When an organization receives communication that they have been included as a beneficiary in a donor’s will, it must determine if this represents an intention to give or an unconditional promise to give. This is imperative as it determines when the bequests are recognized as a contribution.
As long as the donor is living, they have the ability to modify their will, so organizations should only deem the notification that they are named as a beneficiary as an intention to give. Development should track the intention to give, however, at this point in time there is no contribution or promise to give to record.
Only upon the donor’s death and when the will is declared valid by the probate court does the intention to give become an unconditional promise to give. Then the organization would record the gift as a contribution.
Determining the value of the contribution to record is dependent on the type of bequest. If the organization is named as the beneficiary of a general bequest, which identifies a specific dollar amount, determining the value is straight forward. However, organizations that are named beneficiaries of residuary bequests, specific bequests of a piece of property or a percentage of the estate, must recognize the bequest by estimating the value of the gift to be received. This can be done by using the executor’s estimate of the estate’s assets and liabilities and the expected amount and time frame as to when the organization will receive payment of their interest in the estate. This can often be a difficult and a time-consuming process, however the organization should have a reasonable basis to support their estimate. The executor may give a low fair value amount or a dollar range. Recording the low fair value or the low estimate of the range would be appropriate. In addition, any information obtained after year-end about the value of the bequest should be considered for the year-end value.
If you have any questions on the above, feel free to reach out to a Henry+Horne non-profit professional to assist you. For more information on how Henry+Horne can assist your non-profit, check out our Industries page.