Your nonprofit has an ironclad gift – in some trust or an irrevocable pledge for a bequest intent. Things do NOT go as expected and in fact, your institution is entitled to go after someone or an estate to recover funds.
Do you sue?
My experience has shown that nonprofits usually do NOT go after the money. Who needs an article about your suit in the New York Post?
Well, here is a link to one case where the charity decided to sue (and look where the story is!): http://nypost.com/2015/04/07/real-estate-heir-blows-3-5m-meant-for-charity-on-cars-hotels-suit/
This story is light on details. From what I can tell, UJA NY was named remainder beneficiary of a standard testamentary trust (NOT a charitable remainder trust, which would have actually helped in this case). Typical non-charitable testamentary trusts allow the income beneficiaries a limited right to invade principal in case of various needs. Of course, if you read those needs broadly, you realize that not much might be left at the end of the day. And, this is what happened here!
Wealthy guy’s brother-in-law ends up with control of the trust and he uses it. Honestly, we can’t tell whether UJA NY has a good case or not. These things are not very clear and these trusts do offer invasion of principal for its beneficiaries.
What would you do?
Have a great planned giving weekend!