A post to Exponent Philanthropy's blog

Considerations When Making Significant Gifts

Effective and meaningful philanthropy takes many shapes and forms—and sometimes what sounds like the simplest charitable activity to undertake can be the most complicated.

Take, for example, one-time significant gifts. Whereas there is no hard and fast rule about what constitutes a significant gift, what we are referring to here are gifts over $500,000 to an organization or institution. There are numerous horror stories of large gifts gone wrong resulting in years of legal action; institutions not following a donor’s intentions; or heirs discovering that funds were misused or not used in the way in which the donor had intended.

We regularly work with individuals and families to help them ensure that the gift they want to make is a win–win for both the donor and recipient organization. A big part is understanding the best course of action.

One example is right-sizing the gift. Giving $5 million to an organization with a $1 million budget could be disastrous.

Another example is clarity around use of the funds. If you want your gift used for a particular purpose (e.g., to seed a new initiative; serve as leverage to spur other donor engagement; name or endow a department or school, or a senior staff role; or contribute to an endowment or capital campaign), then it is important that this is clearly communicated and documented. If this will be a multiyear gift, it is important that the organization or institution knows what you expect from them to ensure they will get the funds each year. Are there benchmarks that you want them to meet? Is there a particularly way in which you want to be provided information, and how frequently? Keep in mind that you never want to make any gift onerous in terms of what you ask of the organization or institution.

When we helped a client establish the parameters for a $50 million gift to his alma mater, with the goal of making the university’s business school one of the best in the country, the terms and conditions of the gift had to be carefully thought out and discussed with the institution to determine if the goal was even possible. Was it a realistic one? What would the university need to do to achieve the goal? How would they do it? This kind of dialogue between donor and recipient is important to the success of the gift—for all stakeholders—and it doesn’t always matter how large the gift is.

So what do you need to think about when considering a significant gift?

  • Is this truly a one-time gift—a stand-alone, or part of a larger philanthropic strategy? Clarity around where this gift fits into your philanthropic strategy is important. Sometimes a large gift for a specific purpose is given to accelerate a strategic goal of an organization that has historically been funded by grants from the donor. We have a client who, every year, makes one significant gift to an organization that is furthering one of her interests. Each gift is a stand-alone, to a different organization. Others may make a significant gift but pay out over several years. Since the organization knows this at the time the gift is made, it can factor those funds into its annual budget.
  • Have you determined whether the gift is one that would add value to the institution or organization you’ve selected? Having a conversation with the organization or institution about what you would like to see happen and finding out from them whether this is feasible or even needed is an important step.
  • Is this a gift to be given during your lifetime or as a bequest after death? Is it a one-time gift or a multiyear gift? Where will the funds come from: your foundation, your donor advised fund, a trust, or your personal checkbook? All these decisions need to be carefully and thoughtfully addressed with professional support, if possible. There are as many questions as answers, and your decisions and your intentions need to be thought through and communicated to the recipient institution.

Making a significant gift, whether cash, stocks, or complex non-cash assets (or combination thereof), can be both exciting and daunting. A large amount of capital for a specific agreed upon purpose is an opportunity for an organization to successfully pursue an initiative that will add value for all stakeholders. But this is also a strategic and business decision and requires careful thought, mutual understanding of objectives and timelines, and all of this documented and shared with your advisors and heirs.

Betsy BrillBetsy Brill, president and co-founder of Strategic Philanthropy, Ltd., is an internationally recognized expert in philanthropy. She brings to each client engagement the experience garnered from close to 30 years working with families around their charitable giving, and managing and consulting to nonprofits, and a deep understanding of the philanthropic landscape and the key issues facing individuals and communities both globally and domestically.

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