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Bequest Management

Estate Administration Rights and Responsibilities for Charitable Beneficiaries

June 19, 2019
Estate Administration Rights and Responsibilities for Charitable Beneficiaries

What is a Beneficiary?

A bequest is a gift of your personal property, real estate or financial assets upon your passing to a person or organization by means of a will or trust. The person or organization receiving the bequest is known as a beneficiary. There are two types of beneficiaries:

  • Primary – the person or organization designated to receive the benefit or property
  • Contingent – the beneficiary who will receive the benefit if the primary beneficiary has died or cannot be located

If neither beneficiary is available, the bequest will revert to your estate and be distributed to your heirs according to state law. Therefore, it is often helpful to clearly state what you want to happen to your assets if the named beneficiary cannot be found, is no longer alive, or the organization is no longer in existence. Examples of beneficiaries include minor children, charities or businesses, parents, spouses, siblings.

Recommendations for Charitable Beneficiaries During the Estate Administration Process

When a potential donor approaches a charitable beneficiary regarding a gift, the nonprofit organization should help determine the type of bequest and the donor’s charitable intent. This includes determining what the donor wishes to accomplish, how much he or she wants to give, and when he or she wants to give it. The charitable beneficiary will have to work with all parties involved to maximize the benefits and impact of the donation on the donor’s estate, family, and organization he or she wants to support.

However, it is also possible that the donor does not want to involve the charitable beneficiary in the estate planning process during his or her lifetime. In this case, the charitable beneficiary will only find out about the bequest after the donor’s death.

Fiduciary Duties of Nonprofit Organizations

After a donor passes away, charitable beneficiaries, such as nonprofit organizations, have a fiduciary duty to protect the organization’s interests and ensure that the full amount of any charitable bequest is actually received. Likewise, the organization also has a responsibility to make sure that its donor’s intentions are carried out.

If the charitable bequest is not handled properly, the gift may be delayed, lessen in value, or result in litigation. In order to guarantee that these responsibilities will be fulfilled, organizations should keep an open line of communication with the executor (i.e. the individual appointed to settle the estate of a deceased person) to remain informed of the progress of the estate’s administration.

After receiving its initial gift notification from the estate, the organization should express its appreciation for the gift and thank the executor for his or her work. It is also appropriate for the organization to ask about the anticipated timeline for the estate administration process. In doing so, the organization will be able to determine when it can expect to receive the charitable bequest.

Charitable beneficiaries also have a responsibility to obtain copies of the will or trust agreement and account/distribution statements following notification of the bequest. The organization should review these documents to make sure the estate administration process runs smoothly.

How Can We Help?

At Chisholm Chisholm & Kilpatrick LTD, we understand the importance of carrying out your donor’s wishes in the promptest manner possible. We are sure to safeguard our client’s legal and financial interests while maximizing distributions. Contact our office for a free consultation today at 800-544-9144.