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------------------------------
Original Message:
Sent: 12-12-2023 10:22 AM
From: John Taylor
Subject: Return of endowment principal
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:
Sent: 12/12/2023 11:14:00 AM
From:
Subject: RE: Return of endowment principal
Thank you both!
------------------------------
wes.ardoin@gmail.com
Original Message:
Sent: 12-12-2023 10:05 AM
From: John Taylor
Subject: Return of endowment principal
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
Original Message:
Sent: 12/12/2023 10:27:00 AM
From:
Subject: Return of endowment principal
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
------------------------------
wes.ardoin@gmail.com
------------------------------