Clarifying Donor Intent Getting Started

What Do You Mean? Clarifying Donor Intent

The end of the fiscal year for many nonprofits and foundations is here and the flurry of last minute gift negotiation is a reminder that nonprofits must work hard to match their needs with donor interests - especially in this economic climate.

Clarifying donor intent at the outset of any conversation regarding charitable giving, and properly documenting that intent, will help both parties feel good about giving and receiving.

To avoid confusion after a gift is made and to prevent costly proceedings when the intent of a gift is insufficiently documented, here are a few practical tips to guide both nonprofits and donors:

1. State your intentions up front. Many donors and nonprofits enter into negotiation on a charitable gift with clear intentions in mind. For example, the donor may want to endow a scholarship fund, give to a building project or pay to stock the shelves of a food pantry every month. On the other side, the nonprofit may need unrestricted funds more than anything, or support for a consultant or other outside expertise. If both parties enter into negotiations with clearly stated intentions, conversations tend to progress more quickly and smoothly. 2. Document your intentions in writing. Nonprofit organizations and donors may have developed a close relationship and trust over time. They may not think a written gift agreement is necessary, preferring to go on a handshake or "my word." Without a clearly documented gift agreement, however, the details of a gift's intention may be lost in translation. Staff turnover in the development office, a change in a family foundation trustee, or the passage of time, present additional challenges. Depending on the complexity of the gift and the terms associated with it, an agreement can take different forms. Often it can be as simple as a letter between the two parties describing the proposed amount and payment terms. For more information on gift agreements, please read our March 1, 2011 advisory, "Smart Steps to Take When Making or Receiving a Charitable Gift." 3. Know when to hit the "pause" button. There may be instances where agreement on the terms of a gift cannot be reached or when conversations reach an impasse. It may be wise to put the conversations on hold until the donor is more comfortable with the plan, the organization's work is more clearly developed or, other donors come forward. Sometimes conversations can take place later in the year, or when other opportunities arise that may be a better match between the intentions of both parties.

Taking a few preventive steps and documenting the intentions of your gift will go a long way toward preserving donor intent, meeting the needs of the charitable sector and promoting the positive image of philanthropy.

Getting Started The lawyers and philanthropic advisors at Hemenway & Barnes LLP are skilled in assisting both nonprofits and donors in their charitable endeavors. For assistance with any of these matters, please contact your Hemenway & Barnes attorney or the authors of this advisory:

Nancy B. Gardiner Gioia C. Perugini [email protected] [email protected] 617-557-9767 617-557-9777

This advisory is provided solely for information purposes and should not be construed as legal advice with respect to any particular situation. This advisory is not intended to create a lawyer-client relationship. You should consult your legal counsel regarding your situation and any specific legal questions you may have.