The Sorp Revision: Legacies

By finance expert Don Bawtree

Don Bawtree
Don Bawtree

Legacies are one of the most contentious issues in charity accounts. Some trustees say a legacy counts as income only when the cash has arrived; others say it belongs to the charity almost from probate, though not before.

These different approaches can affect a set of accounts by many millions. But the new Sorp requires income to be brought in when "more likely than not", rather than when it is almost certain.

The new Sorp emphasises existing principles, but says legacies should be treated as income after probate, as long as the estate has enough assets to pay and any other conditions have been dealt with.

The accounts need to track what happens after the year-end, right up to the date of signing the accounts. New payments and disputes will need adjusting. It is a good reason to get your accounts signed off quickly!

Of course you need to put a value on a legacy and weigh up the risks of a dispute reducing its value. But any good legacy administrator can do this.

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