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This guidebook is intended to offer practical advice to philanthropists who want to ensure that the assets they dedicate to charity are disbursed as they intend. It identifies common pitfalls, explains the relevant tradeoffs, and offers detailed descriptions of successful strategies for safeguarding donor intent. It lays a broad range of options before you, and suggests ways of defining, securing, and perpetuating your charitable intentions.
What this guidebook is not intended to do is provide specific information for executing governing instruments, applying for tax-exempt status, or completing state filings. Those are issues best left to expert legal counsel, who can address your specific needs. Similarly, this guidebook is neither an elaborate theoretical justification for donor intent nor an exhaustive history of the many instances in which charitable institutions have violated the clear wishes of their benefactors. While those are all worthy topics, the purpose of this guidebook is more down-to-earth. It intends to serve as a practical resource for successful individuals who want to think clearly about the future of the assets they plan to dedicate to charity.
Why Donor Intent Matters
If you intend to dedicate large sums of money to charity, you should think hard about what purpose you want that money to serve. If you intend to have others collaborate in your philanthropic giving, especially after your death, you should not assume that your successors will instinctively understand your wishes. Moreover, even if they understand your wishes, you should not assume that they will necessarily want to be constrained by them. If your intentions as a donor are to be respected, you need to clarify what you want your assets to accomplish and create safeguards that help ensure their intended disposition.
You ignore donor intent at your peril. Insufficient planning for future philanthropic efforts can lead to catastrophic consequences. Philanthropists have left fortunes to charitable purposes, only to have their money go to causes they would have opposed. In some cases, their assets were put to uses that would have made them sick. The history of modern philanthropy involves a sad litany of one great foundation after another ignoring—and in some cases violating—the most cherished principles of their founders. Poor planning has likewise contributed to the destruction of families, as various relatives fight over what they believe to be the intended purpose of the funds. At its worst, insufficient attention to donor intent has made the legacy of intelligent and generous individuals into cautionary case studies. On occasion, it has turned a well-meaning, intelligent, and generous philanthropist into a punchline.
Insufficient planning for future philanthropic efforts can lead to catastrophic consequences.
But deviations from donor intent are not necessarily quite so dramatic. Donor intent can be compromised by a simple lack of clarity about the purpose of the donated assets—a vacuum that is inevitably filled by the interests and enthusiasms of succeeding boards and staff. In fact, most deviations from the original donor’s intentions are not the result of conspiracy or malice. They are more often than not a consequence of largely preventable issues like ill-conceived plans for leadership succession or unclear, inadequate, or contradictory instructions. To keep your resources dedicated to the causes you care about the most, it is essential that you take pains to define your mission and safeguard the means of its execution.
There are other, perhaps slightly more abstract, reasons to think carefully about defining and securing your intent. Every violation of donor intent creates a marginal disincentive for future philanthropy. Deviations from donor intent do not occur in a vacuum. Rather, they inevitably affect the decisions and behavior of other philanthropists. If a donor’s friends and colleagues see his money going to causes and groups that they believe he would disapprove of, will they be more or less likely to dedicate funds to charity? At some level, a lack of foresight and planning may serve to decrease the overall amount of charitable giving by individuals and families.
At a still deeper level, violations of donor intent call into question the very assumptions that make possible American civil society. When donor intent is violated, and particularly when it is egregiously violated, it undermines the bedrock trust on which all charitable giving rests. At the heart of the American tradition of generous giving is a respect for the dignity of each individual. That respect in turn makes possible many of the voluntary associations that enrich and strengthen our democratic culture. Violations of donor intent thus weaken our nation’s proud tradition of voluntary private initiative and erode American civil society.
Donor Intent vs. Grant Compliance
Before proceeding, it is important to clarify what we mean by donor intent. Donor intent, as we use the term, is primarily concerned with ensuring that a grantmaking organization understands and acts on the vision of its founding benefactor. Those entrusted with the responsibility of disbursing charitable resources have a moral obligation to distribute the assets in the manner they believe most consistent with the intent of the original donor.
Donor intent is related to, but distinct from, grant compliance. Grant compliance is a matter of ensuring fidelity to the terms of a specific charitable gift. A donor—individual or institutional—may make a grant to a nonprofit on the expectation that the recipient will use the grant for specific, defined purposes. It is the moral responsibility of the nonprofit grant recipient to deploy those assets in a good-faith manner most consistent with the terms of the grant.
