Ethics of Engaging Seniors About Possible Real Estate Gifts

By Dennis Bidwell
August, 2017

Here, drawing on some of the suggestions in that document, is an approach that has worked for me and my clients and, I believe, has served well the interests of many donors and their families.

1. Nothing is more important than keeping in mind the best interests of your donor prospect’s present and future needs, as best you can determine them. This can mean putting the brakes on when an enthusiastic donor wants to give away more than appears good for them. Some years back I was working with a hospital in conversation with a retired nurse who was devoted to this organization, for whom she had worked her entire career. She wanted to give her home to the hospital, retaining a life estate. The problem was that she didn’t have much in the way of other assets, and she might have risked impoverishing herself should health challenges come her way in the years ahead. We expressed great appreciation for her extraordinarily charitable impulse, but recommended that she instead leave the house to the hospital in her will, leaving her options open.

2. It’s also important to keep in mind that one of the donor’s needs may very well be to feel good about the charitable legacy they leave behind. Indeed, I think the most satisfactory element of my work is helping people to realize that they sometimes have, through their real estate assets, charitable capacity way beyond what they thought possible. In doing so, extraordinary gifts sometimes result – gifts that leave the donor proud and satisfied beyond measure.

3. Always take time to probe to learn the donor prospect’s full set of objectives. Too often gift planners start a conversation with a donor prospect with a particular gift structure in mind. It’s almost always better to start by seeking to understand a donor’s complete situation – their income objectives, their tax planning objectives, their wishes regarding various pieces of real estate, their life-style wishes, their desires toward their children and other heirs, the variety of charities they wish to help. From this will come a variety of gift proposals aimed at meeting their particular objectives. The proposals are likely to be much better received when grounded in the prospect’s stated intentions.

4. Always urge your donor prospects to seek professional input from financial and legal advisors. But think carefully about the right time for donors to seek this input. I have worked with many gift officer clients to present a menu of interesting and appropriate real estate possibilities for the prospect to consider Sometimes the intrigued donor has immediately referred these possibilities to their attorney or other advisor, who has dismissed them out of hand as unconventional or untested. (Sometimes this means the advisor is personally unfamiliar with the recommended approach.) I have found it often works better to spend time with the donor, and family members, letting them arrive at their own understanding of the proposed arrangement, and only later in the process — when they are comfortable with a particular gift structure — turn to their professional advisors. At that point the advisor will of course feel compelled to caution them if they really see undue risk, but hopefully they’ll see their role more as implementing a viable strategy than finding reasons to say no.

5. Encourage the involvement of family members. This is trickier than it seems. Especially with real estate that’s been in the family and has acquired emotional attachments. Sometimes parents are very clear-headed about their desire to dispose of a piece of real estate knowing full well that would not be their children’s preference. Sometimes parents, well-advised by counsel, want to treat one child very differently than another. Which is to say that the involvement of children, or brothers and sisters, in the discussion or property disposition may or may not be appropriate. Like many other matters, this is where good judgment, aided by the advice of experienced colleagues, is essential.

6. Other guidelines. I have seen in the Santa Fe document and elsewhere a number of practices that seem important and reasonable:

a. Ask potential donors if there is anyone else they’d like to join them in a meeting with you.
b. Ask if the potential donor has an executed durable power of attorney. If so, include that person in discussions where feasible.
c. Always emphasize that no immediate decision is necessary.
d. If there is any reason to question the mental capacity of the potential donor, be sure that one of the donor’s professional advisors and/or a trusted family member is present for discussions.
e. It is important to promptly provide a written summary of discussions that have taken place, and to encourage the donor prospect to share this with others where appropriate (keeping in mind the caution of item #4 above.)

These are almost always somewhat tricky situations. It’s not appropriate or ethical for the charity’s representative to come on too aggressively or with too specific of a proposal early in the conversation with the prospect. On the other hand, it’s not the job of the charity’s representative to be so cautious and timid, out of fear of appearing pushy, that they withhold from the donor prospect creative and appropriate ideas that might unlock charitable potential in ways fulfilling to donor and charity both. Experience and judgment, and adherence to a common sense code of ethics, will reveal a middle path.

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