The College Donor Digest

$100 Million Gift Dispute Illustrates the Imperative for Clear Gift Agreements

August 14, 2018 | Joe DeGraff

Pictured above: University of Chicago - Ida Noyes Hall

A clear gift agreement is a boon for all parties: Donors can feel confident that their intent will be honored, and the beneficiary has clear guidelines for fulfilling the gift’s purpose. The risks of insufficiently precise gift agreements are demonstrated by a recent lawsuit between the Pearson Family Foundation and the University of Chicago, which could result in the termination of a $100 million pledge.

When the Pearsons made their gift in 2015, it was the second-largest single donation in the University’s history and created the Pearson Institute for the Study and Resolution of Global Conflicts. In one of the highest-profile donor intent cases of the decade, the Pearson Foundation argues that the university’s programmatic and hiring operations have fallen short of the gift’s intent. The university has filed a countersuit.

Because the case at Chicago is still under legal review, we can’t speculate on an outcome. Some donor intent lawsuits do have happy conclusions: One of last year’s major donor intent disputes was resolved, after heated public feuding and threat of lawsuit, when a new, more detailed memorandum of understanding was negotiated between the University of Utah and the Huntsman Foundation. The foundation then recommitted $120 million in new donations.

There is always a greater chance for donors to clash with universities when expectations aren’t made crystal clear in the agreement. (One gift agreement with the New York Public Library even specified the exact letter size of the donor’s name on the library’s façade!)

Clear instructions do not imply mistrust, they are simply the best way to avoid misunderstandings. If you’re planning a higher education gift, work with an adviser like FAR to ensure your intent is fulfilled.

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