Legacy Giving to Charitable Organizations

Plain English Breakdown

The official source does not provide specific penalties for non-compliance by charities or covered entities, nor does it specify the exact enforcement mechanisms beyond mentioning certain divisions may enforce the bill.

Legacy Giving Rules for Charities

This law sets rules for financial institutions to pay designated benefits to charitable organizations within a certain time frame after receiving proof of the donor's death, and it outlines conditions under which charities must return funds if there are claims against the donor’s estate.

What This Bill Does

• Requires banks, brokers, credit unions, and other financial institutions (covered entities) to pay designated benefits to charitable organizations within 60 days after receiving proof of a donor's death.
• Allows covered entities more time up to 120 days if federal law requires them to take specific actions before paying the benefits.
• Requires charities to return some or all funds received from donors if there are claims against the donor’s estate that need to be settled within 60 days of receiving notice.

Who It Names or Affects

• Financial institutions like banks, brokers, and credit unions
• Charitable organizations that receive donations

Terms To Know

Covered entity

A financial institution or investor that holds benefits designated by a donor for a charity.

Designated benefits

Money or assets given to a charitable organization by someone who has passed away.

Limits and Unknowns

• The bill does not specify what happens if charities do not comply with the rules.
• It is unclear how this law will be enforced in practice.

Official Summary Text

The bill requires a bank, broker-dealer, depository institution, credit union, or financial or institutional investor (covered entity) that holds benefits that are designated by a donor to a charitable organization to pay the designated benefits not later than 60 calendar days after the charitable organization submits an affidavit attesting to the death of the donor and including certain other information, except as described in federal law. If a covered entity that holds designated benefits is unable to pay the designated benefits to a charitable organization because federal law requires the covered entity to take certain actions or satisfy certain criteria in order to pay the designated benefits, the covered entity must take such actions or satisfy the criteria and comply with the bill not less than 120 days after the charitable organization submits the affidavit to the covered entity.
If a charitable organization receives designated benefits that concern a creditor claim, statutory allowance, or elective-share or supplemental elective-share claim (outstanding claim) for which the charitable organization may be liable, the charitable organization must return to the donor's estate a portion or all of the designated benefits in order to satisfy the outstanding claim within 60 days after receiving written notice of the liability, with certain exceptions. If the charitable organization fails to comply, it must pay statutory interest to the donor's estate for each day the unreturned amount remains outstanding. Upon receiving notice of the outstanding claim from the personal representative of the donor's estate, the charitable organization must hold all or a portion of the designated benefits in a constructive trust pending a determination of the outstanding claim. Moreover, the charitable organization may be subject to one or more court actions.
A covered entity that holds benefits that are designated to a charitable organization shall not:
Require the charitable organization to establish an account with the covered entity as a condition of receiving the designated benefits; or
Require an individual employed by, or serving on the board of, the charitable organization to submit personal information as a condition of receiving designated benefits.
The bill may be enforced by the division of banking, the financial services board, or the division of securities, as appropriate.
(Note: This summary applies to the reengrossed version of this bill as introduced in the second house.)