Does Donor Recognition Create Obligations?

Is a donor obliged to provide ongoing support to a charity after a building or facility is named in their honour?  The legal answer is “no”.  Naming, however, may stir up complex feelings of ownership and hope, which often lead to misunderstandings — even after the donor is dead.

Ownership

Donors and their descendants understandably feel ownership for a facility in the family name.  The place, for example, may define their public reputation and be a source of pride.  Let’s not forget that buildings get shabby, priorities change and new funds are required.

Not surprisingly, managing donor pride is not always easy for charities.  There have been a number of high profile stories of donors who objected to change, rebuilding and loss of recognition at Canadian charities.  This is a public relations issue for the charity because no future major donor wishes to see an unhappy past donor.   Charities must be prudent, however, as a naming opportunity is a limited organizational asset.

Hope

Charities are forever hopeful.  Charities that practice good donor stewardship emphasize gratitude and accountability, but, make no mistake, they also hope to secure additional gift. Over the years, I’ve experienced charities who have solicited the descendants of the original donor for additional support.  Not surprisingly, the solicitation is rarely successful due to shifting priorities or lack of funds.  A side effect of 25 years of major philanthropy in Canada is lots of naming and even greater charity ambition.  Are future misunderstandings about naming inevitable?

Avoiding Misunderstandings

Written gift agreement and recognition policies are essential to reduce misunderstandings between donor (and their descendants) and charities.  Key provisions include:

1.  Time limits on donor recognition.  Some major charities, for example, have 25-year terms for major recognition “opportunities”.

2.  Legal clarity about the non-binding nature of pledges.  Philanthropic donors can’t be sued, but recognition can be withdrawn in the event of non-payment or reputational issues.

3. Clear language that states recognition is offered in gratitude and not as contractual benefit to the donor.

4. Language that releases the donor from future obligations.  With an estate donation, this is a legal release.

5. Advanced documentation about naming to recognize estate donations.

Admittedly, it’s hard for charities to discuss limits on recognition at the emotional moment when a gift is being given.  But it’s even harder to deal with lawsuits and negative media coverage in the future.