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Defining a Philanthropic Legacy Through Donor Intent

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A critical step in the giving process.

Donor intent is a concept too easily dismissed as a “dead hand” rising from the grave to enforce unthinking adherence to selfish and outdated demands. A more perceptive view recognizes that donor intent is much broader and that it encompasses the core values and principles that drive—and give integrity to—the content and style of a donor’s philanthropy.

Honoring donor intent is essential in ensuring philanthropic freedom and the flourishing of private giving. We all benefit from a diverse and flourishing civil society, one in which voluntary donors are free to decide when, where and how to give to improve the well-being of those their philanthropy benefits most effectively. Donor intent, then, should also be viewed as a moral issue, one that demonstrates respect for individual differences.

We often see donor intent described simply as a donor’s instructions about the use of a charitable gift, and it’s understandable that donor intent is frequently confused with grant compliance. Donor intent operates on a macro-level, concerned with overall fidelity to a donor’s values and vision. Grant compliance, though it certainly dovetails with donor intent, focuses on the details of individual grants. What they do share is dependence on a relationship of trust—donor intent on trust between donors and those responsible for implementing their vision and grant compliance on trust between donors and their grantees.

Upholding and respecting donor intent encourages charitable giving. When donors know their intent will be honored, they develop confidence in the charitable sector and the organizations to which they give. However, if donors lack trust or confidence that their intent will be protected by those responsible for upholding it, some either won’t give or will give somewhere else. Tom Riley, who leads the Connelly Foundation in Philadelphia, summarized the importance well:

Our American system thrives in a way that other systems don’t because of charitable giving—these institutions of civil society, this enormous nonprofit sector, that provides so much of what’s good and appealing about American life. But when donor intent is undermined, it has a chilling effect on giving and takes some of the polish off it. That’s not just bad for the person—that’s bad for everybody involved.1

At a time when giving patterns are inconsistent at best, charities and their beneficiaries are counting on generous donors to help continue to provide vital services in communities across the country. The recent decline in donations2 and 20-year decline in the number of donors3 have raised red flags in the charitable sector. Should the remaining donors lose trust that their intent will be honored, we may see these troubling trends exacerbated.

Limited Enforcement Standing

There are two questions when it comes to enforcement of donor intent: (1) how do we identify and define a donor’s intent, and (2) who has the authority to enforce it?

To answer the first, we look to formal documents, including gift agreements, contracts, bylaws and founding documents of a charitable foundation, and wills, to name a few. Whether a donor is living or has passed, their intent can be memorialized in writing or recordings that specify how and when the gift will be used (within legal reason) and, in some cases, how the gift shouldn’t be used. These agreements are meant to clearly guide charitable organizations away from violating a donor’s intent; however, in some cases they’re the best evidence when donor intent challenges are raised by donors or other parties with standing.

The answer to the second question is simple yet frequently contentious: parties with legal standing to raise violations of donor intent. In most states, living donors, their contingent beneficiaries and the state attorney general (AG) are the only parties with legal standing to pursue a violation of donor intent. In some cases, including several of the following examples, when a donor has passed and the only remaining line of defense for their intent is the state AG, whether it will be defended depends on the AG’s motivation and priorities or a judge’s ruling.

The strict limitations on legal standing in cases of donor intent necessitate that donors clearly memorialize their intentions for their philanthropy both to maintain the integrity of philanthropic freedom and to ensure a trustworthy third sector.

Donor Intent Violations

There are many examples of donor intent violations in American philanthropy, all of which teach us important lessons in how to define intent and the best tools to protect it.

Albert Barnes. Albert was a medical doctor, scientist, entrepreneur and businessman who achieved great financial success. In his lifetime, Albert pulled together one of the greatest collections of impressionist, post-impressionist and early modern paintings, currently valued at between $20 and $30 billion. He had a special gallery built in the Philadelphia suburb of Merion to house the collection, which also included old master paintings and ancient, medieval and non-Western art. Albert himself arranged the works of art on the building’s walls in an unconventional fashion, intending that they serve as free educational tools for budding artists and factory workers, not as casual entertainment for Philadelphia’s elite.

