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| Path: Main Street : Resources & Library : Research Articles : Feature Article |
Legal hazards await the unwary in development
July 17, 1996; Canadian FundRaiser
"Development can be a legal minefield for those who are unwary," according to Robert Patterson, lawyer and Director of Trust Services with the Columbia Union Conference of Seventh Day Adventists. Patterson made this remark during a recent seminar at the 22nd North American Conference of Christian Philanthropy in Toronto. Among particular areas of hazard he discussed, are conflicts of interest, undue influence, and the unauthorized practice of law.
Conflicts of interest
c Conflicts of interest arise when there is a divergence of interests between two parties, such as when the tax needs of the donor contravene the needs and desires of the charity or when the donor prefers a revocable trust over one in which the charity is named irrevocably. According to Patterson, the easiest way to deal with these situations is by safeguarding independence. He recommends encouraging the potential donor to seek independent legal counsel, and suggests that charities provide a list of three or four lawyers who have experience in the particular area.However, along with suggesting several attorneys, Patterson cautions that the lawyer's client must always be made clear to all parties. When initially approaching a donor, the lawyer must disclose that he or she represents the charity. When the lawyer is brought in to assist with a legal document for the donor, the lawyer must then disclose to the organization that he or she is now working in the interest of the donor.
Patterson also recommends that charities develop acceptance policies for the different trust mechanisms. Such policies enable organizations to give potential donors a clear picture of the scope of the donation possibilities and any restrictions with respect to trusts or donor directed endowments. These policies can also help the charities to articulate their needs in a specific area.
Undue influence
Undue influence is the process of exerting so much influence on the person making the will or gift that their action is not an expression of their interest, but of the person exerting the influence. In his seminar, Patterson addressed the relationship between a parishioner and pastor, where there is an explicit trust. However, it is also easy to imagine cases relating to mental capacity, emotional state, physical health, or other questions of susceptibility, where a potential donor may become the subject of undue influence.To combat the potential for forfeiting gifts as a result of undue influence, gift planners should involve the donor's family and legal counsel in the discussions and decision to make a gift. Additionally, charities should guard against gifts which are motivated more by a personal relationship with the gift planner that the charity itself.
Unauthorized practice of law
While many planned giving officers have developed their own legal forms for various trust instruments, gift planners should be cautioned against the unauthorized practice of law if they are not lawyers. Donors should be encouraged to involve their lawyers or other independent legal counsel. In all cases, documents should be drafted by a licensed attorney.While there are many legal minefields in the area of relations between gift planning offices and donors, the key to successful results is disclosure and documentation.
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