off my shoulders!
JULIE: I really don’t know what to say . . .
IDA: My dear, there’s nothing to say but “yes.”
Now Julie, and the Foundation, have a dilemma. They are concerned that a refusal of Ida’s request could lead to the loss of a significant gift. They are equally concerned about the burden that would come with accepting the assignment. Nickelhoffer’s does not have (or cannot spare) the internal resources to serve as executor of what seems to be a large estate. It needs to break the bad news to Ida, and quickly, as her estate planning is in process.
Charities deal with this problem every day. Almost invariably, the charity wishes to decline the appointment. The search for a delicate “way out” usually involves all or most of the following questions.
Can a charity even be eligible to serve as an executor?
Charities are frequently appointed as executors and sometimes serve in the role. The most common cause of disqualification would be a state law (such as that in Florida, for instance) that renders non-relatives from out-of-state ineligible to serve in that capacity. Obviously, reliance on those statutes is at best a partial solution.
Can we accept the appointment and decline later, when the donor dies, and the probate process begins?
Many charities would have grave reservations about the ethics of a deceptive and self-serving “agreement.” For example, a standard of the National Association of Charitable Gift Planners suggests that charities must “in all dealings with donors, institutions and other professionals, act with fairness, honesty, integrity and openness.” Consenting to serve as executor with no intention of keeping the promise falls far short of the standard of behavior anticipated in the recommendation.
It is a different story if the charity accepts the appointment, but informs the donor that when the time comes, it will need to engage someone to handle the day-to-day work of estate administration. The donor should be informed that there will be a cost to the estate for that service. The upside is that the charity may also wish to assure the donor that it (the charity) will monitor the performance of the chosen professional and take all reasonable steps to minimize expense.
Why do donors ask charities to serve their executor?
Our experience suggests that one or more of three reasons is generally in play: (a) the donor has no family, or at least no trusted family; (2) the donor has faith in the charity; and/or (3) the donor wishes to minimize administration costs.
What if we recruited a volunteer to perform the task? Could we get a volunteer lawyer or accountant with a connection to our organization?
It could be a solution in at least some cases. Certainly, professionals often donate their services to worthy causes. However, for a large estate, this sort of volunteering could well turn into a multi-year commitment. If a willing volunteer emerges – perhaps a retiree – the charity should carefully examine the risk that it undertakes with the arrangement, especially if the volunteer is uninsured for such activities and is acting as an agent for the charity.
The federal Volunteer Protection Act, for example, insulates volunteers from liability, but does not so protect the charities that recruit them.
Is there a way to solve this executor problem once and for all?
Yes. Some organizations have adopted a no-executor policy and published it in the gift planning section of their website. It is much more palatable and less awkward to point to an existing practice when declining a donor’s request. The statement can be short and simple:
XYZ’s Board of Directors has directed that neither the organization nor any of its employees or agents may serve as the executor, personal representative, or trustee for the will or trust of a donor.”
What’s the best way to “sell” this to Ida, or any other disappointed donor?
The “best” way may depend upon the individual receiving the message, but we have a good starting point:
“Our organization takes the responsibility of stewardship very seriously. We value contributions like yours and do everything possible to make sure we carry out your wishes. We are professionals, but not professional executors. Estate administration can get very complicated and requires specialized legal and accounting skills that Nickelhoffer’s just doesn’t have. The process of handling your estate would be in much better hands if you found the right person. We are happy to help you do that.”
Related News & Knowledge
- Is It Worth Starting a Charitable Gift Annuity Program? A Decision-Tree Approach
- Charitable Gift Annuity Pitfalls: Tips for the Unwary
- Is This a Gift We Really Want? What Does The Gift Acceptance Policy Say?
- Estate Planning Shortcuts: What the Gift Planner Needs to Know
- What Does RMD-QCD Spell? A Gift Planning Opportunity