To Restrict Or Not To Restrict, That is the Question

To Restrict Or Not To Restrict, That is the Question

By Jackie Jacobs

Every so often, a charity is fortunate enough to learn from a lawyer’s office that a decedent left it a gift in his or last will and testament.

Sometimes, such bequests are directed for specific purpose, program, or event. The charity is obliged to honor the donative intent.

Many bequests, however, come with no strings attached. What does a charity do when money drops out of the sky?

Such was the case in 2015 with a multi-million dollar librarian’s bequest to the University of New Hampshire. Robert Morin, a longtime library employee who ate microwave dinners and drove a 1992 Plymouth while slowly amassing a $4 million fortune, bequeathed his entire estate to his longtime employer and alma mater. The bequest was largely unrestricted.

The University put $1 million dollars of the windfall toward a video scoreboard for its new $25 million football stadium, drawing a public outcry.

One critic stated, “the school’s administrative decision to spend a quarter of Morin’s generous donation on an inconsequential trinket for the athletic department is a complete disgrace to the spirit and memory of Robert Morin.”

According to Inside Higher Education, “the football scoreboard seems out of sync with the life of a library employee with a reported passion for movies and books, one said to have read 1,938 books published in chronological order from the decade starting in 1930.” Others argued that funneling valuable unrestricted money into athletics instead of important academic pursuits is simply wasteful spending.

Protecting donor intent is a charity’s moral obligation, explains author Jeffrey Cain in his guidebook on the defining and safeguarding philanthropic principles. He asserts that “the charity must distribute the assets in a good faith manner that it believes to be most consistent with the intent of the original donor and the terms of the gift.”

Because the Morin bequest was unrestricted, the University had wide latitude in spending his money. Perhaps Morin would have preferred more scholarly uses. Maybe he would have preferred that his gift be endowed rather than spent down. But there were no such gift restrictions.

A blogger to the New York Estate Planning Attorneys blogsite noted that legally nothing wrong was done. But perhaps from a public relation’s standpoint the University of New Hampshire’s allocations for the funds were mistaken. “When a person leaves a bequest or gift in their will, the assets or money is generally given freely and without restriction.” It added that “The entire probate process is designed to retitle assets, respect the wishes of the deceased and ensure that everything is done according to the law,” concluding that “the danger of not having any conditions or restrictions attached to a bequest or gift….is that there is no guarantee that the funds will be used for purposes that you approve of.”

If given a choice, charities prefer unrestricted rather than restricted gifts. Andy Canada, formerly with the Indiana University Foundation, notes that unrestricted giving is critical to almost every non-profit, “ … to take advantage of opportunities as they arise… or meet any critical emergency needs that come along.” Cognizant of the importance of unrestricted gifts, the $10 billion Lilly Endowment actually offers Indiana community foundations matching grants for unrestricted gifts that they procure.

Per Canada, organizations need to be proactive in approaching their constituents about unrestricted giving.” It might be more difficult than discussing a restricted gift to a specific project, but the flexibility of the funds are critical for the organization.”

The Lilly Endowment’s commitment to unrestricted giving and the case of Robert Morin give food for thought to how to structure bequest provisions to our favorite charities. Clearly, unrestricted giving requires a deeper level of trust between the donor and the organization, and the donor must feel confident that his or her funds will be utilized to move the organization forward.

Some of the world’s oldest charitable endowments are in England. Today, they continue to fund good works more than 500 years after their creation. That’s what you can buy when you leave a legacy: years, decades, generations, even centuries of doing good. Restricted or unrestricted? Choose wisely.

Article appears as originally published in the Ohio Jewish Chronicle Wednesday November 22, 2017.

Jackie Jacobs is the Chief Executive Officer of the Columbus Jewish Foundation, the Central Ohio Jewish community’s planned giving and endowment headquarters.