Charitable pledges can present a real problem after a person’s death if the pledge is not specifically dealt with in the person’s estate planning documents so that the donor’s true intent is made clear.
A charitable pledge must have all of the elements of a contract (offer, acceptance and consideration). Consideration is typically the missing element. Consideration has been found when the charity agrees to name a building after the donor in exchange for the pledge or where the pledge will be used to secure gifts from others. While California Civil Code Section 1614 provides that “a written instrument is presumptive evidence of consideration” in a trust context the trustee (or executor) must make a determination that the pledge is a valid and enforceable debt of the decedent. As a result, it may be that only a large pledge will satisfy the consideration requirement, placing the fiduciary and the charity in a difficult situation absent a clear statement of intent in the decedent’s trust or Will. The trustee may be required to obtain court authority to honor the pledge, which will increase the cost of administration. Or the charity my consider bringing an action to enforce the pledge, which may be undesirable from a public relations point of view. This is truly a “lose – lose” situation.
In a recent estate, the client died without having discussed the charitable pledges that he had made during his lifetime with his attorney and the charities to which the pledges were made never advised the donor to make certain that the satisfaction of the pledges were set forth in his estate planning documents. The bulk of the client’s estate was left to several charities, which included certain of those charities for which there were balances due under pledges made by the decedent. For each pledge it was clear that the form provided by the charity, which was clearly completed in the decedent’s handwriting and acknowledged by the charity, easily satisfying the offer and acceptance requirements. However, it was also clear that the charities had not agreed to take any particular action in reliance on the pledge. And it was not clear whether the decedent had taken the outstanding balances due on his pledges when determining the percentage of his estate that he was leaving to the various charities under the terms of his trust. The trustee ultimately decided that it was necessary to file a petition with the Probate Court to obtain instructions concerning the enforceability of each separate pledge as a debt of the decedent.
This case is an excellent example of why charities should advise their donors of the need to provide for the satisfaction of any outstanding pledge in their estate planning documents and estate planners should add this to their list of issues to discuss with clients. It is now on my list.