Focus: Finance and Governance - Outlook - The uncertainties of legacy income

Helen Verney, finance director at Jewish Care

Have you noticed that nearly everyone you meet in the voluntary sector has an opinion on whether legacy income will go up or down in the future?

They speak with absolute confidence, often with detailed theoretical arguments and sometimes with rather shaky anecdotal examples. If they get it right two years running, they are encouraged to expand and develop their theories further.

But have you also noticed that when you're listening to their theories you feel the same way you do when you're listening to your investment manager speak at great length about the interest rate in Kathmandu and the likely impact on the price of Vodafone shares of Mrs Smith buying a cottage in the Lake District and increasing the amount she spends on fish and chips.

It's the feeling that we as finance directors dread the most - not knowing who is right and who is wrong.

Well, perhaps that's just me. The trouble is that, as charity finance directors in medium to large fundraising charities, we need to find ways of budgeting for the uncertainty that surrounds legacy income each year.

Arguably the greatest uncertainty the human race faces is how and when we are each going to die, although it doesn't usually feel good to dwell on it for long.

We know for a fact that life expectancy continues to increase as a result of improving standards in health and social care and, in my opinion, the effects of eating too many preservatives. With this in mind, it's probably best not to budget for those legacies of which you have been notified by a live donor or legator.

The reality is that even if your 'legacy pipeline' measures income expected from only the estates of supporters who have already passed away, the uncertainty for budgeting can continue for what could be years.

Is the charity to receive an outright gift or is it waiting for the residuary?

Will it be shared with three other charities or - more difficult still - has a relative disputed the will? Then, of course, you need to ensure the solicitors are still awake and paying attention - at which point you might, somewhere down the line, receive a cheque.

I know some finance directors who won't budget for legacy income at all, some who use the complex 'finger in the air' approach and others who have developed various complex statistical models.

At Jewish Care, I can report that our method of 'pipeline plus a fixed percentage' has proved prudent for the past few years. If it works again this year, I intend to develop some weird and wonderful theoretical tales with which I can mesmerise any finance directors new to the sector.


- The finance director has to find ways of budgeting for the uncertainty surrounding legacy income each year

- This might depend on whether the charity is to receive an outright gift, whether a donation is to be shared with others or if a family member has contested a will.

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