Estate Administration Where the Tortoise Rarely Wins Rob Smitherman, - PowerPoint PPT Presentation

Estate Administration Where the Tortoise Rarely Wins Rob Smitherman, Director Danira Dizdarevic, Assistant Director Gift Planning Administration Northwestern University

Email message of the year! • From the administrator for the Estate of Luke Perry: He left 15% of his estate to Save the Armadillo Foundation. • Our first estate gift! How exciting! • Administrator said an attorney would be contacting us: • Mentioned “paperwork” and “litigation.” • “May be some attorney’s fees and administration costs, but not to worry!” • Calling the President of the Board! We should get a major check soon! 1

Estate Administration by Charities • Types of Estate Gifts • Planning for the Gifts • Gift Administration “Always look on the bright side of death” ♪♪♪♪ 2

Types of Estate Gifts • Gifts through Wills and Living Trusts • Specific Bequests: • Cash/Securities • Personal Property • Real Estate • Residuary Gifts, for example: I leave 50% of the remainder of my estate. • Gifts through testamentary trusts “Bring out your dead!” 3

Types of Estate Gifts • Gifts from individual retirement accounts, 401(k) and 403(b) accounts, and other “payable on death” accounts • Life insurance Gifts “You do realize he has to be, well, dead, by terms of the card, before he donates his liver?” 4

Planning for the Estate Gift • Create standard steps for staff to administer the estate. • Who is the direct contact with the estate representative? • Who signs the legal documents for the estate? • Obtain from Board a corporate resolution for authority to sign. Usually staff positions instead of names (President, VP, etc.). • Send corporate resolution as part of introductory package to estate administrator. • Need notary public on staff. “You will find my last words in a blue folder on my desk.” 5

Planning for the Estate Gift How to keep track of the gift? • Software program (Bequest Manager, etc.) if handling multiple estates. • Spreadsheet for easier reference. • Reminders to contact estate for status (Microsoft Outlook). • Set up paper file for lengthy estates. • Use donor database to document email, telephone calls, correspondence. Grim Reaper: You are all dead. I am Death. Host: Well, that's cast rather a gloom over the evening, hasn't it? 6

Estate Gift Administration • Notice of death of donor • Had the donor notified charity of estate gift? • Condolence letter to family. • Contact gift officer who had relationship with donor. • Contact specific internal beneficiary. • Research: death certificate, obituary, list of heirs • The “what if” scenario: ex-wife, or someone who would benefit from change in life income payment. I’m not dead yet! 7

Life Insurance Administration • Life Insurance Gifts • If charity owns life insurance policy or knows it is beneficiary, can complete claim form with death certificate. • If no knowledge that charity is beneficiary, we have to rely on estate, family members, or life insurance company to notify charity. • How do you designate the gift? Need copy of beneficiary designation page from policy. • How do you get a death certificate? • Administrator or family members. • May have to obtain from county in which the donor died (contact Office of Vital Records). “When you’ve told someone you’ve left them a legacy, the only decent thing to do is to die.” 8

Will/Trust Gift Administration Gifts through a Will, Trust, or Retirement Designation • If you know of possible estate gift, does charity try to contact administrator? • If you know of IRA or other retirement designation, notify financial institution. Some will not notify you. • The waiting game. Did we get anything? “Never say you know a person until you have divided an inheritance with them.” 9

Estate Gift Administration The feeling that you and your team are vultures, waiting and waiting… 10

Estate Gift Administration • Estate administrator sends a notification letter stating that charity is a beneficiary in the estate. Usually requests documents: • Completed IRS W- 9 form listing the charity’s tax identification number and legal address. • Corporate Resolution setting out who has the authority to sign legal documents. • C harity’s 501c3 letter from the IRS certifying the University’s tax -exempt status. Tip: Have those 3 documents handy and mail them with your first correspondence with the estate administrator. Question: A wealthy man dies and leaves ten million dollars. One-fifth is to go to his wife, one-fifth is to go to his son, one- sixth to his butler, and the rest to charity. What does each get? Answer: “A Lawyer” 11

Estate Gift Administration Charity should request from the administrator: • Copy of the will or trust • Administrator may not want to send the entire will or trust. • Illinois law requires each residuary beneficiary to receive the entire will or trust if requested in writing. • Inventory of the estate and accounting when completed • Estimated timeline for partial and final disbursements • Names of family and others who should be included in correspondence • co-administrators, attorneys, accountants • Estimated amount of gift (maybe…). “Leave the gun. Take the cannoli.” 12

Estate Gift Administration And then… 13

Estate Gift Administration • Why does it take so long???? • Gathering all of the assets • Selling real estate, sometimes personal property • Creditor’s notifications and time period to make claims against the estate • Possible litigation • Tax issues “Death is not the end. There remains the litigation over the estate.” 14

Disbursing Funds: Partial and/or Final • Did you get copy of the will or trust? Do not sign anything until you review documents. • Did you get a copy of the Accounting, if final disbursement? • Administrator will request Receipt and Refunding Agreement before most disbursements. • Signing a receipt before receiving funds? • Refunding just the amount charity receives or “joint and several liability?” • Read each refunding agreement, involve legal counsel if needed. “Please. This is supposed to be a happy occasion. Let’s not bicker and argue over who killed who…” 15

Gift Designation • How did the donor designate the gift? • Honoring the donor’s wishes – Uniform Prudent Management of Institutional Funds Act (UPMIFA). • State law requires charity to follow the wishes of the donor. • If donor sets up endowed fund, UPMIFA requires the endowment to support donor’s wishes. “Good evening. Tonight on ‘Is There?’ we examine the question, ‘Is there a life after death?’ And here to discuss it are three dead people.” 16

Gift Designation • What if charity has changed, or donor requests endowment that supports something that charity does not have or will not do? • Example: Northwestern terminated its dental school. What happens when a donor names the dental school as a designation of a gift? • Depends on specifics of designation: • Alternatives? Who can modify designation? • May have to file suit to reform the trust or estate. • If “donor” consents, charity may modify. Is estate administrator a representative of the donor? “Grim Reaper: Shut up! Shut up, you American. You always talk, you Americans, you talk and you talk and say 'Let me tell you something' and 'I just wanna say this.' Well, you're dead now, so shut up .” 17

Estate Gift Administration Issues and challenges • Estate administrator inaction • Litigation within estate • Excessive attorneys’ fees and administration fees • Individual Retirement Accounts and other retirement funds “This parrot is no more! He has ceased to be! He's expired and gone to meet his maker! He's a stiff! Bereft of life, he rests in peace! If you hadn't nailed him to the perch he'd be pushing up the daisies! His metabolic processes are now history! He's off the twig! He's kicked the bucket, he's shuffled off his mortal coil, run down the curtain and joined the bleedin' choir invisible!! THIS IS AN EX-PARROT !!” 18

Reporting and Communication • Use donor database to inform gift officers of estate status through contact reports and document database. • Use estate tracking program (Bequest Manager) – to produce customized reports for divisions of charity, as well as for senior management. • Use email to report gifts to other divisions (Accounting, Gift Processing, Marketing). • Send gift acknowledgment and thank you note to family members. [Geoffrey is confronted by a tall, ominous hooded figure with a scythe.] Geoffrey: Yes? [Pause.] Geoffrey: Is it about the hedge? 19

Email message of the year! • From the administrator for the Estate of Luke Perry: He left 15% of his estate to Save the Armadillo Foundation .” • Our first estate gift! How exciting! • Attorney contacted us, gave us copy of trust. • Family contested trust, years of litigation. • Case settled, due to settlement and attorneys’ fees, received 8% of estate. 20