To ensure his art would be preserved and displayed exactly as he intended, Albert included restrictions in his indenture of trust that went well beyond access and location to include stringent governance and investment mandates that in time threatened the physical and financial sustainability of the collection. Ultimately, with pressure from politicians and millions in financial support from other philanthropic leaders, all of whom were determined to bring Albert’s treasures to downtown Philadelphia, the donor’s intent was overturned by the Pennsylvania Supreme Court in 2004. With Albert’s passing decades earlier, the only party with legal standing to challenge the court was the state’s AG, who declined to bring a case. In 2012, the collection was moved to a new $150 million museum in Philadelphia that provides full public access to the art—much of the time for a fee.

Acknowledging that Albert was a key factor in his own undoing, James Panero, executive editor of The New Criterion, nonetheless concluded in a 2011 article:

These actions undermine the general principle of donor intent. They set a precedent that could discourage future donors from believing that their intent will be honored. All philanthropy involves an act of trust between giver and recipient. These actions erode that sense of trust, to the detriment of future philanthropy.4

Marie and Charles Robertson. Higher education institutions are frequently embroiled in donor intent disputes for a variety of reasons. For alumni donors, in particular, gifts to their alma maters understandably evoke precious memories and strong emotions that lead them to ignore the rigorous due diligence they apply elsewhere in their philanthropy. Transitions in campus leadership also increase the danger of donor intent violations. In 1961, Marie Robertson, an heir to the A&P grocery fortune, and her husband Charles, a 1926 Princeton graduate, gave the university $35 million of A&P stock to endow a supporting organization (the Robertson Foundation) to educate graduate students “for careers in government service.” By 2007, the endowment held $930 million, but it was funding most of the graduate programs in what was then the Woodrow Wilson School of Public and International Affairs. The Robertsons’ children concluded that Princeton wasn’t fulfilling the terms of the endowment and filed suit. A forensic audit revealed that the university had misused more than
$100 million. After a protracted legal battle, the Robertson heirs and the university reached a settlement in 2009 in which Princeton agreed to return $100 million. Princeton took the remaining funds, however, and rolled them into its overall endowment, which now stands at over $35 billion.

It’s true that the Robertsons’ gift had been unintentionally structured to fail. Their use of a supporting organization limited donor control, as did the fact that the gift was made as an endowment. Moreover, neither Marie and Charles nor the college administrators and faculty who accepted their gift in 1961 considered that over time, a relationship originally based on familiarity and trust would erode. But none of these weaknesses can excuse a clear violation of donor intent.

Robert T. Keeler. Several years before his death, Dartmouth alumnus Robert T. Keeler named Dartmouth College a beneficiary in his will by leaving his alma mater a percentage of his estate to be used for the “sole purpose of upgrading and maintaining its golf course.” In a separate 2005 agreement, the college was advised that any funds not used for that purpose were to be returned to Robert’s charitable foundation. In mid-2020, Dartmouth closed the golf course but didn’t return the remaining balance of Robert’s gift—approximately $3.8 million—to the foundation. The New Hampshire AG’s Charitable Trusts Unit agreed with Dartmouth’s explanation that the course was closed for financial reasons and ruled that the college could keep the funds and use them for “golf-related” purposes, including financial support of the men’s and women’s varsity golf teams. Robert’s estate filed a lawsuit, which was rejected by a circuit court on the grounds that the estate didn’t have standing to bring such a suit. In an appeal filed by the estate, the Vermont Supreme Court affirmed the circuit court’s decision by a unanimous vote.   

