Dealing With Demanding Donors

Demanding donors are part of nearly every fund raiser’s life.

While most donors are easy to

get along with, others cause continual headaches for fund raisers and the charities they represent. And as more and more nonprofit groups lavish attention on affluent people who can make sizable gifts — and who are often accustomed to getting their way — fund raisers are increasingly likely to run into troublesome donors.

Donors get angry or upset for many reasons, especially if they misunderstand how their donation would be used, have unrealistic expectations for what their gift can achieve, or expect inappropriate personal favors from a charity. In many cases, the fault does not lie entirely with the donors. Many fund raisers, for instance, fail to set clear limits with elderly donors who end up monopolizing too much of a fund raiser’s time out of loneliness; others do not listen closely enough to what a donor wants.

Written agreements between donors and charities and policies that guide fund raisers in dealing with donors or with specific types of gifts can go a long way toward preventing sticky situations. But they cannot avert every difficult or unpleasant experience a fund raiser is likely to have.

Entrepreneurs who have built their own businesses and corporate executives who are used to running things often want to control every part of their philanthropy, sometimes to the detriment of a charity.

Betsy Mangone, vice president for philanthropic services at the Denver Foundation, worked with one such donor before she joined the foundation. In 1999, she says, she helped a successful businessman create a $3-million charitable remainder trust with stock from his technology company and other high-tech businesses. Through such trusts, donors obtain investment earnings for themselves and sometimes their heirs; after their death, charity beneficiaries get any money remaining in the trust.

Ms. Mangone says the donor insisted on managing the investment of the assets himself, saying he would do better than anyone else at increasing the value of the trust.

“We went over the numbers together and he said, ‘Don’t worry, I’ll invest it and do a good job for you.’” Officials at the charity, who believed in the donor’s financial prowess, publicized his gift widely, says Ms. Mangone.

But soon after the trust was created, the stock market plunged, and the investments the man had made fared poorly; in a few short months, the trust was worth less than $1-million and it has still not regained its value.

“This story did not have a happy ending,” Ms. Mangone says. “If I ever work with a donor like this again, I would gather all the influential people in his life, like his professional advisers, to better discuss the pitfalls that might await a gift so aggressively invested.”

Other donors want to micromanage the projects their gifts support, says Yosef I. Abramowitz, chief executive officer of Jewish Family & Life, in Newton, Mass. He recalls one man who tried to step in and supervise staff members working on a program he supported.

“It got so bad that our board chair had to intervene,” Mr. Abramowitz says. The donor’s interference, he adds, cost the charity money, as it tried to carry out changes he wanted. The solution: appointing Mr. Abramowitz to take on the formal role of serving as a conduit between donors and staff members. “We created a strong buffer between staff and major donors,” he says. “One of my job descriptions is to take it on the chin, so I can insulate them from major donors.”

Mr. Abramowitz recalls yet another donor who demanded a different type of control, one that caused a big loss for his charity. The donor was so thrilled with the success of a program he financed with $2.5-million “that he demanded the project back so he could create his own nonprofit and run it.”

When Mr. Abramowitz, who declines to name the donor, resisted, the donor’s determination — and hostility — only grew. The charity did not have a legal agreement with the donor about the terms of the gift, so it decided to give in and the donor started his own organization.

Even though the donor got what he wanted, the wrangling over the gift cooled his interest in Jewish Family & Life. “Ultimately, we did everything he asked for, yet we are not on the receiving end of any more gifts,” Mr. Abramowitz says. “The lesson is: Make sure you get a gift agreement in writing that offers the organization protection and spells out ownership rights.”

People who are making big and financially complicated gifts sometimes balk at seeking advice from their lawyers, financial planners, or other qualified experts.

“I encounter several donors each year who don’t want lawyers,” says Jeff Comfort, a senior planned-giving adviser at Georgetown University.

Those donors often point out that the university has handled many similar transactions successfully, and they see no reason why they should pay for yet another expert. But a professional adviser who represents the donor’s interests rather than the charity’s, Mr. Comfort notes, is an important safeguard to avoid trouble later, such as allegations by a donor’s heirs that a charity manipulated a donor in failing health.

