What Happens When Planned Giving Results in Lawsuits?

According to the 2020 Giving USA report, donors gave $41.91 billion in bequest gifts during the first year of the pandemic, comprising 9% of all charitable donations. This represents a 10.3% increase compared to 2019. In short, planned giving is a big deal for nonprofits that invest the time and energy into maintaining a program.

Yet, a ProPublical article about St. Jude Children’s Research Hospital outlined what it thought was an overreach in how planned giving programs should be run. Within the expose, there were implications of both ethical and fiduciary impropriety.

The article brought up more questions than it answered. It seems helpful to outline what the typical nonprofit will experience when addressing the question, “What responsibility do I have when it comes to the wishes of my donors?”

How Your Nonprofit Should View Planned Giving Responsibilities

When a nonprofit implements a planned giving program, it should consider that it is not simply receiving money from a different channel than usual but that there are going to potentially be implications that were not expected when receiving the gift.

Notification and follow-through on a bequest can sometimes involve family members of the donor contesting the donation as part of the estate settling process. Without always knowing the intricacies of the donor’s relationship with their family, it is essential to follow the donor's established written intent.

“Beneficiaries have an ethical and fiduciary responsibility towards the deceased's estate,” Ligia Pena, a legacy giving expert from Globetrotting Fundraiser, said. “That means that if an interested party contests a will, the beneficiaries have a right and a responsibility to fight the claim if they know it goes against the deceased's wishes.”

What Your Nonprofit Needs to Know About Planned Giving Responsibilities

As with all gifts, a bequest should still align with your organization’s gift acceptance policy. Even if the gift has been given in good faith, it should be rejected if the gift will eventually violate your existing policies.

Suppose the gift has been through the standard review process that your organization has established. In that case, it is the nonprofit’s responsibility to carry through with the gift when notification is received.

Once the gift is ready to settle, your organization should make all good faith efforts to obtain the funds and carry out the wishes of the donor. If they have established your organization as a beneficiary, you should feel confident in claiming the funds.

What resources can help navigate this process

Navigating a donor's death is an intimidating prospect, and the delicacy of the situation should be something your nonprofit keeps in mind. When establishing your planned giving program, there should be concrete ethical standards and rules of non-engagement if the situation arises.

Establishing clear policies and procedures will allow your organization to operate with clarity if presented with circumstances that fall outside of the usual guidelines. Standardizing ethics is critical since it will give flexibility in acting with confidence if the unexpected arises.

One of the odd items in the ProPublica article was how St. Jude tracked donor interactions. Tracking interactions with donors should be understood as acceptable standard practice. When making notes about a donor conversation in your CRM, the only consideration is not to track sensitive medical information about a person in a non-HIPAA compliant database.

However, it is always essential to establish relationships with experts in the communities that you live within. When in doubt, turn to your local chapter of charitable gift planners or a trusted estate planning legal expert. With planned giving rising in importance, ethically executing responsibilities is a critical question that any sized nonprofit should prioritize addressing.