Magazine

Charity with Strings Attached


If you're like most people, each day's mail brings a new crop of appeals from nonprofit organizations. But unless you are passionate about the proj-ects you're being solicited for, why not follow the latest trend in charitable giving and fund something that does excite you--say, a professor's AIDS research or a local museum's African art collection?

These days, rather than just hand money to charities to use as they see fit, many donors are restricting gifts, large and small, to projects that reflect their values and priorities. They also are asking for more influence over and information about how their money is used. With the economy weakening, donors "have a lot of leverage today to negotiate what they want with charities," says Joanne Johnson, a wealth adviser at J.P. Morgan Private Bank.

Before you draw up a list of demands, be aware that even the most strapped organizations are unlikely to agree to certain conditions. Universities, for instance, might allow someone who endows a chair to make hiring suggestions. But most are loath to relinquish control, since that would compromise academic freedom.

If you want to make a sizable gift, say $10,000 or more, don't just send a check with "football uniforms" or "teen literacy program" scrawled at the bottom. Instead, sit down with someone at the institution and discuss the need for your gift. Of course, how much leverage you have will depend on the size of your donation relative to the nonprofit's wealth and prestige.

Once there's an agreement, put it in writing. Specify what the money is to be used for and the time in which it should be used, says Anne Neal, general counsel at the American Council of Trustees & Alumni, a Washington group that advises donors. Although a letter might do for small gifts, something large should be handled by an attorney, adds Beth Rodriguez, a wealth adviser at J.P. Morgan.

To make sure your donation doesn't supplant funds already earmarked for your cause, request that it supplement the budget, says Stacy Palmer, editor of The Chronicle of Philanthropy. It also is a good idea to detail what you want done with the money in the unlikely event that the charity cannot do as you directed. For example, if Alzheimer's is cured, you can keep a court from deciding the fate of your research dollars by naming a backup purpose, Rodriguez says.

Before signing on the dotted line, ask the nonprofit to provide you with information to monitor your gift. If you are funding a program in "great books," for example, you might ask to receive a syllabus and background on the faculty.

SMALL CHANGE. Although large gifts garner the most recognition, donors who dole out money in smaller installments can retain control by using future gifts as leverage. Similarly, if you have a charitable lead trust--which makes payments to a charity for a period before distributing the rest, generally to the donor--designate more than one nonprofit beneficiary. That way, if you lose confidence in one beneficiary, you can ask the trustee to shift the funds to another, says Mary Hickok, trust counsel at Wilmington Trust. With a charitable remainder trust--which pays the donor first and leaves the remainder to charity--you can change beneficiaries until the final lump sum is disbursed.

For gifts meant to last forever, you might wish to consider ways to retain control beyond the grave; after all, when buildings are renovated, they are often renamed. And just because you handpick a committee to award a scholarship you endowed doesn't mean that you'll control its future members. One solution: Ask that committee members be allowed to recommend their replacements.

Don't attach restrictions simply to throw your weight around. For one thing, if you load conditions onto a small gift, it may cost the nonprofit more to use it than return it. "As the gift gets smaller, I encourage donors to give the institution some flexibility," says Eugene Tempel, executive director of the Indiana University Center on Philanthropy. And if everyone restricts contributions, charities might find themselves with ample funds for glamorous pursuits, such as research, but not enough to pay salaries or the electric bill. By Anne Tergesen


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