Jewish people are particularly good at philanthropic giving. This cultural proclivity probably stems from the Jewish religious imperative to give tzedakah, charity to promote what is good and just in society. Today, it is common to see Jewish names plastered across hospitals, university buildings, libraries, synagogues and cultural institutions of every sort.
There are innumerable personal, financial, moral and social reasons to give. And despite problems with access and other inequalities, private gifts, large and small, have made American institutions the envy of the world. I am often asked, when people divorce, or for whatever reason, default on a gift as a couple, are they still obligated to continue to pay on a charitable commitment, going forward? Let’s consider the issue.
Backing out of a commitment to give under any circumstance – the gift is forgiven
Initially, people sometimes make promises and fail to deliver. Usually, the promised gift is forgiven if the matter is handled delicately and respectfully. Institutions want to preserve relationships with donors. Donors, likewise, generally want to preserve their relationships with the institutions about which they care, even if they need to walk-back a donation.
Backing out of a commitment to Give – the institution enforces the gift
Sometimes, however, conditions surrounding the gift get more complicated. Consider the example of a philanthropist who promised to fund a project that would bear his name, and for whatever reason, backed out of the project. Based on the legal principles of detrimental reliance and promissory estoppel, the philanthropist, even without having entered a contract, can be forced to deliver on his promise in certain circumstances. Such a situation might occur if the institution relied on a reasonable promise, that reliance was detrimental, and the only way damage can be avoided is to enforce the promise. Such situations are rare, but they do happen. In such a case, the institution would be free to rename the project.
The commitment is ongoing during divorce
It is somewhat common for philanthropic couples to make gifts that are paid over a period of time. Upon divorce what happens? If, when a couple divorces, they can no longer afford the obligation, couples in these situations, or lawyers on behalf of the couples, almost always engage the institution. Generally, institutions are eager to help solve these problems.
Other times, the outstanding obligation is treated as a marital debt. The couples may work together to renegotiate the terms of the commitment and share any tax benefits or other benefits attendant to the gift. From a divorce perspective, the gift obligation between the spouses will be treated as a debt to be shared, in an agreed upon percentage. Or, if the parties cannot agree, just like an asset, a debt is presumed to be divided 50-50, or otherwise as a judge or magistrate deems fair and equitable under the circumstances. When a couple defaults on an obligation, the institution can rename whatever was gifted, if they choose, or as according to the charitable documentation provides.
More difficult are the situations where, upon divorce, couples want to rename, or “de-name,” gifts previously given. The original charitable documents may control the outcome. Sometimes, lawyers need to get involved, but again, institutions tend to cooperate to find solutions that work seamlessly for the divorcing philanthropists.
As with all these situations, solutions require finesse and a deft hand.
This article originally appeared as a column for the Cleveland Jewish News.