Bequests of Art

March 13, 2019

For many people, a meaningful part of their legacy is the art they’ve collected during their life. When considering what becomes of their collection after they’re gone, there is a natural desire to get it where it will be most appreciated, and often that means donating it to an institution such as an art museum. A charitable bequest of art written into one’s will or trust may provide a valuable tax deduction as well as allow future generations to enjoy the works. However, these purposes can be frustrated if this intention is not discussed in advance with the recipient organization.  

All too often, the first notice an institution receives of an estate gift is a call from a benefactor’s family, attorney, or financial advisor with news that the deceased donor has provided for them in his/her will or trust with a bequest of all or a part of his/her collection. While very appreciative of the donor’s beneficence, the institution is unable to accept the gift. The works may be outside the institution’s mission or curatorial departments. Conversely, it could be too duplicative of objects they already have. Donations of large collections may simply involve a greater number of works than the institution can display or effectively store. When the designated recipient organization cannot accept such a gift, the natural consequences can include disappointment for the decedent’s family and heirs, regret for the institution, and complications in settling the estate.

To avoid these problems, a donor should let the organization know of the intention to include it in the estate plan. Any organization would be ready and willing to consult confidentially in advance on the proposed gift and assist with the arrangements and documents to best achieve the donor’s desires. If the art or collectibles are not a good fit with that particular organization, they can help guide the donor toward other solutions and possibly another better-suited recipient. As is true with so many endeavors, communication and collaboration yield the best results for all involved.

Impact Investing for Nonprofits, Endowments and Foundations

March 12, 2019

Nonprofit endowments and philanthropic foundations are increasingly interested in how their investment practices can be aligned with the institution’s mission, values and goals. One way to do that is impact investing, which is a process designed to align environmental, social, governance and faith-based goals with an investment portfolio. As impact investment opportunities become more prevalent, institutions are taking notice on behalf of their stakeholders.

In the past, investors of philanthropic funds have not had much evidentiary support for investing alongside their mission. Now, there are three converging trends making it easier for fiduciaries to implement impact investment programs that are capable of delivering competitive returns:

• An increase in data available to investors;
• A shift from negative to positive screening; and
• The proliferation of investment options across asset classes and international borders

Impact investing in the U.S. actually represents around one-fifth of all investments under professional management. While a variety of stakeholders have begun to call on nonprofit institutions to direct endowment assets toward investments that offer competitive returns and benefit society (and move away from investments that undermine the institutional mission) investors need to be comfortable that impact investing is consistent with their fiduciary responsibilities.  

Fiduciary investment responsibilities for endowment investors broadly is defined under two primary acts: the Uniform Prudent Management of Institutional Funds Act (UPMIFA) and the Uniform Prudent Investor Act (UPIA). UPMIFA applies to nonprofits structured as corporations, while the UPIA applies to nonprofits established under a trust agreement. UPMIFA provides that in managing investments, fiduciaries must act in good faith and with the care that an ordinarily prudent person in a like position would exercise under similar circumstances. Other considerations include:

• The charitable purpose of the institution
• General economic conditions
• Effects of inflation and deflation
• Tax consequences
• The role of each investment in the portfolio
• Expected total return from income and appreciation
• The charity’s other resources
• The asset’s special relationship or value to the institution's charitable purpose
• Associated costs

Challenges and Opportunities 

Endowment fiduciaries should be attentive to the continuous evolution of the impact investing landscape. There is a growing body of research that suggests it is possible to pursue sustainable and mission-aligned investment without sacrificing performance. This evolution will present both challenges and opportunities in making investment decisions: opportunities in constructing portfolios that are impact-aligned while meeting the overall mission of the organization and challenges in balancing the institution’s financial needs.  

Best practices and investment policies should reflect on the institution’s mission, goal and objectives. These can be integrated into an Investment and Impact Policy Statement, RFP’s, proxy voting, and portfolio management engagement with firms that have sustainable and mission-aligned expertise. Investment committee members should become knowledgeable of sustainable long-term investment practices.  

Fiduciary principles and investment opportunities provide a pathway for endowment trustees and managers to better align an institution’s goals and mission and its investment portfolio. 

 

Kirk Schmitt, CFA

Relationship Manager, Portfolio Management

Vice President

Leigh Carter

Relationship Manager, Wealth Advisory

Lisa H. Michel, CTFA

Relationship Manager, Wealth Administration

Vice President

Deborah P. Cugel, CFA

Relationship Manager, Portfolio Management

Managing Director

Doris A. Hogan

Relationship Manager, Wealth Advisory

Managing Director

Uma M. Rajeshwar, CFA, CTFA, CFP ®

Relationship Manager, Portfolio Management

Managing Director

Paul D. Neidhardt

Relationship Manager, Portfolio Management

Managing Director

Robert M. Siewert, CFA

Relationship Manager, Portfolio Management

Managing Director

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