Donors And Gift Giving

Gift giving has existed, probably since before written history. Winston Churchill said, "You make a living by what you make, you make a life by what you give." In the Bible, we learn that God loves a "cheerful giver" (II Corinthians 9:7). One of the earliest gifts in the Americas was made by Anne Radcliffe Mowlson who gave the money that started the first endowed scholarship at HarvardUniversity. That was in 1643. Josephine Louise LeMonnier Newcomb donated one hundred thousand dollars to honor her mother, Sophie and thus created the Sophie Newcomb College of Tulane, in Louisiana. In the past one hundred years names such as DuPont, Kresge, Rockefeller, Mellon, Kennedy, Buffet and Gates, have made enormous contributions to charitable causes. In recent week, Facebook founder MarlZuckerburg announced plans to give $100 million to educational causes in New Jersey.
The list of people who want society as a whole to benefit from their giving doesn’t stop with the super rich. In fact most giving is done by medium net worth individuals and much of that through a device called “planned giving.” With so much generosity and goodwill some might think that is an area missing theanimus and complications of the rest of our litigious hungry society. Well, it is not. And it is incumbent upon all of those who operate in the world of planned giving to understand the pitfalls and to try to avoid them. It is further important to understand that the area of giving is a dynamic one, with not only laws changing , but decisions by courts continually alerting how the process works.Planned giving almost always involves creating, or adding to an endowment, which invests the actual donation and then distributes income from the investment as per the donor’s instructions. The area of law that deals with planned giving is difficult, complicated and fluid. Persons responsible for the cultivation of donors, preparation and execution of associated documents, must understand thecomplexities and potential dangers that lie before them. Failure to be ever diligent could, at best, result in a gift being revoked or, at worst, having the charity for which the gift was given liable for damages. This paper examines the history of issues surround donor intent and the steps required to take to minimize potential liability and loss.
At issue is “donor intent.” In mostinstance of direct giving, intent is not an issue, we put a dollar in the Salvation Army bucket at Christmas, we write a check to to the United Way for general use. If we don’t like what the organization does with the money our only recourse is simply not to give again. When a donor has a specific intent for a gift there are then “gift restrictions that are placed upon the gift. For example arestricted scholarship may state “to be used to promote the study of vocal music by undergraduate students at Hendrix College.” The intent here is fairly obvious and it would clearly be a violation if that money was given to a student not studying vocal music.
The problem that has arisen has largely been two fold. First the interpretation of donor’s intent which can occur both during the donorslifetime and after, and second, whether the donor intended to make any gift at all.
It is helpful at this point to look at some definition of the actual “Gift Instrument.”
The concept of a “gift instrument” is crucial to determining whether an endowment fund exists and how it is to be maintained and operated. A “gift instrument” means any “record or records, including an institutionalsolicitation, under which property is granted to, transferred to, or held by an institution as part of an institutional fund.” www.law.upenn.edu, January 2011.
The reference to an “institutional solicitation” suggests that a gift instrument is certainly broader than a two-party endowment fund agreement, broader even than a will, trust, or instrument of conveyance, and that the term can include...