All About Estates

Unrestricted Giving – In Life and Estates

An “ah ha” of COVID-19 is the importance of unrestricted giving to charity.  Donors, foundations and charities are realizing that excess conditions may hinders responses to urgent social needs.  Will this insight last beyond the pandemic? And does it apply to estate donations?

Trust-Based Philanthropy

First a bit of context.  In the charity world, particularly among granting foundations, there is a growing movement called “trust-based philanthropy”.  The tenets of this movement include multi-year unrestricted funding (core funding), simplicity in applications, and mutual transparency.

These ideas aren’t new, but they also aren’t widespread.  Big foundations love complex granting and process.  Some of the most restrictive funders, however, are governments that chase hot ideas, are bureaucratic, and don’t consistently support good organizations.  Demands for accountability by funders, which may distort charity behaviour, often bulldozes trust.

Pledges and Principles

And then COVID-19 hit.  The moment arrived for the professional altruists to embrace trust-based philanthropy.  The Council of Foundation, the U.S. association of mostly private granting foundations, launched its “pledge” based on trust-based philanthropy principles.  Philanthropic Foundations Canada, the parallel association north of the border, followed with five very similar principles.  Both are appropriate responses to the moment.

Charity Candour

Even fundraisers and charities got into the act – and not just because they wanted more money, faster, and with fewer strings.  British fundraiser Clare Wilkins wrote a recent blog advocating for fewer restrictions. She admits that charities are partly to blame.  (It’s not only a question of funder-charity power imbalance.)

Ms. Wilkins wisely notes that “many major gift teams in charities are better geared towards accepting and stewarding restricted funding than unrestricted funding. Many donors recognise that it’s often clearer to see the impact of their donation if they give a restricted gift, so they prefer to give that way—especially if they’ve had a disappointing experience of funding a charity in the past.”

“Similarly, charities can find it easier to articulate progress on specific projects, so they often find it simpler to report on restricted gifts rather than on unrestricted gifts. This means that, often, the experience of giving a large restricted gift to charity can be better than giving a large unrestricted gift.”

Estate Donations

So, what does this all mean for estate donations?

In my experience, the majority of gifts by will are unrestricted.  The gifts may provide general directions, but there are few active, interventionist restrictions.  My theory is this is a result of estate donors being aligned with causes and organizations, not ever-changing projects.  It also may reflect legal prudence that avoids restrictive clauses that cause gifts to fail if the charity can’t execute in the future.

Restricted/Unrestricted Divide

There is a large group of charities that encourage and deserve unrestricted donations.  For example, charities such as food bank, social service organizations, environmental organizations, animal shelters, health and international charities generally receive unrestricted estate donations.  Religious entities, especially places of worship, are also normally in the unrestricted camp. Donors intuitively understand that needs are both focused and constantly evolving.  They want to provide their charities with capacity to respond and serve in the future.

Certain charities, by contrast, almost always receive restricted estate donations.  Most noteworthy are  “institutional” charities, such as universities, museums and performing arts, and hospitals.  These entities have a complexity, endowments, and competing factions/departments.

They have a big donor, recognition-driven culture described by Ms. Wilkins above.  Frankly, having worked at hospitals and a noted universities – outstanding organizations all – I am of the view that restricted estate donations are prudent.  Nonetheless, a drive toward less bureaucracy, greater trust, stable funding, and mutual decency in philanthropy is an ideal worth pursuing.

About Malcolm Burrows
Malcolm is a philanthropic advisor with 30 years of experience. He is head, philanthropic advisory services at Scotia Wealth Management and founder of Aqueduct Foundation. Views are his own. malcolm.burrows@scotiawealth.com

1 Comment

  1. Catharine Williams

    June 25, 2020 - 5:10 pm
    Reply

    Very interesting article. Thank you for writing and sharing.

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