Planned Giving Legal Tidbits - Bequest Pledges

This post is one that I've been itching to write since last week. Please read it carefully and think it over (even if you are not a New York fundraiser - these discussions are always relevant and they at least give you something to ask counsel in your own state)

I mentioned in the previous Legal Tidbits post that pledge agreements in New York that involve naming recognition are legally enforceable, binding commitments. Technically binding out of one's estate, too. And, naming recognition would include a named scholarship in addition to an actual name on a plaque somewhere.

The follow-up question I had as a direct result of hearing this info is what about bequest pledges where the naming only takes place upon the receipt of the pledged funds at death?

Surprisingly, top notch counsel said that case law in New York supported what he termed a contract to make a will as also being a binding obligation upon the parties (namely the estate to pay the pledge).

In legal terms, we are looking for consideration (more simply understood as value exchanged) in a contract context. New York courts not only agree that receiving a named honor in exchange for a pledged gift is consideration to create a binding contract, but the courts agree that a pledge to include a charity in your will that creates an agreed upon naming honor when the bequest matures (gotta love planned giving talk) is also a binding agreement (albeit contingent on both sides fulfilling their promises).

What I am getting at is that in New York, a pledge agreement whereby the donor agrees in writing to include a charity in his or her estate plan in some form or another to receive a naming honor at the time funds reach the charity is ENFORCEABLE as a binding pledge (whether you are included in the estate documents or not).

Long sentences, I know, but you have to say wow.

Sign on the dotted line and it's a gift? One of my clients - closing this fall alone over $5 million of these - said they didn't plan to actually list these commitments on their books. Funny thing - from both the accounting and legal points of view, they should be on the books.

OK, I would advocate some substantiation - like are we really in the will or does this donor really have these assets or is there an estate fight brewing. I would keep these for older donors generally. But, they are not only good planned gifts, but they are bookable (at least at present value).

Stay tuned for part 2 about bequest pledges entitled Don't try these at home. Just a word of caution before you go out and have hundreds of folks sign up.