Protecting Donor Intent

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This new guidebook from the Philanthropy Roundtable shows donors ways to preserve their principles in the grantmaking institutions they create.

The need for such help is clear. All too often, grantmaking institutions pay little attention to the principles that inspired their founding donors’ giving. Indeed, in many cases, the original benefactors would likely never have created the institutions if they could see what would later be funded in their names.

To avoid such violations of donor intent, this volume offers practical advice to philanthropists. It identifies common pitfalls, explains relevant tradeoffs, and details successful strategies for insuring that assets dedicated to charity are disbursed as the giver intends. It lays out a range of choices, and suggests six mutually reinforcing strategies for donors to secure and perpetuate their vision within the charitable institutions they create.

Choose the right time frame  

You can make all your donations during your lifetime while you are present to oversee the giving. You can entrust your assets to others after your death while stipulating a deadline by which the money must be distributed. Or you can create an institution intended to disburse smaller amounts of money in perpetuity.

These three approaches—spending down, sunsetting, and creating a perpetual entity—each have advantages and disadvantages. But establishing a timeframe is an unavoidable decision. If you put it off, it will be made for you.

Define your mission  

When philanthropists fail to make their vision and priorities clear, donor intent is easily eroded. Defining your mission can take time. In the absence of clear principles laid down during your lifetime, though, your goals and priorities are likely to be forgotten or ignored. Leaving the interpretation of your ideas to family members, trustees, and, in the last resort, courts has led to many disappointments. No mission statement can fully protect you, but it will give those whom you have selected to carry out your legacy the tools to advance your interests.

Find the right vehicle  

There are many legal entities through which you can conduct your philanthropy. These include private foundations, charitable trusts, operating foundations, community foundations, mission-driven public charities, donor-advised funds, and supporting organizations. Making the right choice depends on your charitable objectives. Different structures offer various levels of control and varying levels of responsibility. Some donors may have several vehicles, each with its own purpose and strategy.

Be smart in selecting your board  

Choose the wrong people and there is no legal framework, vehicle, mission statement, or time frame that will protect you. Taking time to carefully think through the selection of your board members—and how they will perpetuate themselves once you are gone—is crucial to preserving your intent. It may be the most important decision you make.

Donor intent is a moral concern, and respecting your wishes will make moral demands of your board members. They must be humble enough to subordinate their own enthusiasms to the mission you have set. They must be disciplined enough to constantly revisit and re-engage your vision. And they must be brave enough to take managerial, fiduciary, or legal steps to protect your intent if they feel it has been compromised.

No matter how careful you are about choosing board members, it is still a good idea to develop additional safeguards to ensure the integrity of your vision.

Institute the right policies and culture  

Create a culture that honors donor intent within the organization. Some foundations have adopted the practice of reading and discussing their originating documents on a regular basis. Board members can also reflect on how well they are advancing their founder’s goals during the recruitment, training, and evaluation of new board members. You may require board members to participate in an orientation regarding the foundation’s giving values, and then subscribe in writing to the foundation’s mission. Succession practices like an apprenticeship program for new employees, or a peer review process (with removal powers) among board members can be valuable.

Create external safeguards  

Some donors have created external, third-party safeguards to protect their charitable intentions. Few of these independent safeguards have been put to a legal test, so it is unclear how they will be treated by the courts. But for donors creating entities that will outlive them, external safeguards offer a final layer of oversight and accountability.

One example would be giving board members standing to bring suit for violations of donor intent. Others have given legal standing to disinterested third-party organizations that share a common set of core beliefs with the founding donor. At least one major foundation has instituted a system of regular donor-intent audits.