Be careful with those charitable pledges!

  • by Admin
  • August 5th, 2015

Many if not most of us have favorite charities—foundations, non-profits, research centers. We make periodic donations and support those charities throughout our lives. In some cases, donors are so committed that they make a pledge and name that charity as a beneficiary upon the donor’s death. During his or her life, the donor gets a nice plaque, accolades from the recipients, name in the paper, etc. But were you aware that once that pledge is made, at least for the time being, it cannot be revoked?

In California a case is headed to the courts regarding a donor who revoked her pledge prior to her death. There have been plenty of cases where heirs “ignore” the wishes of the deceased in order to keep the wealth to themselves. But this one is different.

In 2014, Paula Kent Meehan, co-founder of RedKen hair products, died. During her lifetime she donated to a number of charities with the largest beneficiary being St. John’s Health Center in Santa Monica, California. In 2007 she made a pledge of $5 million to be paid upon her death to fund cancer research and promote St. John’s mission. But in 2013 Meehan apparently became disenchanted with the organization after they made some changes to the executive staff that she found unsatisfactory. Unbeknown to St. John’s, she pulled her pledge and that was that. Or so everyone thought.

Meehan it seems had originally signed an “estate pledge commitment” that promises the gift would be legally binding “on me and my heirs, executors, administrators, personal representatives, and assigns.” After she died St. John’s sent a letter to the representatives of the estate asking them to fork over the money—they said no and the battle began.

Other cases similar to this have come up in the last few years. One Princeton University Donor decided not to honor his gift because he believed that the university was not using the money in the way he had intended. He lost the case after 6 years of haggling, with Princeton agreeing only to pay legal costs. Another case in California at Chapman University involves a 98 year old philanthropist who believes he was “coerced into donating $12 million” and that the university failed to keep their promise to him in regard to how the money would be used. That one is still pending.

The point is that when it comes to estate planning like tax planning, you cannot be too careful. Find an expert in estate planning and discuss all details of anything you plan to bequeath before you sign on the bottom line—the pledges may not be able to be reversed.

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