Good records of communications with donors who refuse professional advice are one way charities can protect themselves, says Lynda Moerschbaecher, a lawyer in Carlsbad, Calif., who specializes in donations to charity. She said such records made all the difference when a university she advised was threatened with a lawsuit by a donor who received a big tax bill soon after he decided to transfer assets from a retirement fund into a charitable trust.

When the man first raised the idea of setting up a trust, a university fund raiser wrote him a letter saying the gift could have significant tax consequences and advising him to consult an expert. In addition to a copy of the letter, Ms. Moerschbaecher says, the fund raiser also had a record of a follow-up telephone call to the donor, asking whether he had consulted his advisers. The donor replied: “I’ll have two martinis, and that will be my adviser.” Confronted with the letter and the fund raiser’s notes, including the flip remark, the donor backed off, says Ms. Moerschbaecher.

She says that fund raisers should keep copies of a simple one-page “telephone record” form handy, fill it out whenever important details of a gift are discussed, and add it to the donor’s file. “I write mine during the phone call,” she says. “You have to do it immediately, not half an hour later when you forget stuff.”

Some fund raisers take an added step: They ask the donors to sign a statement saying they were advised by the charity to seek legal or financial counsel and have done so to the extent they deem appropriate. In some cases, children or other heirs are also asked to sign such a statement, to show they understand the terms of the gift and don’t have any concerns that the charity acted in bad faith.

A donor who was considering making a six-figure gift to build a tennis court at a small educational institution in Pennsylvania made a demand the charity could not meet, recalls Andre Donikian, an Indianapolis planned-giving consultant. The donor, recalls Mr. Donikian, “wanted to reserve the court for a few hours a day, from 5 to 7 p.m., which is peak playing time. I just said, ‘That is ridiculous.’”

Mr. Donikian, who as an adviser to the institution, says that, although he and the donor got into an argument over the issue, the man eventually relented. With some donors, says Mr. Donikian, “if you don’t push back, they do not respect you. With difficult people, you need to know when it’s time to push back and when you say no.”

Wayne Olson says that, as a fund raiser at the University of Richmond, he remembers working with a woman who wanted to donate photographs to the university’s museum. Mr. Olson, who now is vice president of the Trust Company of Virginia, says he immediately offered to pick up the photos and deliver them to university historians and archivists, who would assess their value.

When he visited the woman to collect the photographs, says Mr. Olson, “she said that she was expecting ‘a little pat on the back.’ She said ‘I’d like some publicity.’”

Returning to his office, Mr. Olson says, he wrote the woman a gracious letter, thanking her for her interest and promising that he would be in touch as soon as he had more facts, but he wasn’t yet sure whether the photographs were of interest to the university or what sort of publicity could be arranged. Soon after, he says, “she started talking to her husband and friends about how we didn’t appreciate her gift. I got calls from two of her friends, asking what was going on.”

Meanwhile, he says, university officials could find no connection between the photographs and the university. When Mr. Olson told the woman the university did not want her donation, “she got really irritated and repeated, ‘How come you cannot give me publicity?’”

Mr. Olson decided it would help to bring another colleague into the relationship, both to help explain the university’s rationale and to serve as a witness in case the conflict escalated.

“I took the top archivist as a third party to explain why her demands were not valid,” says Mr. Olson. “I also wanted to show that we went to the top of the food chain. I brought the head guy with me to demonstrate that.”

Mr. Olson says that having his colleague there helped bolster the university’s argument that the gift was inappropriate and was a good precaution if the woman accused the university of damaging the photographs.

In other cases, fund raisers hear from donors who want to be honored in public, even if they are not making a big gift. Kathryn Miree, a lawyer in Birmingham, Ala., says that one of her nonprofit clients, whom she declines to name, was recently contacted by a man who wanted to donate $18,000, but also wished to be included in the group of donors who receive special recognition for giving $25,000 or more.

“The donor said if we did this, he would keep giving, but if we did not, the charity would not get any more money from him.” Nonprofit groups should not go along with such demands, because creating an exception for one donor could open the door to others, says Ms. Miree, and could anger donors who gave larger sums. The man never did make a gift to the charity, but Ms. Miree says the organization has had no regrets about its refusal to set such a precedent.

When Gail Chesler was a fund raiser at a medical center, she received calls nearly every day from a widow who had promised at least $1-million to the institution.

