As a nonprofit, donations and legacy gifts fuel your organization and help you further your cause. It is an amazing achievement when you inspire a donor to contribute to your cause. These legacy gifts can be left to your nonprofit through a donor’s trust or will. In a perfect world, receiving a legacy gift from a donor who was passionate about the work you do would be a painless and seamless process. Unfortunately, disgruntled beneficiaries or unfit trustees can drag out this process, diminish the share of the estate you are entitled to, or prevent you from receiving it altogether. If you worry that this might happen to your organization, it is normal to wonder, What is an endowment fund for a nonprofit, and when do I need a lawyer? We are more than happy to explain this to you.
At Gokal Law Group, our firm fosters a culture of giving back. We understand that you have selflessly dedicated your life to helping those in need, and our goal is to ensure trust and will disputes do not derail your mission.
“Donations and support from donors are the heart and soul of the work that nonprofits do, and when complex litigation arises that threatens their funding, we know that this impacts more than just their organization – it hurts the individuals they help,” said Alison S. Gokal, who is a Partner at Gokal Law Group and a long-time advocate for nonprofit organizations. She serves as the co-chair of the OCBA Community Outreach Committee and has served on the boards of the Orange County Trial Lawyer Charities, the National Charity League, the Illumination Foundation, and the Hope Center for the Arts.
What Is an Endowment Fund for a nonprofit?
Generally, an endowment fund for a nonprofit is any gift or donation that serves a specific purpose. Funds from an endowment are invested to generate income used to promote the endowment’s specific cause. A donor may restrict the gift for a specific use or period of time.
Endowments are often used by educational, cultural, and healthcare organizations. Still, any organization, no matter the size, can create one. These funds can be crucial to cover operating costs, fund specific programs, and provide scholarships.
For nonprofit organizations like yours, these funds:
- Reduce reliance on annual fundraising.
- Support long-term goals.
- Enhance your organization’s reputation.
An endowment can be the lifeblood of your nonprofit’s philanthropic endeavors, and legal counsel is often essential – especially when a legacy gift to your organization is contested or delayed by other beneficiaries, trustees, or litigation. Here’s when you need a nonprofit trust litigation lawyer.
When Do You Need a Lawyer for Your Endowment Fund?
A lawyer is essential at different stages for those asking, What is an endowment fund for a nonprofit, and when do I need a lawyer? When setting up and funding an endowment, a lawyer plays an invaluable role in drafting documents, navigating tax implications, and ensuring compliance with various statutes and regulations.
But even if you have worked with an attorney to set up an endowment fund, disputes can arise that can jeopardize your receipt of deserved and necessary legacy gifts. There are two situations that may require an experienced litigation attorney:
- When your nonprofit is dragged into a trust or will dispute.
- When a trustee is not doing their job or breaching their fiduciary duty.
When Your Nonprofit is Dragged into a Dispute
Donors often leave behind endowments to create a lasting legacy of support for organizations and causes they were passionate about. But after someone passes away, it is unfortunately common for estates to enter disputes, which can involve beneficiaries challenging the gift left behind to your organization.
These disputes can take many different forms. Sometimes, beneficiaries directly dispute your endowment because they feel entitled to the assets. In other situations, beneficiaries enter disputes with one another. When beneficiaries have these kinds of disputes, you cannot receive your endowment until they are resolved.
In other cases, a beneficiary could claim that the deceased donor did not have the mental capacity to make the decision to leave your organization a gift. In the event any of these disputes are brought before the probate court, the probate court could order that all beneficiaries – including your nonprofit – must enter “Breslin mediation”, at which point having experienced litigation counsel is of the utmost importance.
It is important to understand the implication of Breslin Mediation, which is the result of a 2021 California Court of Appeal ruling in the case of Breslin v. Breslin. This court ruled that if a beneficiary fails to attend mediation they had notice of, that beneficiary may forfeit all control over the outcome of any settlement at the mediation, and other beneficiaries can shape the settlement in such a way that reduces, or even eliminates, a beneficiary’s interest in the estate.
When the Trustee is Not Doing Their Job
If your organization is named the beneficiary of a trust, the trustee of that trust has certain obligations to perform. A trustee not doing their job or breaching their fiduciary duty is another reason you may need to work with a trust litigation attorney for nonprofits.
It’s important to understand that a trustee has a fiduciary duty to always act in the best interests of beneficiaries and the trust. When a trustee fails to adequately manage the estate and assets, thereby diminishing your share of the estate, this may be a breach of their duty, and it is essential to work with a trust litigation attorney to hold them accountable, defend the deceased donor’s legacy, and safeguard your mission.
In other situations, a trustee may misappropriate estate funds, operate with a conflict of interest, or outright steal estate funds, which can minimize or squander the endowment your organization is entitled to receive.
Regardless of the situation, if a trustee is not upholding their fiduciary duty or siphoning assets for their benefit out of the trust, working with a nonprofit trust litigation lawyer is of the utmost importance.
Is a Dispute or Unfit Trustee Threatening the Endowment You Deserve? Our Team Can Help.
So, now you know the answer to the question: What is an endowment fund for a nonprofit, and when do you need an attorney? As soon as you suspect a trustee is not doing their job or beneficiaries enter disputes with each other or your organization over shares of an estate, it is imperative that you work with a premier nonprofit trust litigation lawyer. The legal process is time-consuming, complicated, and intimidating. But when you work with Gokal Law Group, you work with a team of attorneys who are passionate about advocating for the nonprofit community. We can help you by:
- Representing your nonprofit in mediation or litigation.
- Navigating discovery in the event of a dispute, uncovering the donor’s intent, and collecting the necessary evidence to prove your case.
- Fighting for your nonprofit during litigation to ensure you receive the endowment you deserve.
Don’t let legal hurdles hinder your mission. We can help you navigate litigation and disputes so you can continue making a difference. Schedule a consultation today to work with a team of nonprofit trust litigation attorneys who are as dedicated to your cause as you are.