From time to time, charities are faced with what to do with a restricted gift when the terms of the donor’s restriction can no longer be fulfilled. The doctrine of cy pres permits the courts to modify the charitable purpose of a charitable trust to a purpose that reasonably approximates the designated purpose, where the designated charitable purpose becomes unlawful, impossible, or impracticable to carry out or where it becomes wasteful to apply all of the property to the designated purpose. … Continue Reading
Category Archives: Endowment
Is it time for a Legal Audit?
A legal audit is an overview of an organization’s non-financial compliance, governance and risk management issues. Organizations typically consider a legal audit when new management takes over and wants to ensure they are starting with a clean slate or the in the wake of a costly mistake. … Continue Reading
Nonprofit Law Jargon Buster: What is an Endowment?
Black’s Law Dictionary, 9th ed., defines an endowment as: A gift of money or property to an institution (such as a university) for a specific purpose, esp. one in which the principal is kept intact and only the interest income from that principal is used. This is the popular definition familiar to most nonprofit executives.… Continue Reading
Get Ready for the Protection of Charitable Assets Act
Proponents of the Act argue that registration of charities is important for several reasons. The first of which is that a list of registered charities can serve as a resource for the Attorney General and the public. Additionally, a potential donor will be able to consult the list to ensure that a charity is current in its filings which will help in making an informed decision about contributing. Lastly, the registration requirement serves to remind anyone who operates or plans to operate a charity of the seriousness of the fiduciary duty one undertakes as a director or trustee of a charity.
Detractors of the Act can point to numerous cases of overreaching by State Attorneys General over the years as well as existing multistate registration burdens on charities that fundraise in multiple jurisdictions.… Continue Reading
Nonprofit Law Jargon Buster – Donor Advised Fund
The Pension Protection Act of 2006 (“Act”) offered the first definition of a donor-advised fund. According to the Act, a fund must have the following three characteristics to be a donor-advised fund, and if any of these characteristics is missing, the fund is not a donor-advised fund.… Continue Reading
Permanent Endowment = Infinity and Beyond
Most non-profits understand that if a fund is a permanent endowment, the principal must be preserved in perpetuity. Still, in my practice and in the ASU Lodestar Center course I teach on non-profit law, I am often surprised by how little some fundraising professionals understand about the mechanics of gift restrictions – particularly the implications of permanent restrictions… Continue Reading