“She would call to complain about her doctors, their billing practices, the treatment she received from various staff members,” recalls Ms. Chesler, who declined to name the institution or her current employer. “She would threaten to change her will or remove the medical center completely to reflect her displeasure.”

Ms. Chesler says that she and her colleagues tried to appease the woman by finding alternative doctors, keeping her away from staff members she disliked, and intervening on her behalf in billing disputes. “We put the whole hospital at her beck and call,” she says, but nothing worked.

Finally, Ms. Chesler says, “I stopped trying to solve every one of her many issues.”

When the donor kept calling and threatening to change her will, Ms. Chesler says she remained cordial. But she began telling the woman that if she was truly unhappy with the medical center she should not give it any money — a comment that usually ended the conversation.

Even after giving up efforts to placate the woman, Ms. Chesler says she found the calls nerve-wracking. “I was always thinking it would be because of me that we wouldn’t get the money,” she says. “But you have to set boundaries. I put some distance between that woman’s complaints and me.”

In the end, Ms. Chesler had nothing to worry about: She says when the woman died, the medical center received a seven-figure gift.

But some demands by donors are worth meeting, says Frank Bentz, a fund-raising consultant in Indianapolis, who recalls the elderly donor in New York he was trying to persuade to give to the University of Minnesota when he was a fund raiser there. The donor knew Mr. Bentz was attending a university fund-raising event in Manhattan, and had agreed to attend.

“Then she told me she had a boyfriend and could we send a limo for him because he had a hard time getting in and out of taxis,” Mr. Bentz recalls. “My boss had a fit, but I told him it was worth it. Eventually, she left her entire estate to us.”

As more and more charities solicit planned gifts, donations that often involve complicated tax breaks and provide income to donors and heirs, the potential for misunderstanding has grown.

Ms. Moerschbaecher recalls how upset a couple in their mid-50s became a year after they created a $2-million charitable remainder trust to benefit a church. The husband and wife both quit their jobs to do missionary work, figuring that they would use the money from the trust to help pay their living expenses. They expected the trust to provide $140,000 a year, and when they died, the charity would end up with any money left over.

But in its first year, the couple received just $63,000 from the trust. That was because the fund raisers and advisers who worked with the couple said they were certain the donors wanted their trust to pay a percentage of its value each year, rather than fixed payments. The couple, it turns out, did not understand the legal terminology describing the payout rate in the trust and assumed they would receive a fixed amount each year.

Ms. Moerschbaecher was eventually able to revise the terms of the trust, but that wasn’t easy because, at the time, federal law did not permit changes in the approach for paying out a charitable remainder trust.

To avoid such misunderstandings, Ms. Moerschbaecher says, fund raisers should always ask donors to explain in their own words how a contribution will work, particularly in cases where a donation provides both tax breaks and income.

Not all problems with gifts are caused by donors, however. Some fund raisers jump to conclusions about what a donor wants and do not dig deeply enough to understand the person’s true objectives in making a large gift.

Ms. Miree, the Alabama lawyer, says she was asked to meet with a donor who wanted to give $50,000 to create the first gift annuity at a community foundation, which she declines to name. The foundation’s fund raisers told Ms. Miree that the donor “would not budge” from her demand for annual annuity payments that were one percentage point higher than the foundation could pay.

Most charities set payment rates based on donor’s age and other factors, following advice from the American Council on Gift Annuities about how to best ensure that a nonprofit group will get at least half the money put into an annuity.

Both the donor and the foundation were very frustrated by the impasse, Ms. Miree says.

After posing several questions that shed no light on why the donor was so insistent, Ms. Miree says she finally asked the woman point blank why it was so important for her to receive a 9-percent return rather than 8 percent.

“She said she wanted to be able to give the income away,” says Ms. Miree. “She had a strong charitable intent, but they had assumed she just wanted the income.”

Once the donor’s objectives became clear, Ms. Miree says, it was a simple matter of choosing a different gift, a donor-advised fund, that achieved the woman’s goals — and benefited the community foundation.

“I see this type of problem over and over,” says Ms. Miree. “You hear what the donor says and you go with that, but the donor may not understand it the way you do.”

“You have to start with what the donor is trying to achieve,” she adds. “If you know that, you can almost always realize a gift.”