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How does the name change of a facility impact endowment funds in its name

  • 1.  How does the name change of a facility impact endowment funds in its name

    Posted 27 days ago
    Hi everybody,

    We have a facility on campus that we are considering officially re-naming.  There are several endowment funds that carry the current name of the facility and support the operations of the facility.  If the College officially changes the name of the facility (but not the purpose or activities associated with the facility), what actions do we need to take on the endowment funds? 

    Must we officially file to change the endowment funds' names as well? 
    Do we need to contact all past donors to those endowment funds to alert them of the change?
    What if a past donor is upset about the name change; can they demand their investment in the endowment be returned to them?
    What other impacts might there be on the endowment funds when a facility goes through a name change?

    (Ie if we change the name of the facility from the Octagon Garden to the Square Garden, and we have the Octagon Garden Endowment Fund and the John Doe Octagon Garden Endowment Fund.)

    Thanks!


    ------------------------------
    Gwen Donev
    Director of Advancement Services
    Gustavus Adolphus College
    gwendonev@GUSTAVUS.EDU
    ------------------------------


  • 2.  RE: How does the name change of a facility impact endowment funds in its name

    Posted 27 days ago
    I think you now see how having a renaming protocol added to your endowment agreement can be useful!  All of your agreements should have one or two sentences that indicate the purpose of the fund is permanent, regardless of future facility name changes.

    For now, I think it is vital you communicate with any donor who established an endowment to support a facility where that facility is mentioned with a specific name.  As you mention, you could have some unanticipated donor relations problems if you don't.  What if they do not like the name?  Or worse, what if the new name is in recognition of an individual that the donor didn't care for?  At the very least, if there isn't a renaming statement in the agreement, you will want to make an amendment.

    But to answer your question about returning funds, you are under no obligation to do so.  The donor's money was irrevocably given to you.  However, depending on the language in the endowment agreement, it is possible the donor could cite you for a breach of contract.  This is yet another reason why you want to have a conversation with these donors before the fact.  If they do not like your plans, you can work with the donor to find an alternate use for their endowment.

    In rare instances, institutions have returned funds.  However, that act will require the issuance of a 1099.

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987






  • 3.  RE: How does the name change of a facility impact endowment funds in its name

    Posted 6 days ago
    Thanks for that.

    We currently have a renaming statement in our Gift Acceptance Policy, but not in the gift agreements themselves.  I think we can easily add that into gift agreements going forward, and create an amendment for those currently impacted.

    What about living donors with future estate gifts to our general "Octogan Garden Endowment Fund"?  If the garden becomes the Square Garden, do they need to make any changes in their estate documents to indicate the name change, ie the "Square Garden Endowment Fund"?  These are donors who didn't establish a named fund, but are directing their planned gifts to the College's fund.

    Thanks!




    --
     Gwen Donev

    Director of Advancement Services

    Gustavus Adolphus College

    800 West College Avenue

    Saint Peter, Minnesota 56082

     

    Email:  gwendonev@gustavus.edu

    Office:  507.933.6515






  • 4.  RE: How does the name change of a facility impact endowment funds in its name

    Posted 6 days ago
    All gift agreements, including planned gifts, should have a clause that allows for redirecting a gift in the future should the original purpose no longer exist or become unlawful or unenforceable.  The term for these statements is a "savings clause."  So, I'd begin now to include that sort of language.

    As for previously established agreements without a savings clause, it's up to you and your counsel whether amendments to agreements - planned or otherwise - are needed.  I'd probably not worry about it at all if no change has occurred or is contemplated.  But, you will want a strategy in place for any circumstance in the future when the original purpose can no longer be honored.

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987







  • 5.  RE: How does the name change of a facility impact endowment funds in its name

    Posted 6 days ago
    One final suggestion regarding realized bequests.  Often, we do not even know that a donor has placed us in their will - let alone give us a chance to suggest language for the donor to use.  Therefore, institutions should establish a Realized Bequest Policy as either a stand-alone policy or a section within their Gift Acceptance Policy.

    The policy statements can be short and simple.  They should include the following elements:
    • The right of the institution to reallocate a specific bequest if the original intended purpose no longer exists is unlawful or unenforceable (savings clause language)
    • What action the institution will take upon receipt of an undesignated or unrestricted bequest.  I normally suggest this section indicate two or maybe three options:
      • If above a specific amount, the realized bequest is added to a Quasi Bequest Endowment.  The earnings from this endowment can be used for general operating purposes, but the corpus cannot be touched without a vote by the governing board
      • If below a specific amount, the bequest is credited to the annual fund or the highest priority for the current year annual giving program
      • You could have a third option for extremely high-value bequests that permit the Board to initially vote on the allocation - either to the quasi-endowment, another institutional priority (such as a new building underway), or a combination of those.
    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987