Final Chapter in the Alabama Hall of Fame Case

This Alabama case and a subsequent real situation has morphed into a classic planned giving ethical quandary discussion. See previous posts under the label Alabama Ethical Dilemma for discussion of when to think twice about accepting a CGA when it is being created on behalf of an incapacitated person.

When we last left off, a friend had read my blog (about the Alabama case involving a CGA created by a son/guardian where a court later took back the funds because the CGA didn’t make sense in his mother’s overall estate plans) and called me about their own quandary. With a check for multiple hundreds of thousands of dollars in hand and a “power of attorney” cousin wanting to create a CGA for her 90+ incapacitated relative with no history (giving or otherwise) with the organization in question, we were trying to figure out how much due diligence should be done before completing the gift (thinking positively). And, based our discussion, they called the “power of attorney” to see if there were any children or siblings who should be notified of this big gift.

Well, they confirmed that there were no children or grandchildren. So, they finalized the gift.

Why this postmortem post? They admitted to me that the “power of attorney” didn’t sound too pleased to answer the questions so they cut off the questioning – not to jeopardize the gift. My problem is: why should the “power of attorney” be concerned about answering questions? She is taking hundreds of thousands of dollars out of this incapacitated relative’s estate. I would think that some caution and transparency would be what everyone expects.

To the organization's credit, this was not the only charity that the “power of attorney” was creating CGAs for, so if it ever becomes an issue in a surrogates court, at least the story in the NY Post or Daily News will have several charities to mention.

Something though has me thinking that this is probably a case of an underlying family dispute and the emptying of the elder great aunt’s estate at the expense of others. Will it stay off the radar of the eventual estate and executor, if the CGA is being used to cut out inheritances to more direct relatives?

This is another example of where a carefully drafted gift acceptance policy could have solved this quandary for us. The policy should say that the organization does not accept CGAs created by representatives/guardians/power of attorneys unless….

You fill in the blanks. How about a form signed by the guardian or power of attorney? How about a requirement that the institution confirm from an objective, third party that the gift makes sense and is agreeable to all living next of kin of the donor’s estate?

If you are a trustee of an organization that manages a gift annuity program, wouldn’t it make sense that out of the ordinary, sticky situations be brought at least to a gift acceptance committee or an executive committee to assess the risks involved? Isn’t there a risk that a guardian or power of attorney is overstepping their bounds – even if on paper they are allowed to make a gift – and that the there could be negative consequences down the road?

Better yet, is accepting a gift like this the right thing to do?