information for executors and administrators

Pecuniary gifts - a certain sum of money

It is very useful to let the charity beneficiaries have a copy of the Will (or an extract of the clause mentioning the charity) so that they can record the type of gift they have been bequeathed, and ensure they fulfil any obligations or wishes set out in the Will alongside their gift. This is particularly important for IFAW as we are formed of two sister organisations and must ascertain which one is legally entitled to the gift in the Will.

Pecuniary gifts will then usually be paid as soon as sufficient funds have been received by the estate.

residuary gifts - a share of the estate

You will be aware that Executors are obliged to seek the maximum benefit from an estate for the beneficiaries. Similarly, charity trustees are required by law to seek maximum benefit from gifts left to their charities through Wills and will need to request documentation from you for their files to meet regulatory and audit requirements. Such requests are routinely made in all estates. A checklist of the minimum information charities must request can be found on the last page of this leaflet.

It is very useful to let the charities have a copy of the Will and a list of the estate’s assets and liabilities early on, so that they may consider whether there are any assets which need to be treated in a particular way, such as to use the charity exemption from Capital Gains Tax.

IFAW is made up of two sister organisations so the copy Will is crucial to help us identify which is the correct beneficiary between the two. Charities will usually enquire of the estates progress every few months. If there are multiple charities it may be helpful to request a 'lead' charity who can act as a single point of contact between you and the rest of the charities.

At the end of the estate, please provide a copy of the Estate Accounts to the beneficiaries, before making distributions.

So that the charity can provide the executor with proper receipt and legally discharge them of their duty, the minimum information the charities will need to have received are a copy Will and Estate Accounts. This ensures the charity meets regulatory and audit requirements, protecting both the charity trustees and the executor.

Further details about the points above and others are provided in the section below.

specific gifts - a specific asset such as jewellery, shares, or property

To help the charity understand the asset bequeathed to them, please let the charity beneficiary have a copy of the Will (or an extract of the clause mentioning the charity). This is particularly important for IFAW as we are formed of two sister organisations and must ascertain which one is legally entitled to the gift in the Will.

Please also provide the charity with a valuation of the asset. The charity should then be able to tell you whether they wish to take the asset ‘in specie’ (in its present form) or whether they wish for the asset to be sold and to simply receive the proceeds. Please note that assets can carry tax implications (see below).

If the gift includes land or buildings, it would be helpful if you would consult the charity beneficiary over the marketing, asking price and offers received. To ensure that you get the best price for the property, you should obtain written valuations from at least two firms of estate agents. In certain circumstances, a property may have development potential, in which case the charity would request to be closely involved in any decisions taken. Please provide charities with a copy of the completion statement after the sale.

If there is not going to be enough funds in the estate to pay all the gifts in the Will, please let us know.

If the gift is a specific value set in the Will, the gift will ‘abate’, meaning that it will reduce proportionally based on the value of the gift compared with the size of the estate. please let the charities know at the earliest opportunity if this is likely.

When you are ready to make payment of the reduced gift or there are no funds for the gift at all, you will need to provide the charities with a copy of the Estate Accounts. This should show all the assets and income of the estate and the payments made by the estate, along with how the final gift values (if any) have been worked out. Charities request this to ensures that they meet audit and regulatory requirements imposed on them by law to show their auditors why the full value was not received.

If the estate is liable to IHT, please provide a copy of the calculation or copy IHT form. UK-registered charities are exempt from IHT payable in the UK and if 10% or more of an estate is left to charity then the whole estate's IHT rate can be reduced to 36%. Charitable relief should be claimed in the return you make (they will not otherwise volunteer it). IHT currently affects estates of net value above £325,000.

Where the residue of an estate is divided by the Will between both exempt and non-exempt beneficiaries (for instance, between charities and individuals), you must take care to consider which beneficiaries’ gifts bear the tax before you distribute. Before deducting the tax from residue, you should divide the residue into exempt and non-exempt parts and then deduct the tax only from the non-exempt share. This ensures that the charity concession is applied properly.

