By Lee Sherman
If you regularly contribute a portion of your income to charity, you may have found yourself in a situation where you want your donation back. The most common reason given by most donors is that charities are ignoring their wishes and not using the money as intended.
Worse, you may find that the charity itself turns out to be corrupt. How often have you heard of situations where the trustees are using donations to line their own pockets instead of what they are intended for? With the increased scrutiny of charitable organizations that has come as a result of technological advances, an increasing number of donors are demanding more accountability. And some are even asking for refunds.
There’s good news for donors here. If the terms of the gift are violated, you are well within your rights to demand your money back. In fact, the charity is legally required to return the gift if they’ve violated the terms. In other cases such as a scandal that is unrelated to your donation, the law is less clear. The onus is on the charity to decide whether or not they want to return your donation.
In some ways, getting a refund from a non-profit is not unlike requesting one from a profit-making business such as a store in the sense that there is little regulation to fall back on. However, just as a store won’t be in business very long if it doesn’t accept returns, charities must subscribe to a code of ethics in order to survive. Charities rely extensively on repeat donations and they need to make sure their donors are happy.
Don’t write a blank check
If you’re considering a charitable donation that falls within scope of what your charity considers a “major gift status”, you may want to have your financial advisor draft a charitable gift agreement (sometimes referred to as a letter of intent) that not only precisely proscribes how your gift will be used but also protects your donation in case of misuse. At minimum, this should include the ability to transfer the gift to another charity if you feel it’s necessary. It should also include the right to sue the charity in case of a dispute. These agreements are critical when it comes to endowments. For example, if you’ve tied your donation to a specific purpose, say an endowment to build a university building or hospital that will bear your family name, you’ll need to think about what happens should the building be torn down or moved. Or, perhaps, in an effort to spur fundraising for a particular cause, you’ve made your donation contingent on a charity raising matching funds within a certain period of time.
Financial advisors caution that, without expressed, written conditions it is extremely unlikely that the money you’ve donated will find its way back to your family trust. The ultimate goal of a charitable gift agreement should be to preserve your legacy for generations to come.
Lee Sherman is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Lee is an experienced journalist and editor with over 30 years of expertise with a significant history of writing in the personal finance and technology arenas.
