Paul L. Caron
Dean



Wednesday, September 19, 2007

Eason Presents The Restricted Gift Lifecycle, or, What Comes Around Goes Around Today at Penn State

John K. Eason (Tulane) presents The Restricted Gift Lifecycle, or, What Comes Around Goes Around, 76 Fordham L. Rev. ____ (2007), at Penn State today.  Here is the Conclusion:

Going beyond the Robertson v. Princeton dispute, I’d like to conclude with a few additional thoughts about the restricted gift lifecycle and the interconnectedness of decisions and outcomes across the lifespan of a restricted gift, with a particular focus on the trend towards a more liberalized cy pres doctrine. These doctrinal liberalizations will undoubtedly alter judicial decision-making, though at what pace remains unclear. Such liberalization should also influence non-judicial decision-making. Interaction with the state attorney general—being the primary party charged with enforcing the organization’s compliance with its fiduciary duties—is just one example. In this regard, the more liberal doctrinal acceptance of modifying donor directives should “grease the wheels” when it comes to the recipient organization’s dealings with the state attorney general. The “grease” comes in the form of the new starting premise; namely, that the donor possessed a general charitable intent notwithstanding her specific directives. This premise, plus the addition of a “wasteful” trigger for invoking cy pres, should also make the prospect of “tweaking” dead-hand controls less offensive and less likely to generate a public backlash (both an organizational and attorney general concern).

Once a modification trigger is reached, moreover, negotiations should also proceed more favorably by virtue of the wider latitude granted by the “reasonably approximates” versus traditional “as near as possible” wording of the permissible modifications.  The organization’s proposals for alternative uses of the restricted assets may thus appear more palatable to an attorney general when considering the state’s position on a proposed change in the use of restricted charitable assets.  This prospect, in turn, should reduce the need for organizational management to take an aggressive stance in its own unilateral interpretation and implementation of the donor’s restrictions, particularly as identifiable changed circumstances begin to heighten the motivations for doing just that.

From a donor’s perspective, the noted doctrinal liberalization might solidify the move towards ever more detailed donor-charity gift agreements. From the recipient organization’s perspective, these doctrinal liberalizations should inspire more concerted efforts to incorporate some endorsement of the organization’s broader mission into the donor’s statement of purposes—even where all parties agree that a more limited purpose is the primary objective.  Such efforts are both consistent with managerial fiduciary responsibilities and could later—in the face of changed circumstances—serve to open many otherwise restrictive doors by permitting a court to find confirmation that a donor looked favorably upon the recipient organization and its broader mission.   It thus seems clear that in the end, decisions must reflect the gift’s beginnings, and in the beginning, decision-maker should actively consider the gift’s potential end.

https://taxprof.typepad.com/taxprof_blog/2007/09/eason-presents-.html

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