Every violation of donor intent creates a marginal disincentive for future philanthropy.
The distinction between donor intent and grant compliance is not always obvious. (Supporting organizations and operating foundations—both addressed in Chapter 4—involve, in some sense, issues regarding both donor intent and grant compliance, as the terms are defined here.) That is because both donor intent and grant compliance involve a relationship of trust—the former, between the original donor and those entrusted with signature authority over his checkbook; the latter, between a grantmaker and a grant recipient. Indeed, in everyday conversation, the terms “donor intent” and “grant compliance” are sometimes used interchangeably.
This guidebook is concerned first and foremost with donor intent. It is principally intended for donors who are thinking about establishing a charitable giving entity and who want to preserve their intent, as well as for trustees, directors, or family members looking to recover donor intent in the charitable entity for which they are responsible.
For many philanthropists, donor intent is an afterthought. Many grantmaking entities are established with vague missions, muddled succession plans, and few, if any, accountability mechanisms. Unfortunately, too few philanthropists take the trouble to incorporate into their founding documents the details and language necessary to assist future generations in making operational their charitable intent.
All of this is quite understandable. Many donors put off being specific about their intent because they want to avoid unpleasant conversations—conversations about mortality, about letting go of hard-won assets, about making decisions that might upset members of (often extended or complicated) families. But the fact that these conversations are unpleasant does not mean that they are unnecessary.
By taking time to carefully consider a range of strategies for securing your philanthropic intentions, you are an exception. By understanding your options today for securing donor intent in the future, you are not only taking the necessary first step for advancing your philanthropic legacy. You are also helping your family, associates, and future directors to understand and carry out the mission you set for them.
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Guidelines for Ensuring Grant Compliance
Grant compliance is an important concern for all donors. This is not the place for an exhaustive treatment of grant compliance, but it is appropriate to list a few principles that should guide thinking about how to oversee and manage grants made to public charities.
First, become familiar with the organization to which you are making a grant. Get to know its mission, leadership, and programs. Make site visits. Depending on your level of commitment to the organization, get involved in the life of the organization by attending its activities, programs, and functions. Do you feel comfortable entrusting this organization with your charitable gift? Compare this organization to like organizations working in the same or similar field. Do your homework and get involved.
Second, recognize that over time institutions and the people who run them change. As such, consider making a grant for a specific period of time rather than an open-ended grant or endowment gift. For numerous reasons, organizations over time cannot always live up to the terms of a gift. Some organizations simply go out of business. Making a long-term commitment to an organization while restricting your gift to annual grants based on performance gives you maximum leverage in terms of grant compliance.
Third, depending on the nature of your gift, ensure that there is a gift contract or grant agreement in place. There are many examples of gift contracts, some more complicated than others. Grant agreements can help to ensure that both parties have a clear understanding of expectations and they can also outline in advance a means of resolving disagreements.
Fourth, you may consider making your gift through an intermediary organization that will serve to enforce your intentions over time. A third-party organization can ensure compliance standards in your absence prior to disbursing funds. Likewise, you may also consider establishing successor beneficiary organizations that act as backup grantees if the original grant recipient fails to live up to the terms of the original gift agreement.
Finally, it is important to understand the limitations associated with making a grant. Even with a gift agreement, once you make the grant, the money is no longer yours. It is much easier and more effective to establish a good working relationship with an organization prior to making a gift, than it is to try, after the fact, to enforce compliance when outcomes may not be as rosy as you expected or as you were promised. It can take time, even years, to understand what you can realistically achieve through your grantmaking within a given field or with a particular organization or group of organizations. Many donors make large gifts early on that they later come to regret. Take time to learn about the field in which you are working, the people and institutions doing the work, and try to formulate realistic expectations grounded in experience rather than slick marketing brochures, attractive websites, or utopian ideas about what your gift can accomplish.
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More Donor Intent Resources from The Philanthropy Roundtable
Protecting Donor Intent by Jeffrey J. Cain
- Get an electronic or print version of this practical guidebook.
- The Philanthropy Roundtable website’s special Donor Intent section where you can find our most recent articles and resources related to protecting donor intent.
Donor Intent Resource Library
- This extensive resource library will direct you to the best articles, books, and discussions on the topic of donor intent