Legal standing is all too frequently a stumbling block in efforts to protect donor intent, and in this case, the use of a will to convey the donor’s restrictions was insufficient to establish such standing. Dartmouth has been successful in maintaining control of the funds because “the statement of understanding between the Keeler estate and Dartmouth that formalized the gift made no provision for the estate or the foundation to recover the money if the golf course was closed.”5 Although the donor’s restrictions were perfectly clear in his will, the absence of a carefully worded gift agreement with Dartmouth (ideally one naming a contingent beneficiary with legal standing to sue) enabled the college to ignore his wishes.

Michael Moritz. Ohio State University alumnus Jeffrey Moritz, son of Michael Moritz for whom the College of Law is named, has been disputing the management of a $30.3 million endowment created by his father in 2001. Michael was both an undergraduate and law school alumnus of Ohio State. He was able to attend law school at Ohio State only because he was offered a full tuition scholarship plus a stipend, and he wanted to ensure that other students would benefit from his professional success. The terms of the gift required Ohio State to invest those funds as a permanent endowment and spend the earnings for his specified purposes: to support four chaired professorships and 30 annual law school scholarships plus stipends. In appreciation, Ohio State named its law school after him.

Nine months after he made this gift, Michael was killed by a hit-and-run driver. For years, the Moritz family assumed that Ohio State was honoring the terms of Michael’s gift. But in 2016, his son noted in a financial report that Ohio State unexpectedly sent to his mother that the university had never provided the full 30 scholarships since the gift was made in 2001 and was distributing only 12 to 16 awards each year. He was also shocked to learn that the endowment held only $21.9 million when he estimated that it should have grown to over $50 million. When he confronted Ohio State, the university claimed that the drop was entirely due to the recession, but financial reports eventually revealed that about
$3 million had also been taken from the Moritz fund to support the university’s development operations. The 1%-1.3% annual fee—which the university had begun charging in 1994—appeared nowhere in the 2001 gift agreement, and the Moritz family claimed the school never told them about the fee, which began to appear in gift agreements only in 2008.

In response to what he had discovered, Jeffrey demanded that Ohio State return $3 million to the endowment, but both Ohio State and the state’s AG fought his attempt to reopen his father’s estate so the probate court could appoint him administrator to enforce the original gift agreement. The absence of legal standing was frustrating, but Jeffrey became acquainted with other Ohio State donors who shared his concerns and launched the Honor Bound Initiative to bring together these donors, publicize their dissatisfaction with Ohio State and put pressure on the university to change its policies around endowed gifts. The publicity caught the attention of Ohio legislators and has resulted in several attempts, all unsuccessful so far, to pass donor intent legislation.

Serranus ClintonHastings. Donor intent lawsuits focusing on naming rights have increased significantly in recent years. In late 2022, California Gov. Gavin Newsom signed a bill to change the name of University of California Hastings College of the Law to University of California College of the Law, San Francisco. Within a week, the Hastings College Conservation Committee, which includes alumni and six descendants of the law school’s founder, Serranus Clinton Hastings, filed a lawsuit against state and school officials on the grounds that the removal of their ancestor’s name violates an 1878 contractual agreement. In that year, Hastings gave the state $100,000 in gold to establish the institution, stipulating that it carry the name “Hastings College of the Law,” and ensuring the return of his gift to his heirs—with interest—should the school ever “cease to exist.” That amount is currently some $1.7 billion.

The dispute erupted in 2017 when the San Francisco Chronicle published an op-ed calling for renaming the law school because its founder had encouraged and financially supported lethal violence against Native Americans in the 1850s. In response, a Hastings Legacy Review Committee was formed and commissioned a 3-year study on the matter. The current lawsuit contends the study raised doubts about any direct involvement of Serranus in the deaths of members of the Yuki tribe and notes that the school’s dean, David Faigman, recommended against any name change. Following a second accusation against Serranus in 2021, however, the law school’s board resolved that the dean should collaborate with California’s state government to remove Serranus’ name. A bill authorizing the change, AB 1936, was introduced in the California Assembly on Feb. 10, 2022. It passed both Assembly and Senate without a negative vote in August of that year, was signed by the governor in September and took effect on Jan. 1, 2023.

