Beyond the Grave: Balancing Confidence and Flexibility in Gift Planning


Balancing Confidence and Flexibility in Gift Planning

By:  Adam Aptowitzer

One of the unstated pillars of gift planning is to find ways of assuring a donor that his/her wishes will be carried out after death.  Unfortunately, this can be a double-edged sword. While it may help convince a donor to give now the future needs of a charity can be difficult to anticipate. Consequently, it is important to balance flexibility with respect for the donor’s wishes when discussing gift planning arrangements.

Typically when donors are considering their end of life gift planning they attempt to include a number of strings by which to effectively direct their donations from beyond the grave. Generally speaking, when the donation is large or the gift has personal, sentimental value to the donor (such as artwork) the strings attached will be significant. These strings may even make little sense to implement but are often a reflection of the importance of the gift to the donor. For example, we have seen conditions attached to the gift of artwork with the proviso that it be on continuous display. When the charity consulted experts it became clear that such continuous display would be damaging to the artwork in question.

Charities often feel compelled to include a number of these strings prior to being even asked by the donor as a way to ease into the conversation about gift planning.  At times, this involves placing restrictions on the control of a foundation which may accept the gift and conditions on the use of the funds it holds.

While this may induce a certain level of confidence in the donor so that he or she can have some reasonable level of assurance that their wishes will be respected the fact remains that the charity itself cannot, with certainty, foresee the future. It may be that the charity will need to access the funds of an endowment in case of either an unanticipated emergency or opportunity.  While there exist measures for charities to encroach on the endowment with permission of a court, there is no guarantee that such permission will be forthcoming (see below).

Moreover, the doctrines which allow such encroachment are not available in every circumstance. Consequently, charities should negotiate clauses which allow for encroachment on the capital of a gift notwithstanding the impact this may have on the donor’s confidence. One would hope that so long as the objects of the charity are being pursued donors may wish that the charity has the flexibility to adapt to changing circumstances.

In a recent British Columbia case, a charity received a long-term endowment gift from a donor.  When circumstances arose that the charity saw another use for the money it approached the donor (who was still alive) and asked for their consent to use the money in a different manner. The donor agreed. However, the province took the position, based on a statutory statement of what is likely the law in all provinces, that the purpose for which the property is being used cannot be changed except if it becomes impossible or impracticable to use the funds for the original purpose for which they were donated.

That this can happen should give both the donor and the charity pause in their thinking that all gifts are necessarily for the best long-term pursuit of the charity’s objects. The fact remains that the best intentions of donors and indeed those of the charity may be frustrated by unanticipated events both good and bad and by the abilities of others to interfere with the workings of a charity. Gift planning arrangements should take into account these types of situations and the donor must trust that the charity will, in good faith, act to implement the spirit of the gift for as long as possible but that the charity itself should not be handcuffed to the directions given by the donor.

Drache Aptowitzer lawyers are familiar with these kinds of gift planning arrangements and are available to help in the construction of your documents.