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A New Kansas Law Protects Donor Intent
Publisher's Note: This post appears here courtesy of The James G. Martin Center. The author of this post is Jack Salmon.
Earlier this year, in a landmark action, the Kansas legislature passed the Donor Intent Protection Act, which helps ensure that donors' wishes are respected when they make a charitable gift as an endowment. This is a significant step forward for philanthropy, as it will help to build trust between donors and beneficiaries, on campus and elsewhere.
Donor-intent protections are intended to uphold the details of an explicit written agreement between a donor and a charitable organization. Such agreements typically specify how the endowed funds will be used, such as for a specific program or purpose. When a donor makes a gift to an endowment with specific intentions, it is important that those intentions be respected.
There are a number of reasons why this is so. First, donor-intent protections help ensure that donors' wishes are carried out. When donors make a gift, they are entrusting their money to a charitable organization with the expectation that it will be used for the purpose they intended. Donor-intent protections help to guarantee that this trust is not betrayed.
Second, donor-intent protections help build trust between donors and beneficiaries. When donors know their wishes will be respected, they are more likely to give. This is good for both donors and beneficiaries, as it helps to ensure that charitable organizations have the resources they need to carry out their missions.
Third, donor-intent protections help promote transparency and accountability. When charitable organizations are required to adhere to donors' intent, it helps to guarantee that they are using donors' money in a responsible and ethical way. This is important for both donors and the public, as it helps to hold charitable organizations accountable for their actions.
One example of disregarded donor intent concerns the Moritz family and Ohio State University (OSU). In 2001, Michael Moritz, an alumnus of the Ohio State law school, generously donated $30.3 million to the university. The purpose of Moritz's donation was to establish a permanent endowment that would be utilized for specific objectives, including the support of four chaired professorships and the provision of 30 annual law-school scholarships, along with stipends.
After a span of 15 years, Jeff Moritz, Michael's son, examined a financial report concerning his father's endowment fund, provided by OSU. To his astonishment, Jeff discovered that OSU had awarded only 12-16 scholarships per year, falling far short of the agreed-upon number of 30. Furthermore, the endowment fund presently held a total of $21.9 million, and approximately $3 million had been withdrawn to support OSU's development operations.
Regrettably, the Moritz family found themselves unable to legally enforce Michael Moritz's instructions concerning the disbursement of his endowment gift. As a result of OSU's disregard for its donor's intentions, more than 300 law students were burdened with significant debt for a legal education that should have been financed through the privately-endowed funds of the Moritz Merit Scholarship.
Carol Bratton's story serves as another unfortunate example of a donor whose wishes were disregarded. Having worked as an administrative assistant to the dean of the Logsdon School of Theology at Hardin-Simmons University, Bratton had a strong connection to the institution, as did her late husband, who served as the associate vice president of information technology there. In memory of her husband, Bratton decided to make a donation to their longtime employer.
In 2008, she contributed $5,000, and over the next five years she saved enough to make an additional gift of $10,000, which met the minimum requirement to establish an endowment at Hardin-Simmons. Bratton's agreement specified that if the doctor of ministry program were to be discontinued, the dean of Logsdon would have the discretion to allocate the funds to benefit seminary students in some other way.
However, in 2020, Bratton received an email notifying her that the Logsdon seminary was being closed altogether and, consequently, that her scholarship would be terminated. Regrettably, Hardin-Simmons University was now unable to honor the original intention behind Bratton's gift. When she requested that the donation be returned to her, Bratton states, the university's vice president for advancement responded by laughing and dismissively stating that it would never happen.
A final example is the case of the Robertson Family and Princeton University. In 1961, Charles and Marie Robertson donated $35 million to Princeton to establish a graduate school for international and public affairs. The gift included specific instructions for preparing graduates for careers in government, specifically in the area of international relations.
By 2002, the Robertsons' endowment fund had ballooned to $900 million. However, the descendants of the Robertsons discovered that fewer than one in five graduates were entering government careers as the Robertsons had intended. Worse yet, a forensic audit revealed that over $100 million of earmarked funds had been misused by Princeton.
After a six-year legal battle, the case was settled in 2008. Under the terms of the settlement, Princeton agreed to return $100 million to the Robertson family, but the university was allowed to keep the remaining $800 million in endowment funds.
The Robertson case is a clear example of how donor intent can be disregarded by universities. It is also a reminder that donors have a right to expect that their gifts will be used in accordance with their wishes.
The Kansas legislature's decision to pass the Donor Intent Protection Act is a positive step for philanthropy. The law will help build trust between donors and beneficiaries, promote transparency and accountability, and ensure that donors' wishes are carried out. Other states should follow Kansas's lead and introduce similar legislation to protect donor intent.
As a previously hyperlinked study makes clear, donors who believe their wishes will be respected are more likely to give to the charity of their choice. The study also found that donors who are satisfied with the way their gift is used are more likely to give again in the future.
These findings suggest that donor-intent protections can play a significant role in increasing charitable giving. By helping build trust between donors and beneficiaries, donor-intent protections can encourage more people to give to charity. This is good for both donors and beneficiaries.
Jack Salmon is the director of policy research at Philanthropy Roundtable. He publishes research, commentary, and analysis on issues facing the charitable sector and philanthropic freedom. His work has been featured in a variety of outlets, including The Hill, Business Insider, RealClearPolicy, and National Review.
