Assessing the risk – a key to planned giving success

When it comes down to precautions in planning giving (i.e. cover yourself letters, seeking your own counsel, etc…), there is one good rule of thumb:

The bigger the gift, the bigger the stakes, the more ethical and legal precautions you take!!

What spawned this post?  Check out this charitable bequest nightmare story:

The point is this: as a potential bequest or other planned gift unfolds, you as a fundraiser have to make a decision how much fire power (i.e. legal help and other outside experts) you need.  At certain dollar amounts, let’s say $100k range, you might want to review the gift with a consultant. Get to the $1 million range, you might want paid legal counsel to be involved. It could also start with hostile family members.  It could be an unusual arrangement.

You will have to judge for yourself when a gift requires more protective action.  The linked story is an extreme example of how badly a good intent can go (the only solution there might have been  for the donor to create and fund his foundation while he was alive and in a sound mental/physical state).

In any case, as a fundraiser involved with donors and their estate plans, you need to develop a workable gauge.  If you bring it all out for every gift, your costs and/or efforts will be out of control. On the other hand, a few thousand dollars of expert guidance might save your institution millions of dollars later on.

One comment

  1. This rings true from my experience, even in situations where there is no surviving widow or children (step or otherwise). We have one ongoing case where a nephew is contesting the estate administration. While it looks like we will not have to refund any of the sizable distribution already made, legal costs and possible settlement are likely to eat up most of the remaining estate assets–you can almost see the lawyers involved doing the math, including our own outside counsel! By contrast, we essentially ignored two other threatened suits in cases where we had known the decedents’ intentions well before they died and had substantial interaction with them, i.e., we could show the children’s lawyers that the bequest was not a fluke but a deliberate and longstanding plan and that we had a relationship with the testator (even if we were not claiming reliance). In one of those cases, hiring local counsel was a simple and effective investment, as interpretation of NJ law was at issue, not something our in-house counsel is expert on. The paper trail–including birthday cards and even casual notes in addition to more formal gift-related documents–added up in both cases, too.

    Of course, working too closely with an older donor may open up the issue of undue influence–and there is always the issue of competency. In another pending matter where the donor is still alive and my charity stands to receive 90% of the residuary estate (something like $750,000 at present), her friends have asked us to help her shield her assets–“your assets” as the friends keep saying to me–from being consumed by her medical care. In that case, I had already noted after a meeting several years ago with the donor that I was not comfortable with her competency and would not accept a large outright gift from her. Given our status as a named beneficiary, it makes no sense to interject ourselves in this situation, other than to tell the friends to consider consulting with a qualified elder law attorney to consider available options (hopefully legal ones).

    Finally, on the back end of gifts, there is always the Charities Bureau of the AG’s Office (or its equivalent outside of NY). Alas, having to bring them in usually means there is a real mess/problem, but they often can break a log jam and the price is right. Moreover, they reliably will not permit estate administration fees that they deem excessive, which may also bring the intended charitable beneficiary more welcome and needed funds.

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