Could your charity recognise legacy income earlier than you previously thought?
One of the changes introduced by the new Charities SORP 2026 relates to the accounting treatment of legacy income. Although this may initially appear to be a relatively small technical change, it could have a significant impact on when charities are able to recognise income from legacies within their annual accounts.
Historically, charities have generally been advised to wait until a grant of probate has been obtained before recognising legacy income, alongside satisfying the other relevant recognition criteria. However, under the new SORP, the approach has changed, and charities may now be able to recognise certain legacies earlier.
What has changed?
Under the previous Charities SORP (2019), the recognition of legacy income was linked to the charity establishing its entitlement to the legacy. This required sufficient evidence that a valid will existed, the benefactor had died and the executors were satisfied that the estate’s assets would not be required to meet other claims against the estate.
The new Charities SORP 2026 removes the specific requirement to establish ‘entitlement’ before recognising legacy income.
Instead, the recognition criteria are now aligned with the general principles of FRS 102. Legacy income must be recognised when:
- It is probable that the legacy will be received; and
- The value of the legacy can be measured reliably.
This represents an important change in emphasis. Rather than treating probate as the defining point at which a legacy can be recognised, charities must now consider the circumstances of each legacy and whether the recognition criteria have been met.
Does this mean probate is no longer required?
Not necessarily. The new SORP still identifies a grant of probate (or grant of confirmation in Scotland) as an important indicator that receipt of legacy income is probable.
Paragraph 5.86 explains that receipt of legacy income will normally be considered probable when:
- Any applicable grant of probate or, in Scotland, grant of confirmation has been made.
- The executors have established that there are sufficient assets in the estate, after settling any liabilities, to pay the legacy.
- Any conditions attached to the legacy are either within the control of the charity or have been met.
However, the important distinction is that probate is now one of the indicators to consider, rather than an absolute prerequisite for recognition.
This means that there may be circumstances where a charity can recognise legacy income before probate has been granted, provided it has sufficient evidence to demonstrate that receipt is probable and the amount can be measured reliably.
What should charities consider?
The new approach requires charities to exercise judgement when assessing the circumstances surrounding individual legacies.
For example, a charity may receive notification from an executor or solicitor that it has been named as a beneficiary in a will. Although probate has not yet been granted, the charity may have received sufficient information to establish that:
- The deceased’s will identifies the charity as a beneficiary.
- The estate has sufficient assets to meet its liabilities and make the payment.
- There are no significant disputes or uncertainties affecting the legacy.
- The amount expected to be received can be reliably estimated.
In these circumstances, the charity should consider whether the legacy meets the new recognition criteria rather than automatically waiting for probate to be granted.
However, it is important to remember that simply being notified that a charity has been named in someone’s will is not sufficient, in itself, to recognise the income. There must still be sufficient evidence that receipt is probable and that the value can be reliably measured.
What if the value of the legacy is uncertain?
The new SORP also specifically recognises that circumstances such as property valuations, disputes between beneficiaries, challenges to a will or uncertainty over the estate’s liabilities may affect both the probability of receiving a legacy and the ability to measure its value reliably.
Where these uncertainties exist, the charity will need to consider whether the recognition criteria have been met.
If a legacy meets the definition of an asset but does not yet satisfy the recognition criteria, the charity may instead choose to disclose it as a contingent asset, helping users of the accounts understand the potential future financial benefit.
The SORP also includes guidance on estimating legacy income, including the use of a portfolio approach for charities that receive a significant number of legacies and have sufficient historical information to support reliable estimates. This is generally unsuitable for material individual legacies or charities that receive legacies infrequently, where each legacy should be considered separately.
How can Saint & Co help?
The changes provide an opportunity for charities to reconsider whether their current approach to legacy income recognition remains appropriate. If you would like to discuss this further please get in touch with Sophie Graham.
NB: Charities SORP 2026 applies to accounting periods commencing on or after 1 January 2026.
