MAJOR GIFTS & CONFUSING GIFT TERMS
A common problem in accepting major gifts is confusion over gift terms. Often that is due to the number and variety of communications between the donor and donee organization's development officers, board, and operating departments during the gift making process.
What many organizations do not realize is that each communication may have legal implications as to the use or permanence of the gift. What's worse, sometimes communications from the donee organization may end up imposing legal restrictions that neither the donee nor the donor intended. Let's consider the following example.
A hospital finds among its endowment funds a file labeled Smith Gift. In the file is a record of a check receipt along with the simple transmittal letter, "For your excellent care during my recent surgery, enclosed please find a gift to the hospital of $50,000". There is no other gift instrument or any indication from the donor Mr. Smith that the gift was meant to be anything other than wholly expendable for general hospital purposes.
However, a note from the chairman of the hospital board to Mr. Smith contains a conversational aside pledging to use the "Smith Fund" for the best purposes of the hospital. Another letter from the chief medical officer states, "Thank you for your generous gift which I know will be helpful in purchasing surgical equipment."
The net effect of these two letters is most likely to create a permanent endowment fund solely for the purchase of surgical equipment.
As to the purpose of the gift, seemingly off-hand notes and even internal notes or communications can create legal obligations. When there is no single piece of writing clearly identifiable as the "contract" in a gift transaction, any written or verbal evidence may be used to shed light on the gift terms. Thus, the chief medical officer's statement probably commits the hospital to such purposes.
As to the use of the term fund, it is true that the Chairman may have referred to the Smith Fund merely as a way to acknowledge its separateness from other funds or its importance to the hospital. However, his use of the word fund implies a gift of long duration, one in which the income/appreciation of the gift may be expended but not the principal.
Such confusion can lead to anxiety within an organization over expending such gifts and cause the gifts to sit unused or undocumented for years. The problem can be avoided by:
- Better coordination among those responsible for communicating with donors.
- Training of relevant board and staff on how to keep legal commitments out of informal letters.
- Perhaps most importantly, having a document (whether a simple letter signed by both parties or a more formal donor agreement) which clearly represents the full agreement of the parties and takes precedence over other stray writings.
- You may effectuate this by developing brief form donor agreements for a variety of giving levels and gift types that simply state the donor's intent and whether any restrictions apply.