Protecting Donor Legacy Intentions

A recent announcement by the University of Alberta stated it will be demolishing a $26Million mansion gifted to the institution in 2010. The reason cited is that the upkeep, in excess of $250K/yr and the need of $1.5Million in repairs. The University also pointed out that this asset doesn’t align with its institutional mandate.

This isn’t the first time that a large-scale asset has been decommissioned, deaccessioned, sold, or moth-balled by a charity. In 2018 the National Gallery sold one of it’s Chagall paintings in order to purchase a more “mission-aligned” piece of Canadian National History.

In 2017, UBC leased out a portion of its Endowment Land to build student housing and other real estate developments. The proceeds of which are going back into the university for programming and services.

The “How” behind the acceptance of large donations. What happens if Donor intentions are abused?

How are gifts like this made? What do legacy donation negotiations look like? How are decisions to off-load significant assets from charitable institutions made and justified? What role does the donor (or their family) play in a charity’s decision making to dispose of a legacy gift?

Whenever you consider donating a unique gift to an organization, whether it is a mansion, a piece of art, or a plot of land, the obligation is on the donor to articulate the terms of use. It is up to the charity to ensure that those terms align with the mandate of the organization from the outset and if they don’t, to not accept the gift.

It is up to the donor to be actively involved in the stewardship of the funds; this includes having clear governance around decision-making at the granting table. In 2002 The Robertson Family sued Princeton University for misuse of funds (the book, Abusing Donor Intent, can be found on our virtual bookshelf).

“As the Robertson children saw things, it wasn’t just that Princeton had fallen short of matching their parents’ aspiration for the gift by not working hard enough to place more students in government service; it was that Princeton had intentionally used the endowment for purposes unrelated to the Wilson School, thus violating the original intent of the gift.”

(Philanthropy News Digest, Apr. 8, 2014) 

The case of a $35Million donation from the Robertson Family to Princeton University, highlights what happens when recipient organizations abuse the donor’s intentions around the gift.

In this case, the Robertson Family initially gave the funds to Princeton to be held in The Robertson Trust at the university. What is unique about this structure is that the Robertson Trust was a separate trust within Princeton University so independent trustees could oversee the program. Over the course of about 50 years, the trust grew to an estimated $800+ million. As the assets grew the family began to question the effectiveness of the fund and the more that they questioned the more strained the relationship between the two entities became. This ended up in the court system with a legal settlement: Princeton paid $40 million to reimburse the Robertson Family’s legal fees, it also gave the Robertson foundation $60 million, and the university took over the Robertson Trust completely enveloping the $800million into their almost $13Billion endowment portfolio. So while the family was left with some money to further the founder’s objectives ($60Million), it is far less than what the university ended up with when the trust was rolled into the overall endowment.

What is a Legacy Gift?

There are four types of legacy donations:

  1. Leadership Gifts
  2. Naming Opportunities
  3. Endowments (incl. investment funds)
  4. Planned Gifts

Legacy gifts can do two things:

  • Support bricks & mortar projects
  • Develop & support the intellectual property of an organization, programs and services that happen within an organization or the research and development to advance the mandate of an organization

The most important thing for a donor to realize is that NOTHING is in perpetuity. 

If you are considering a capital campaign investment (bricks & mortar); buildings have a shelf-life of 30-40 years, or one-and-a-half generations. In some cases, if a company rebrands, they may be responsible for the costs of rebranding all their sponsorship properties. The ongoing maintenance and operations of a facility may be an additional cost to the donor. These costs may be the driver for the charity to offload or not accept a non-cash gift donation (like a mansion).

Donor looking down on a white table with the word GIVE painted on it

Protecting Donor’s Intentions – What goes into a Donor Agreement?

What you need to know about gift/donor agreements:

  • Binds a funder and grantee to complete certain activities or meet specific objectives.
  • May impact the Estate so family leadership needs to sign off
  • Sets forth donor’s intentions and expectations
  • Clearly articulates what the measurements will be specific to use of proceeds
  • Sets timeline for disbursements and activities
  • Lays out ways to modify the project should things change within the organization or external shifts impacting the execution of the program
  • Articulates how funds will be invested/managed for long-term projects
  • Stipulates the type of contribution (cash, sale of shares, collectables, etc.) and in the case of property – use of property
  • Acknowledgement/Recognition and reference to donor
  • Reporting expectations
  • Highlight restrictions, and have a way for new leadership to make changes if founder is no longer involved
  • Sunset clauses in the event that foundation winds down mid-grant

In some families today there are five generations sitting at the family foundation table sharing their opinions on what to fund, when to disburse capital, and the direction of the foundation. These generations go as far back as the Great Depression. Think about the generations in your family and what influences you in your decision making, the taboos around money and how that may be different from that of your grandparents or great grandparents. 

It is important to remember that you are more than your pocketbook. You and your family bring time, talent and ties as well as treasures to the table when it comes to supporting charities. We encourage you to leverage all of these assets as part of your legacy gift.

Please visit the resources section of our website for more tools to help you plan out your philanthropic legacy.