Freelance Fundraiser’s Jottings

20 October 2008

Legacies: the recession effects and how to overcome them

Filed under: Uncategorized — freelancefundraiser @ 9:28 am

At this time of worrying financial chaos, many charities are turning to their legacy fundraising as a way to ensure sizeable income, despite the total unpredictability of legacy income. The theory is that you only need a few good legacies to make up for any drop in other income streams, such as regular giving, corporate giving, etc.

However, charities are beginning to find that the current situation is also affecting their legacy income in two particular ways: the value of estates and the time it takes to realise the income.

1. Estate values
With the fall in house prices as a direct result of the banking crisis, this has had a knock-on effect on legacies, especially with regard to residuary bequests. Like every other house sale, prices have fallen to levels of about 18 months ago. According to some colleagues, there is also a rise in the number of buyers getting to the point of exchange of contracts and then trying to barter down the house price further.

As charities, Trustees and fundraisers are required, by law, to ensure the maximum income possible from bequests. For some charities, this has meant losing their buyers, because the new offer price was too low. The result has been houses going back on the market at a time when properties are not shifting.

One could look at the situation and say that house prices had become unrealistically inflated, so the drop has brought the market back to a sensible level, which, will in time, have a beneficial effect when people can once more access mortgages.

2. Timescales
As well as the issue in the previous point about houses going back on the market, the whole slowdown in the market, because of the difficulties now in getting a mortgage has slowed the sales process considerably. As a result, Estates are taking much longer to complete in the legacy administration process. This, in return, means longer for charities to wait to get all their money. However, if there are other assets in the Estate, such as savings, shares, etc, then charities should get some income in the shorter term, as these can be distributed prior to the house sale going through.

3. Conclusions

Yes, charities will find their legacy income going down over the next year or two. One leading legacy administrator has predicted by 16-20%. Also, it will take longer to close the file and receive all that is due, owing to the slowing down of property sales.

So what should charities be doing? Well, adjusting your legacy targets is the obvious one. Trustees often fail to understand that legacies are unpredictable and that one can have bumper years and awful years side by side! Always take an average of at least 5 years when working out what the target might be, then reduce that by, say, 20% for the next year or so.

Charities would also do well to increase considerably their legacy marketing activity, to try and counteract the predicted drop in legacy values, by getting more legacies overall.

When doing this emphasise the need for residuary bequests, rather than pecuniaries, as these will always be more inflation-proof, even in volatile times such as these. When the markets do stabilise and begin to grow again, residuaries will automatically follow. Residuary gifts are also likey to be much higher in value than pecuniary gifts.

Improving your online legacy pages will also help to increase the number of gifts in Wills. This is an area I have made a specialism in my work. The great thing with web pages is that you’re not limited by space and can go into more detail. If you think I could help you develop this aspect of your legacy fundraising, please get in touch, via my website: to discuss this.

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