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  • 1.  Return of endowment principal

    Posted 12-12-2023 09:27 AM

    We have a situation wherein an endowment was established in error by an executor of an estate prior to having full authority to do so.  Sufficient agreement had not been given by other estate stakeholders.

    We are now in the process of refunding the principal amount to the estate.  Does anyone have any experience in how to handle the $ gain from holding that money temporarily?

    Thanks



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    wes.ardoin@gmail.com
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  • 2.  RE: Return of endowment principal

    Posted 12-12-2023 09:59 AM
    No specific experience for an endowment, but in a similar situation, where money was turned over in error to a nonprofit foundation and had to be returned, the foundation received management fees for investing the funds. 


    Thank you,
    Isaac Shalev
    Data Strategy Expert
    Sage70, Inc.
    (917) 859-0151
    isaac@sage70.com

    Schedule a 30-minute consultation now:






  • 3.  RE: Return of endowment principal

    Posted 12-12-2023 10:06 AM
    The only obligation you have is for the return of the principal. They have no claim on any earnings, just as they would not be penalized for losses. This was their mistake, and it's a good thing it was not an expendable fund where you had already spent the money.

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987






  • 4.  RE: Return of endowment principal

    Posted 12-12-2023 10:14 AM

    Thank you both!



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    wes.ardoin@gmail.com
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    Original Message


  • 5.  RE: Return of endowment principal

    Posted 12-12-2023 10:23 AM
    I can also imagine some donors who might threaten legal action, especially if you created the endowment without a bonafide agreement (which might not be true here). Still, I can imagine a situation where it might be the path of least resistance (and public discussion) for you to cut a check for some amount.

    I have observed such an arrangement when an institution failed to honor the terms of an endowment and the donor demanded a refund "plus interest." The institution opted to return a portion of those earnings. But, at the same time, they reported the income to the IRS by way of issuing a 1099 to the donor.

    This also reminds me to mention that if the funds were received and invested last tax year, you may need to issue a 1099 anyway. The estate may well have reduced last year's tax burden by the amount of that donation.

    John


    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987





    Original Message


  • 6.  RE: Return of endowment principal

    Posted 12-12-2023 10:38 AM

    We do have an agreement in place which established the new fund.  We also have in writing, via email, from the new executor, that we only return the principal.  I think we are probably out of the woods there in terms of any legal threat as well as hard feelings.  The new parties involved are apologetic for our inconvenience.



    ------------------------------
    wes.ardoin@gmail.com
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    Original Message


  • 7.  RE: Return of endowment principal

    Posted 12-12-2023 11:17 AM
    Wonderful.

    Although things went a bit South here, I'd encourage your major gift team to include the family spokesperson in a portfolio. There obviously was some interest in giving to your organization. There could still be a cultivation opportunity down the road.

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987





    Original Message


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