The Complexities of Probate Administration with Nonprofits and Charitable Organizations
To accompany my guest writer’s blog today, I knew that I wanted to discuss a subject related to nonprofits and estate work. However, the subject of “nonprofits and estate law” is a wide-ranging area with many different topics and important considerations, including but not limited to: tax considerations, different vehicles, best practices for trusts, specificity of language in documents, and more. After some consideration, I elected to focus on the question: Why and how are probates more complicated when nonprofits and charities are involved?
As a reminder: probate is the legal process where the person administering the estate (executor or Personal Representative) has to go to Court to be appointed to administer the estate. They also must work with the Court system to account for their work and be discharged when they are finished. Today, I am not going to address concerns of non-probate work, such as trust administration when nonprofits and charities are involved.
In the past, a person could make their will, name a nonprofit or charitable organization as the primary beneficiary, and the probate would be no more or less complicated than if that person had instead left their estate to a friend. This is no longer the case.
About ten years ago, this changed as a result of both Court practice and Minnesota statutes. Now, when a nonprofit receives a significant amount of the estate (such as a percentage, rather than $500.00), there are additional requirements from the Court system, which include:
- A supervised probate; this means that there is a hearing to begin the probate, occasionally a hearing or two during the probate, and a hearing to close the probate. Occasionally, we are able to get waivers from all parties and skip the hearing; still, the process of obtaining those waivers is more legal work—attorney and paralegal time, billed by the hour—than would otherwise be required.
- Additional, more comprehensive accounting requirements for the Personal Representative.
- Notice provided to the Minnesota Attorney General’s Office, and additional correspondence to ensure that any questions or concerns from the AGO have been addressed.
Most probate judges and referees would argue that these are minimal additional requirements, since (A) accountings are required anyway, and (B) a couple of short hearings or additional correspondences are not such a big addition. However, I would gently suggest that any time we need to wait for a hearing to be scheduled or waived results in more delay and more time on behalf of the Personal Representative, who is typically volunteering their time. The constant start-stop-wait-start again-stop of the Court system can delay closing an estate, cumulatively, by several (or many!) months. This is a delay that can be more meaningful to some clients than others.
All of this leads me to the important question: why the change? And why the additional requirements?
The answer is simple: to protect the nonprofits and charitable institutions.
If you have never worked at a nonprofit—or perhaps, more accurately, a mid-size or small nonprofit—then it’s harder to see why this is so important. However, if you have experience at one of those nonprofits, you’ll know that they seldom have on staff a qualified attorney with experience in reviewing estate accounting documents, filing objections, and otherwise ensuring that the actual estate is managed appropriately. Nonprofits are seldom staffed or funded with an ability to object when, say, the Personal Representative or attorney charge too much in fees, take too long, or end up delivering a suspiciously smaller amount of money than they should, given the size of the estate. Putting forth a retainer to have a private attorney assist them is often untenable giving the uncertain amount of the actual bequest in question.
The idea is that the Minnesota Attorney General’s Office can act as a protective agent, with the right to object on behalf of the nonprofit, and ensure that the estate administration is on the up-and-up. The judge is further involved in supervising the estate for the same reason.
These rules serve to protect the actual intent of the decedent and their will. This does mean more work for the Personal Representative; that’s the cost of doing business when you list a nonprofit or charitable institution in your Will directly. As a note: please do not interpret this explanation as a suggestion to avoid charitable giving. Instead, I recommend that you use this information to think more about the mechanism that you use to provide charitable giving as part of your overall estate plan.
If you are interested in learning more about how to set up an estate plan that avoids some of this bureaucratic burden for your Personal Representative (executor), please reach out. We can discuss your other options involving direct beneficiary designations, trusts, and other gifting strategies.
The material contained or linked to in this blog is for general informational purposes only, and is not intended to create or constitute an attorney-client relationship between Courtney Law Office, PLLC and any person. The information is not offered as legal advice and should not be construed as legal advice. Readers should not act on the information presented without consulting an attorney about your specific situation. Communications with the Courtney Law Office are not confidential unless a legal relationship is established by a representation agreement. If you would like to establish a legal relationship and seek legal advice, please reach out.
