Virginia Esposito
02/01/2007
Virginia Esposito is president of the National Center for Family Philanthropy in Washington, D.C.
After a prominent individual dies, many families want to make a large, memorable philanthropic gift to honor the deceased. We often hear from families in this situation at the National Center for Family Philanthropy. We also hear from heirs who are living with the consequences of a large gift made in honor of a family member, often with that person’s name attached.
| In some cases, heirs tell me that they realize their name might be attached with Velcro—that is, until a bigger donor comes along. |
The large extended family of Algur (Al) Meadows, a Dallas oil executive and one of seven siblings, faced that three-pronged issue several years ago. Meadows, who died in 1978, had spent many years in Spain and amassed a collection of 19th- and 20th-century Spanish art that critics have called the most important portfolio of its kind outside the Prado Museum. Meadows was also a supporter of Southern Methodist University (SMU), and after his death, the family elected to continue that support in his name. The university named its school of the arts after him and also set up the Meadows Museum with his donations. Between 2000 and 2002, the family held many conversations with SMU officers, trustees and the museum directors in preparation for giving them another $20 million to build a new museum.
They continue to have discussions every time the museum curator considers new acquisitions. At one point, they had to decide if Meadows’ legacy was appropriate for an exhibition of Balenciaga’s fashions—it was, they thought. In another case, they considered whether or not to purchase a private El Greco collection, even though the artwork was not strictly aligned with the original collection. They chose to acquire it. Fortunately for the family, Meadows left reams of documents concerning his wishes for dispensation of his art collection, along with a number of interviews he gave to television reporters regarding his views on collecting art, including one of him walking through the SMU museum. In January 2006, the family foundation gave the Meadows School of the Arts an additional $33 million.
Ongoing gifts such as these bring up another question common to the heirs of a legacy grant. I have met with third- and fourth-generation heirs who think that their relationship with the recipient institution has become messy and expensive, with a fuzzy definition of what is expected of both the donor and the recipient. In fact, the National Center for Family Philanthropy’s initial research on how to work with a legacy grant began with one such family asking for advice. The heirs felt that the institution, a university, was becoming complacent, believing that the family would contribute to any fundraising effort. Family members also wondered if they were becoming jaded themselves, failing to keep a watchful eye on what the school was doing with their money.
With a large university capital campaign coming up, we suggested to the family members that they hold a dialogue with the principal parties at the school to let them know that they were not opposed to planning their next big contribution. But the family, we advised, should also admit that after years of working together in a fairly passive way, they wanted both sides to consider what each needed to do to make this a successful partnership in the long run. That tactic invited the grantees to also bring their needs to the table. The family members had their turn, telling the university what direction they would like their money to take if they made another substantial grant. After a few of these meetings, the family held a retreat where they devised a plan to give what turned out to be a very significant gift, but under very new circumstances. For one, they would request that the school set some benchmarks for its own performance.
On top of the potential for complacency, another trap that threatens families who control a gift in their name is the danger for other potential donors to assume that the family’s wealth underwrites all the needs of an institution. Legacy grants can actually inhibit the named organization’s ability to raise new funds. In this particular case, the university had also become somewhat casual about seeking funding from other sources. The family decided to address this problem by making their new donation a challenge grant. In this way, they let the community know that they were still active supporters, but also wanted to provide incentives for new gifts.
| Perhaps the most dangerous pitfall facing these families, however, remains the temptation to make memorial gifts very quickly after a loved one’s death, in the moment when grief is exceedingly palpable. |
A legacy grant generally implies that the family will continue to help the recipient, but it is also possible to make a memorial gift, a one-time gift in memory of someone. When a notable person passes away, the family should prepare themselves to be bombarded by requests to honor that person. Indeed, the cynics among us have noticed that some of these requests come with the expectation that the family will also make a generous gift in response to such an honor.
I know of a family that dealt with this predicament admirably. After their matriarch passed away, her heirs made a significant grant to an institution in her name, but they were smart enough to set some ground rules. They stipulated that they were making this gift although it lay outside of their usual mission, and that the organization should not expect any future gifts from the foundation. If a family foundation makes a memorial gift or any other kind of discretionary gift, it should clearly state in the next annual report or on the foundation’s website that the donation was an exception. We recommend a caveat such as this: “The following grants fall outside the foundation’s general scope and guidelines and were made at the discretion of specific trustees. The foundation does not accept proposals in these areas.”
Perhaps the most dangerous pitfall facing these families, however, remains the temptation to make memorial gifts very quickly after a loved one’s death, in the moment when grief is exceedingly palpable. Unfortunately, some grantee organizations have become very adept at taking advantage of these situations. A few years ago, I was talking with the family of someone who had passed away very suddenly, and I was shocked at how many large nonprofits had approached them and said, “You know, we were in negotiations with the deceased, and he promised us this much money.” Clearly if he really had been talking to all of them, he would have been doing nothing with his life but speaking to nonprofits. Saddest of all, perhaps, was the fact that the family found it very difficult to discern which nonprofits the deceased probably had made promises to.
The family of a woman named Jane Russell in Washington state handled this situation in a way that I admire. She and her husband, George Russell, had purchased a small brokerage and mutual fund business from George’s grandfather and developed it into the well-known investment firm, the Frank Russell Co. When Jane passed away in 2002, the family wanted to honor her in an important way, but they decided to take time to consider the best way to do so. Rather than make a quick, emotionally laden decision, the Russell Foundation and the heirs invited everyone connected to the foundation—grantees, members of the community and colleagues—to suggest ways the foundation might honor her. Then the foundation invited a group of trustees and family members to meet to slog through all the suggestions and make a choice. Eventually they decided to launch a program, run through the foundation, that they called Jane’s Fund. Russell had been deeply involved in helping community development in Tacoma and Pierce counties; today the foundation plans to use the fund to provide fellowships to individuals who want to serve the community, as well as organizations promoting the arts, education and human services. The foundation announced its first class of fellowship recipients in 2004 and plans to offer the grants every other year. The way the family planned the program gave them some time to compose themselves and make a decision that served the foundation and the community well. A job well done.