Canadians are charitable people. According to Statistics Canada, 82% of Canadians made a financial donation to a charitable or non-profit organization in 2013 (the latest year statistics are available). The amount given by donors increased from an annual average of $469 in 2004 to $531 in 2013. The most generous donors are those age 75 and over – indeed, every older age category was more generous than the previous one.
But what happens when a donor dies before completing his or her pledge to a charity? Is the estate required to complete the promised donation? The question made the news recently when it was reported that Duke University had sued the estate of billionaire Aubrey McClendon, who had recently been killed in a car crash at the age of 56. McClendon, an alumnus and major benefactor of the university, had left unfunded commitments to the university totalling around $9.94 million, which was about half of what he had pledged to the school in recent years. Creditors of the estate claimed that McClendon’s vast and complicated estate might end up being insolvent, as a result of debts totalling at least $500 million.
Whether a charitable pledge is enforceable depends on the circumstances surrounding the making of the pledge. In general, if the recipient charity made an express promise to carry out the object of the pledge, the pledge is binding. Furthermore, if the charity took steps and incurred expenses to carry out the intended result, and can show that it would not have taken these steps unless it was to receive the gift, the pledge is likely to be legally enforceable.
On the other hand, simple pledges to donate are not enforceable. If the charity made a vague promise about what it intended to do with the gift, the gift is also not legally binding and the estate would not be responsible to pay. Similarly, courts have held that where a group of donors were promised the same outcome, the charity cannot enforce the pledge against any particular pledger.
A case involving an incomplete pledge was dealt with by the Ontario Superior Court of Justice in the 2003 case of Brantford General Hospital Foundation v. Marquis Estate. Helmi Marquis and her late husband Jack had met at Brantford General Hospital and later became long time donors and volunteers at the hospital. The hospital’s coronary care unit was named after Mr. Marquis in recognition of his philanthropy. In December 1999, Mrs. Marquis signed a pledge form promising to give $1 million to the hospital over 5 years. She died in May 2000, having only made the first installment of $200,000. While her will left a fifth of the estate’s residue to the hospital, the hospital demanded the remaining $800,000 from her pledge. Her estate trustees declined to pay, and the hospital sued.
At trial, the hospital’s CEO testified that he had approached Mrs. Marquis to ask her to be a lead donor on a new fundraising campaign, which would help pay for the merging of the hospital’s coronary care unit and its ICU into a newly created critical care unit. The CEO had told Mrs. Marquis that the hospital wanted to name the new critical care unit after her and her late husband.
The court concluded that the pledge was not binding. The naming rights of the new unit were not a condition of the pledge contract (indeed, the signed pledge contract made no mention of using the couple’s names for the new unit), but rather a gesture to show the hospital’s gratitude to the two benefactors.
As for Duke University, the decision to bring a claim against a major benefactor’s estate was met by both surprise, and some criticism, by some staff and alumni. The school decided to withdraw the claim, and apologized to the McClendon family. The withdrawal of the claim leaves it somewhat unclear whether Mr. McClendon’s pledge would have been enforceable.