For wealthy donors who wish to put their name on a building, beware. There can be a lot of disappointment for donors who give away large sums of money, thinking that they would get to see their name on a building or institution like a university, science lab, or cultural center but end up in a legal battle instead.
Naming Rights and More
The best way to ensure that this type of drama is avoided is for donors to clearly state their wishes in a detailed, legally binding document. Donors need to make sure that all payment terms, signage, publicity, and deadlines for work to be done are also set within the contract. Each party should know exactly what they are agreeing to.
For example, one wealthy donor wanted to leave millions to his alma mater and have a library named after him. His agreement specified that his name was the only one to be on the library and that it must last into perpetuity. The detailed agreement came in handy when the university tried to replace the donor’s name with another after a few months. One phone call was all that it took to rectify the mistake because the contract provided that the donor could sue the school to enforce the agreement or get his money back.
Some disputes go beyond the naming rights and into other areas. For example, country singer Garth Brooks recently got into a battle with an organization over the construction of a building. Mr. Brooks made a $500,000 donation to Intigris Canadian Valley Hospital in Oklahoma on the condition that the hospital would build a women’s center named after his mother. The hospital argued that it never agreed to those conditions and used the money elsewhere. Mr. Brooks sued and the jury not only awarded him back his donation but also doubled the award for punitive damages against the hospital.
Donors have the right to decide how much flexibility an organization can have with a donation. The donation can be made with strict compliance guidelines, or it can be given with a little leeway. They should also be sure to elect someone to ensure that the recipient sticks to the agreement after the donor becomes incapacitated or dies.
Other Issues with Naming Rights
Donors much also consider how long the recipient must stick to the agreement. As years go by, the circumstances surrounding the donation and naming rights might need some flexibility. For example, donors should consider what should happen if the building needs serious renovation or is torn down, and new potential donors want naming rights.
Similar considerations apply if the donation is a bequest or a gift named in an estate plan to an organization or institution. In that case, the estate plan should include room for flexibility in case the gift’s purpose is no longer relevant. That can be accomplished by either giving the recipient leeway with the gift or by naming alternate plans for the donation.