Hospices have long been recognised as strong legacy charities, benefiting from the generosity of individuals who wish to leave a lasting impact on compassionate end-of-life care.
These gifts are a vital source of income for hospices, helping to fund services that are not always fully supported by statutory funding. However, while legacies are a key source of income, they are inherently unpredictable and this unpredictability presents a challenge for financial planning and sustainability.
Under the Charity Statement of Recommended Practice (SORP), legacies must be accounted for only when receipt is probable and the amount can be reliably measured. This means that hospices struggle to accurately budget for legacy income in advance, even if they have a history of receiving such gifts. As a result, many hospices find themselves in a position where significant income arrives unexpectedly, making long-term planning difficult.
Strategies for managing and planning for legacy income
To address this, (having taken the appropriate legal advice to ensure adherence to articles of association and governing documents), hospices can consider implementing a legacy endowment strategy. Legacies, by their nature, are often intended by the legator to provide longer-term support. By recognising this intent, hospices have an opportunity to establish expendable endowments - funds that are invested to generate income over time, while allowing for capital to be drawn down strategically.
One practical approach could be to establish a policy whereby legacies over a certain threshold - say, £150,000 - are automatically considered for endowment treatment. This threshold allows hospices to distinguish between gifts that are best used for immediate needs and those that can support future sustainability. Establishing an investment policy for these larger legacies over the longer term will in turn create a more predictable income stream, helping to smooth out the volatility of annual fundraising and legacy receipts.
This strategy is particularly relevant given the financial challenges currently experienced by hospices. Rising costs, workforce pressures, and limited public funding mean that hospices must be proactive in securing their financial future. Predictable income streams are essential to maintaining high-quality care and expanding services to meet growing demand. Legacy endowment funds can play a crucial role in this, offering a buffer against economic uncertainty and enabling hospices to plan with greater confidence.
Furthermore, the establishment of a legacy endowment can demonstrate to future legators the long-term nature of their gift as well as aligning with donor intent. By investing these funds and using the returns to support ongoing operations, hospices honour that intent while strengthening their financial foundation.
How we can help
In conclusion, while legacies are unpredictable by nature, they need not be unpredictable in their impact. By adopting a thoughtful legacy planning policy, hospices can transform one-off donations into enduring sources of support. This approach not only enhances financial resilience but also ensures that the generosity of donors continues to benefit patients and families for years to come.
If you would like to discuss how you can implement such strategies in your organisation, please contact your usual Crowe contact.
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