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Earlier this year, in a landmark action, the Kansas legislature passed the Donor Intent Protection Act, which helps ensure that donors' wishes are respected when they make a charitable gift as an endowment. This is a significant step forward for philanthropy, as it will help to build trust between donors and beneficiaries, on campus and elsewhere.
Donor-intent protections are intended to uphold the details of an explicit written agreement between a donor and a charitable organization. Such agreements typically specify how the endowed funds will be used, such as for a specific program or purpose. When a donor makes a gift to an endowment with specific intentions, it is important that those intentions be respected.
There are a number of reasons why this is so. First, donor-intent protections help ensure that donors' wishes are carried out. When donors make a gift, they are entrusting their money to a charitable organization with the expectation that it will be used for the purpose they intended. Donor-intent protections help to guarantee that this trust is not betrayed.
Second, donor-intent protections help build trust between donors and beneficiaries. When donors know their wishes will be respected, they are more likely to give. This is good for both donors and beneficiaries, as it helps to ensure that charitable organizations have the resources they need to carry out their missions.
Third, donor-intent protections help promote transparency and accountability. When charitable organizations are required to adhere to donors' intent, it helps to guarantee that they are using donors' money in a responsible and ethical way. This is important for both donors and the public, as it helps to hold charitable organizations accountable for their actions.
One example of disregarded donor intent concerns the Moritz family and Ohio State University (OSU). In 2001, Michael Moritz, an alumnus of the Ohio State law school, generously donated $30.3 million to the university. The purpose of Moritz's donation was to establish a permanent endowment that would be utilized for specific objectives, including the support of four chaired professorships and the provision of 30 annual law-school scholarships, along with stipends.
After a span of 15 years, Jeff Moritz, Michael's son, examined a financial report concerning his father's endowment fund, provided by OSU. To his astonishment, Jeff discovered that OSU had awarded only 12-16 scholarships per year, falling far short of the agreed-upon number of 30. Furthermore, the endowment fund presently held a total of $21.9 million, and approximately $3 million had been withdrawn to support OSU's development operations.
Regrettably, the Moritz family found themselves unable to legally enforce Michael Moritz's instructions concerning the disbursement of his endowment gift. As a result of OSU's disregard for its donor's intentions, more than 300 law students were burdened with significant debt for a legal education that should have been financed through the privately-endowed funds of the Moritz Merit Scholarship.
Carol Bratton's story serves as another unfortunate example of a donor whose wishes were disregarded. Having worked as an administrative assistant to the dean of the Logsdon School of Theology at Hardin-Simmons University, Bratton had a strong connection to the institution, as did her late husband, who served as the associate vice president of information technology there. In memory of her husband, Bratton decided to make a donation to their longtime employer.
In 2008, she contributed $5,000, and over the next five years she saved enough to make an additional gift of $10,000, which met the minimum requirement to establish an endowment at Hardin-Simmons. Bratton's agreement specified that if the doctor of ministry program were to be discontinued, the dean of Logsdon would have the discretion to allocate the funds to benefit seminary students in some other way.
However, in 2020, Bratton received an email notifying her that the Logsdon seminary was being closed altogether and, consequently, that her scholarship would be terminated. Regrettably, Hardin-Simmons University was now unable to honor the original intention behind Bratton's gift. When she requested that the donation be returned to her, Bratton states, the university's vice president for advancement responded by laughing and dismissively stating that it would never happen.
A final example is the case of the Robertson Family and Princeton University. In 1961, Charles and Marie Robertson donated $35 million to Princeton to establish a graduate school for international and public affairs. The gift included specific instructions for preparing graduates for careers in government, specifically in the area of international relations.
By 2002, the Robertsons' endowment fund had ballooned to $900 million. However, the descendants of the Robertsons discovered that fewer than one in five graduates were entering government careers as the Robertsons had intended. Worse yet, a forensic audit revealed that over $100 million of earmarked funds had been misused by Princeton.
After a six-year legal battle, the case was settled in 2008. Under the terms of the settlement, Princeton agreed to return $100 million to the Robertson family, but the university was allowed to keep the remaining $800 million in endowment funds.
The Robertson case is a clear example of how donor intent can be disregarded by universities. It is also a reminder that donors have a right to expect that their gifts will be used in accordance with their wishes.
The Kansas legislature's decision to pass the Donor Intent Protection Act is a positive step for philanthropy. The law will help build trust between donors and beneficiaries, promote transparency and accountability, and ensure that donors' wishes are carried out. Other states should follow Kansas's lead and introduce similar legislation to protect donor intent.
As a previously hyperlinked study makes clear, donors who believe their wishes will be respected are more likely to give to the charity of their choice. The study also found that donors who are satisfied with the way their gift is used are more likely to give again in the future.
These findings suggest that donor-intent protections can play a significant role in increasing charitable giving. By helping build trust between donors and beneficiaries, donor-intent protections can encourage more people to give to charity. This is good for both donors and beneficiaries.
Jack Salmon is the director of policy research at Philanthropy Roundtable. He publishes research, commentary, and analysis on issues facing the charitable sector and philanthropic freedom. His work has been featured in a variety of outlets, including The Hill, Business Insider, RealClearPolicy, and National Review.
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