Will This Gift Turn Out to Be a Burden? A Good Gift Acceptance Policy Can Really Help
Charities often, but not always, have advance notice of a gift from the living or the deceased. Sometimes, gifts arrive unexpectedly and even from unknown sources. Generous gifts can still be problematic. Here are three real-life cases.
The Mysterious Bitcoin Bequest
Gifts of cryptocurrency are still a bit novel, frequently quite large, and sometimes a bit mysterious. What happens when the gift is anonymous or from a donor hitherto unknown to the organization? Does your charity reject it? Investigate? If so, how deeply? Or is it best simply to accept the money?
In December 2020, a French computer programmer made a Bitcoin gift of roughly $500,000 to various politically oriented groups in the U.S. Days later, the programmer committed suicide. There was some evidence that part of the donations (which may well have been legal as made) were ultimately used in connection with the January 6th siege at the U.S. Capitol. The FBI investigated whether the donations may have been part of an effort by foreign agents to interfere in U.S. elections and/or to destabilize the country. We don’t know how—or whether—the investigation ended, but the payment caught the attention of the Congressional investigation into the Capitol attack.
Questions to Ponder: If your charity had received part of the $500,000 gift, would you be concerned? If the donor turned out to be a person of suspicious reputation, what would your organization do? Would you have investigated immediately upon receiving a gift from a foreign national previously unknown to your charity?
Funnyman’s Gift No Laughing Matter
The 1920s were the golden age of silent movie comedy, and its three shining lights were Charlie Chaplin, Buster Keaton, and Harold Lloyd. Lloyd, instantly recognizable in the famous “hanging from a clock” picture, was the wealthiest of the three. As evidence of his success, he undertook what was considered the most ambitious residential architectural project of its day. “Greenacres,” as the finished estate was known, boasted a 35,000 square-foot main house, multiple other buildings, a professional-quality golf course, an amusement park (for the Lloyd children), a working farm, and extensive Versailles-style gardens requiring maintenance by sixteen full-time landscapers. The property also featured what was then the largest swimming pool in the state of California.
Lloyd lived at Greenacres until his death in 1971, leaving his money to family members and bequeathing Greenacres to a foundation, with instructions that it be operated as a public museum focusing on the silent film era.
One problem: Lloyd failed to fund the foundation or provide capital for maintaining or renovating the immense property. There was no money to transform an enormous residence into a museum or to fund its operation by a nonprofit foundation. The museum effort quickly failed, the property was mortgaged (the debt likely guaranteed by the foundation), and Greenacres was sold for less than the cost of construction 50 years earlier.
Question to Ponder: If you were the CEO of the foundation, how would you have handled the matter upon learning of the Greenacres gift at the time of probate?
Naming Rights: In Perpetuity May Be A Bad Idea
Many visitors to New York City take in a Broadway show. The so-called “Great White Way” has been an iconic theatrical district for more than a century. Most of those tourists remain unaware that a mile away, the “Lincoln Center” offers a robust menu of theatrical and musical entertainment in a multi-venue complex. Many locals consider Lincoln Center, built from the 1950s onward, to be the new Broadway.
The Lincoln Center concert hall opened in 1962 as Philharmonic Hall. A decade later, it was renamed Avery Fisher Hall as part of a gift agreement with the namesake, a noted patron of the arts. Mr. Fisher contributed $10.5 million and was assured (contractually) that the facility would bear his name in perpetuity.
Sometime around 2013, Lincoln Center was in the midst of a capital campaign and recognized that the value of the naming rights held by Fisher had increased exponentially. Mr. Fisher was deceased, but his children would not forego the naming rights without consideration. Lincoln Center wound up paying the Fishers $15 million (half again as much as the original contribution) for the privilege of reselling the rights to the highest bidder. The winner turned out to be David Geffen, a fabulously wealthy business magnate and motion picture executive. Mr. Geffen contributed $100 million for the Fisher naming rights.
Charities and other nonprofit institutions have become increasingly aware that naming rights are most profitably offered on a term-of-years basis. It may not be wise to offer such donor recognition in perpetuity. A long-forgotten name on a building can be a maddeningly unproductive asset. (There are still over 1,000 “Carnegie Libraries” in existence and 2035 will be the 200th anniversary of Mr. Carnegie’s birth).
An ironic final note. Even in the wake of the Fisher experience, Mr. Geffen’s naming rights are reportedly perpetual. Doubtless, there will come a day, perhaps sooner than later, when some philanthropist offers far more than $100 million to succeed Fisher and Geffen. Notably, at this writing, Mr. Geffen is 81 years old and has no children.
Questions to Ponder: Would your charity sell permanent naming rights? Would it resell permanent naming rights if there were no descendants of the original honoree to object? (In some states, the Attorney General would “stand in” for the original donor and enforce the right.)
Overall Takeaway
Questions of gift acceptance often involve complex financial, legal, and ethical questions. It is easier for a nonprofit to consider and resolve these issues if there has been a thorough and reflective preparation and adoption of a gift acceptance policy and, ideally, a meaningful statement of corporate values. Ethical codes and gift acceptance policies are best when tailored to the unique culture of an individual organization. Such documents will not usually offer explicit answers to difficult questions but will provide important guardrails for the process of determining the right thing to do.