The use of legislation—rather than a judicial decision—to invalidate the 1878 agreement has resulted in an unusual lawsuit. The plaintiffs are arguing this isn’t only “an unconstitutional impairment of the state’s contractual obligations to S.C. Hastings and his descendants,” but it also “violate[s] constitutional prohibitions against bills of attainder and ex post facto laws, as well as the California Constitution’s requirement that the College remain in its existing ‘form and character,’ free from sectarian or political influence.”6

Legislative Efforts

As mentioned above, the donor intent dispute between Ohio State University and the Moritz Family caught the attention of Ohio legislators, including the newly elected state senator Sen. Jerry C. Cirino, vice chair of the Workforce & Higher Education Committee. In March 2021, he introduced legislation to remedy those deficiencies in Ohio law that had frustrated Jeffrey Moritz’s ability to hold Ohio State accountable for its actions. The Ohio state Senate passed the bill on June 16, 2021, by a bipartisan vote of 31-2, and a companion bill was introduced in the Ohio House.

The entire bill was included as an amendment to a “must pass” K-12 education bill, but it faced heavy opposition from Ohio State and was removed from the education bill before it passed the Ohio legislature and became law. The process repeated itself in Spring 2023 when the Ohio Senate once again passed a higher education bill that contained an amendment including donor intent protection covering endowment agreements between donors and state colleges and universities. The bill was added to the Senate version of the state budget, but because of widely acknowledged disagreement between the Senate and House over the higher education content, it was removed from the budget in its entirety. Proponents of donor intent legislation in Ohio are determining their next steps.

Although the attempts to protect donor intent in Ohio have failed so far, proponents of donor intent found success in Kansas this year. In April,
Gov. Laura Kelly signed the Donor Intent Protection Act, the purpose of which is to provide legal recourse to donors and donor representatives when a donor’s gift restrictions on an endowment gift aren’t followed.7 The bill, which passed with overwhelming support in both the Kansas state House and Senate, is a signal to charitable organizations and donors alike: Donor intent is critical to maintaining trust in charitable institutions, and as more attempts are made to violate it, legislatures can respond.8

Whether more states decide to pursue a version of the Kansas bill remains to be seen, but as we continue to see examples of violations like those described above, don’t be surprised if more legislative action is taken.

Donor Intent in Practice

As an advisor or counsel to philanthropists, helping a donor determine and clearly document their philanthropic intent is a critical step in the giving process. While charitable organizations are some of the most trusted institutions in our country, there are too often examples, such as those above, in which donors’ wishes are violated, either intentionally or unintentionally, by those tasked with honoring them. Each violation can serve as a lesson to donors and recipients alike in how to better define, document, and defend donor intent, leading us to a stronger, more trustworthy practice of philanthropy.

Endnotes

1. www.philanthropyroundtable.org/resource/donor-intent-is-important-for-a-healthy-philanthropic-sector/.

2. https://philanthropy.iupui.edu/news-events/news-item/giving-usa:-total-u.s.-charitable-giving-declined-in-2022-to-$499.33-billion-following-two-years-of-record-generosity.html?id=422.

3. https://philanthropy.iupui.edu/news-events/news-item/latest-data-shows-new-low-in-share-of-americans-who-donated-to-charity.html?id=363.

4. www.philanthropyroundtable.org/magazine/outsmarting-albert-barnes/.

5. https://www.vnews.com/Dartmouth-College-Robert-Keeler-golf-course-gift-editorial-50710553.

6. https://fingfx.thomsonreuters.com/gfx/legaldocs/akveqarowvr/Hasting.pdf.

7. www.kslegislature.org/li/b2023_24/measures/documents/summary_hb_2170_2023.

8. www.philanthropyroundtable.org/kansas-enacts-law-protecting-donor-intent/.


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