Tips for Nonprofits that Receive Estate Bequests

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Many people like to include charitable gifts in their wills and other estate plans. For beneficiary organizations these kinds of gifts are potentially significant sources of giving. An organization that is the beneficiary of such gifts should understand how they work.

The specific mechanics for distributing assets out of someone’s estate after death depend on how the individual organized the estate before passing. Gifts to a nonprofit might be included in a will, or they may be specified in a trust. The gift may be triggered upon the individual’s death, or it may be delayed until the death of another beneficiary, typically the individual’s surviving spouse.

The distribution of assets from an estate can take a year or longer, as the estate’s executor or trustee works through the process of paying off debts and expenses. Sometimes this involves selling off property, which in the case of real estate or other complex assets can take some time. Until the estate or trust closes at the conclusion of this process, the beneficiaries may not receive any part of their gifts. In cases involving relatively small gifts, the trustee or executor may opt to pay out gifts sooner just to get them out of the way, but they are not required to do so.

Under California law, a trust’s trustee is required to notify beneficiaries of the trust whenever a significant change to the trust occurs, including the death of the individual who created the trust. These notices must be sent within sixty days of the event and must be accompanied by boilerplate legal notices. Beneficiaries of California trusts are entitled to receive a copy of the trust documents upon request.

A beneficiary of a trust has 120 days from the date of the legal notice, or 60 days from the date of receipt, to raise objections to the trust or any mechanics raised in the notice letter. Failing to raise objections in a timely way results in the loss of ability to raise objections later. In cases involving significant value, it is therefore very important for an organization to request and examine trust documents closely to verify that the trustee is properly managing its interests.

If a trustee or executor fails to provide required notices, or doesn’t properly distribute gifts, it may be necessary to file a lawsuit to recover the assets that the organization is owed. Whether this sort of suit is justified often depends on the scale of the gift. Small gifts may simply not be worth the expense, but larger gifts may be unlawfully withheld by a trustee or executor.

The Church Law Center of California advises churches and other nonprofits on legal matters. We can help your organization examine its options in the event a bequest is not honored. Call us today at (949) 892-1221 or reach out to us through our contact page.

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