Is a donor obliged to provide ongoing support to a charity after a building or facility is named in their honour? The legal answer is “no”. Naming, however, may stir up complex feelings of ownership and hope, which often lead to misunderstandings — even after the donor is dead. There are legal, practical, and human issues to consider.
Legal Limitations
Donations must be freely given and are not contractually binding, even if significant donor recognition is provided. The Ontario Superior Court of Justice provided clarity on this issue in Canada in Brantford General Hospital Foundation v. Marquis Estate, a 2003 case.
Helmi Marquis and her late husband Jack were loyal donors to Brantford General Hospital and its Foundation. The hospital named its coronary unit for Mr. Marquis. Thereafter, Mrs. Marquis pledged $1 million to the hospital over 5 years to update the unit to focus on critical care. The donor died in May 2000 after making a first payment of $200,000.
The hospital foundation demanded the balance of $800,000, but her estate trustees declined to pay. The hospital foundation sued. Ironically, she also left a fifth of the estate’s residue to the foundation. The foundation, however, lost at trial. The court determined the pledge was not binding. Naming the new critical care unit was merely an expression of the hospital’s gratitude not a binding contractual condition.
Sense of Ownership
Donors and their descendants understandably feel ownership for a facility in the family name. The place, for example, may define their public reputation and be a source of pride. But there are practical issues. Let’s not forget that buildings get shabby, priorities change, and new funds are required.
Not surprisingly, managing donor pride and feelings of ownership is not always easy for charities. There have been several high-profile stories of donors who objected to change, mergers, rebuilding and loss of donor recognition at Canadian charities. This is a public relations issue for the charity because no future major donor wishes to see an unhappy past donor. Charities must be prudent, however, as a naming opportunity is a limited organizational asset.
Hope
Charities are forever hopeful. Charities that practice good donor stewardship emphasize gratitude and accountability, but make no mistake, they also hope to secure additional donations. Over the years, I’ve witnessed charities soliciting the descendants of the original donor for additional support. Not surprisingly, the solicitation is rarely successful due to shifting family priorities or lack of funds. A side effect of 30 years of major philanthropy in Canada is lots of naming and even greater charity ambition. Are future misunderstandings about naming inevitable?
Avoiding Misunderstandings
Written gift agreement and recognition policies are essential to reduce misunderstandings between donor (and their descendants) and charities. Key provisions include:
- Time limits on donor recognition. Some major charities, for example, have 25-year terms for major recognition “opportunities”.
- Legal clarity about the non-binding nature of pledges. Philanthropic donors can’t be sued, but recognition can be withdrawn in the event of non-payment or reputational issues.
- Clear language that states recognition is offered in gratitude and not as contractual benefit to the donor.
- Language that releases the donor from future obligations. With an estate donation, this is a legal release.
- Advanced documentation about naming to recognize estate donations.
Admittedly, it’s hard for charities to discuss limits on recognition at the emotional moment when a donation is closed, but it is important for donors to understand the legal features of charitable donations. Better to get it right. It’s even harder to deal with lawsuits and negative media coverage in the future.
