Why Gift Agreements Succeed or Fail: Describing the Gift in Black and White

In an earlier post, I talked about how Gift Acceptance Policies can be an opportunity for charities to start their relationship with a donor on a sound legal footing based on shared ideals. In this post I’ll talk about a related legal instrument, the Gift Agreement. Gift Agreements mostly come into play where larger gifts are concerned (think six figures) but may be appropriate at a much lower threshold depending on the specifics of the situation. Now this is emphatically not a post about the technicalities of Gift Agreements, and I will limit myself to one common point of failure: the description of the gift.

It is amazing how many ways this can become important. Even for a cash gift, eliminating any ambiguity over the number of zeros is great to do early, but where attention to detail really comes in is when the gift involves a financial interest in some larger situation or enterprise. For example, an income-generating interest in securities, real estate, a corporation, etc. I recently learned of a situation in which a university was donated a valuable insurance policy, but failed to understand their responsibility in funding the policy, so no provision was made by the university so that the gift would realize its actual value. This was a failure to understand the financial instrument at many levels of the organization, but it certainly should have been caught when creating detailed description of the gift. In a world where gifts frequently include complex financial instruments or interests, the Gift Agreement is one place we can be certain that both parties fully understand the nature of the gift, and any duties the recipient organization is taking on to ensure that the full value of the gift is realized.

Or take the example of a donation of artwork or a historical artifact to a museum. The description must make clear that the “gift” is not only the piece of art or artifact itself, but also the related documentation unambiguously establishing provenance and the donor’s right to assign the item. There are so many examples of museums plunged into endless and embarrassing legal quagmires over donations of stolen art, Native American artifacts, human remains, cultural patrimony, even lunar regolith, that it would be redundant to share another one or retread the same examples. Instead I’ll share an example of how it can actually go smoothly. When a friend of mine was working in the Yale Peabody museum when a well-known donor made an impromptu visit with mystery donation wrapped in a beach towel. It turned out, to the mild horror of my friend (an experienced attorney), to be a elephant tusk. So, ivory. Also, it was intricately carved in the traditional West African technique. So, cultural patrimony. However, this object is now proudly displayed in the Peabody’s collection. You can view it online here. This is because the provenance and supporting documentation were requested, fully considered and treated appropriately before the gift was accepted.

The simple fact is that even gifts of complex financial instruments, encumbered financial interests (which I will discuss in a future post), in-kind gifts, or objects of historical or cultural interest can go as smoothly, and be as straightforwardly beneficial to as a simple cash gift given a well-drafted Gift Agreement.