If there are specific gifts left to individuals in the Will before residue is dealt with, the situation is more complicated. You are advised to seek professional advice. In addition, most charity Legacy Officers will be able to offer assistance on this point.

Charities have an exemption from CGT. However, it may be payable when assets such as investments or property are sold which have gained in value since death. This is because the Executor is deemed to be selling as an individual, even though the assets will benefit charities.

During the tax year of the death and the following two years, there is an annual allowance of £12,300 for the executor to make a gain on an asset without needing to pay CGT. If the gain is more than the allowance, then CGT will be payable.

Accordingly, if there is a danger of Capital Gain which will exceed the annual exemption, you can use your power to appropriate. This is a simple book-keeping exercise. You do not need to transfer the assets to the charity(ies) before sale. Instead, you confirm to the charities that you will appropriate the assets on their behalves with their agreement, and then sell as agent (Bare Trustee) for the charities. The easiest way to do this is by a Memorandum of Appropriation. Some Legacy Officers may be able to provide you with a template Memorandum to use, which simply needs to be filled in and signed in order complete the exercise and use the charity’s exemption.

If property is being appropriated, be aware that the legal procedures will be slightly different in that the property may need a special valuation to be completed (known as a s. 119 valuation) and that appropriation needs to take place before contracts are exchanged.

Charity Legacy Officers will be able to advise you on how to proceed.

If the estate includes land or buildings, it would be helpful if you would advise the charity beneficiaries at an early stage in the administration. Please consult them over the marketing, asking price and offers. To ensure that you get the best price for the property, you should obtain written valuations from at least two firms of estate agents. We would be grateful to receive a copy.

In certain circumstances, a property may have development potential, in which case the charities would request to be closely involved in any decisions taken.

If a property sells at a value higher than the probate value, it may create a Capital Gains Tax (CGT) liability. CGT can also arise on some investment sales. Please see the CGT section above for guidance on how to mitigate this. Please also gain valuations of other significant assets such as jewellery, paintings, and investments.

If you are notified that a claim may be brought against the estate please contact the charities immediately, providing as much information as possible. Any payment made from the estate to meet a claim comes from residue, directly affecting the charities’ benefit. Charity Legacy Officers are experienced in these matters and would wish to be involved in any negotiations from the beginning.

You may find as Executor that you are asked to make payments to people, which are not part of the estate administration or gifts set out in the Will, but that you feel should be made on moral grounds. Please do not approve any such requests until you have spoken to the beneficiaries. Charities do not have the legal freedom that individuals do to approve these payments and law on this area is quite strict. Whilst most charities will have the power to settle a legal claim, different considerations arise with an ex-gratia claim. If a request for an ex-gratia payment is made, the charities will ask the Executors to provide a full explanation of the circumstances to help the charity’s Trustees to make a decision. If they do feel that they are under a moral obligation, depending on the value, they must then apply to the Charity Commission for an Order to make the payment. They cannot agree to the payment without the sanction of the Charity Commission. Further information can be found from the Charity Commission.

We fully appreciate that, by acting in person, you are saving the estate costs which would otherwise be incurred by using a solicitor. In the absence of any clause in the will empowering the executor to make a charge for his or her services, executors are not legally permitted to charge for their acting as Executor, as this is regarded under law as profiting from a position of trust. You are, of course, entitled to reclaim all reasonable expenses actually incurred, such as the cost of travelling, fares, postages, telephone calls, photocopying and any payments made for such items as death certificates, swearing fees, etc. Charities are of course bound by the law, and we trust that you will understand that a residuary beneficiary charity may need to query expenses, particularly where the claim appears to include a time element.

Executors are obliged to prepare and provide the residuary beneficiaries with a set of Estate Accounts at the end of the administration period. This is not to question the quality of the administration, but for the charity to satisfy itself that there is no outstanding matter which would create a liability on its Trustees. The Estate Accounts can be fairly top-line and need only show the assets of the estate, the payments made by the estate and how the final distributions have been calculated. When you have prepared the final estate accounts, please send them to the beneficiaries for approval before you distribute the funds. Although rare, this will save you having to recall funds if there is a problem.