DONATIONS - Simpsons

1 Simpsons SolicitorsTelephone: (61 2) 9247 3473 Suite 1202 Facsimile: (61 2) 9247 3442135 Macquarie NSW 2000 AustraliaDONATIONSThis is a short paper summarising the legal issues around accepting DONATIONS for your museum orgallery. It includes a sample Deed of gift in a proper form for accepting museums are brought into existence by a generous collector who has decidedto give his or her collection to the community. Many more are able to enhance theircollections thanks to DONATIONS . At a time in which acquisition funds are limited,many museums have to develop their donor programs if their collections are togrow in size and spite of the importance of DONATIONS , many administrators do not go about theacceptance of DONATIONS in a legally safe manner. There are three matters whichshould be considered:(a)the power to accept DONATIONS ;(b) the means used to secure legal ownership of the material.(c) whether the museum really wants the gift.

2 (i) Power To Accept GiftsAs has already been discussed, the museum only has the power to dothings that its constitution allows it to do. With museums establishedby State or Federal governments there is rarely a problem for thestatute which establishes the museum will invariably provide thepower to accept or refuse gifts. Usually this power is limited to theextent that the gift must be accepted in pursuance of the museum'sobjects (as set out in that statute). Thus a natural sciences museum maynot have the legal power to accept the gift of a vintage motorcycle,even if it were inclined to accept established by local councils do not have the benefit of anindividual statute and they vary so much from instance to instance thatthe best advice is to contact the relevant local government authority, inwriting, and ask it to advise of any such restrictions. (This is calledpassing the buck).2. Simpsons SolicitorsTelephone: (61 2) 9247 3473 Suite 1202 Facsimile: (61 2) 9247 3442135 Macquarie NSW 2000 AustraliaMuseums which are non-profit companies or incorporated associationswill have to examine their articles or constitutions and ensure that theyhave the power to accept DONATIONS .

3 (If this reveals that the museumhas been accepting gifts without having the legal power to do so, theboard should immediately amend the powers to include such a powerand then ratify their earlier decisions).(ii) Approval Of GiftsThe board must approve all gifts to the museum. In this it will beadvised by the director, but the final word must lie with the common approach is for all offers of gifts to be channelled throughthe registrar or the director. They will prepare a recommendation forthe board. No staff member should indicate that a gift will be accepteduntil it has been considered by the director and the board.(iii) Means Used To Secure Legal TitleMany museums have important material in their collections but cannotprove that they own it. More than once, relatives of recently deceasedbenefactors have turned up at a museum and asked for "their"property back and all too often the museum has to hand the materialover, for although it is sure that it was the intention of the benefactorto donate the material it can not prove that the transaction was otherthan a have been promised a future gift and not done sufficient tolegally secure it.

4 (a) Ordinary giftsLegal title in a gift passes upon its delivery. The difficulty arisesfrom having to prove that the transaction was truly a , for a gift to be legally effective one must be able toshow that:(1) there was a clear intention to make a gift;3. Simpsons SolicitorsTelephone: (61 2) 9247 3473 Suite 1202 Facsimile: (61 2) 9247 3442135 Macquarie NSW 2000 Australia(2) the object was delivered; and(3) the gift was most difficult of these to prove is the intention to make a gift. Forexample, unless the documentation is sufficient, it is difficult to provethat a transaction was a gift and not a loan. For example, in 1987 theMuseum of Contemporary Art in Madrid announced that it washaving to return 61 works by Picasso that had been allegedly donatedto the museum by the artist's widow, because of the absence ofdocumentary proof of her intention. To overcome this surprisinglycommonplace sort of problem, all museums should develop standardprocedures which protect most powerful proof of ownership is provided by a Deed of not essential for the legal efficacy of a gift, the deed form isundoubtedly the safest way to record the museum's ownership of thegifted item.

5 The following provides a standard form: Simpsons SolicitorsTelephone: (61 2) 9247 3473 Suite 1202 Facsimile: (61 2) 9247 3442135 Macquarie StreetSydney NSW 2000 AUSTRALIATHIS DEED OF GIFT is made the day of 190 ,BETWEEN: Simpsons of .. ( "Donor") , a body corporate constituted under the ..Act, 19 , as amended, ("Museum"). Donor is the owner of the property described in the Schedule hereto; Donor wishes to make a gift to the Museum of that Museum wishes to accept that gift ("Property").NOW THIS DEED WITNESSES AS FOLLOWS: 1. The Donor hereby assigns to the Museum all of the right, title and interest ofthe Donor in the The said assignment is unconditional and WITNESS WHEREOF this Deed has been executed on the above SCHEDULE2. Simpsons SolicitorsTelephone: (61 2) 9247 3473 Suite 1202 Facsimile: (61 2) 9247 3442135 Macquarie StreetSydney NSW 2000 AUSTRALIASIGNED SEALED AND DELIVEREDby the Donor in the presence of: (Witness))) (The Donor)Because a deed is somewhat formal, needs witnessing by a person who is notparty to the deed, many administrations choose to limit their use of the deedform to gifts of over a certain value, or where possession of the chattel is nothanded over at the time of gift.

6 (Future gifts must be in the form of a deed ifthey are to be enforceable: see next section).If a deed is not used, it is essential that the museum use an "Acknowledgmentof donation ". This is not a legal term. It merely provides evidence of theparties' intentions. As this is contemporaneous with the gift, provided that itis properly drafted, later contestants will find it hard to form must make it absolutely clear that the donor intends that themuseum is to receive full legal ownership so that there can never be anyquestion of the museum's rights. The form should contain the followingwords:The museum accepts your unconditional gift of the items in the attachedSchedule. The museum hereby acknowledges in accordance with yourexpressed intention that it now has full title to, and responsibility for, thesaid the gift is complete, it cannot be revoked.(b) Future giftsA promise to make a gift is unenforceable unless it is in theform of a deed (if the gift is to take place while the patron is still3.)

7 Simpsons SolicitorsTelephone: (61 2) 9247 3473 Suite 1202 Facsimile: (61 2) 9247 3442135 Macquarie StreetSydney NSW 2000 AUSTRALIA alive), or in a will (if it is to happen upon death). (For Bequests,see section (vi) below).It is not uncommon for a patron to seek to leave material with amuseum on the understanding that it will be later given orbequeathed to the museum. (A recent and controversialexample of this has been the housing of the Sackler collection ofOriental art at the Metropolitan Museum). Then the patron hasa change of mind, or dies without giving the necessaryinstructions in the will, and the museum is asked to return theobject that it has expected to keep. This is not merely a matterof disappointment; the museum will have expended resourceson the object that it may not have been prepared to apply, hadit known that its possession was to be only , public museums are established for public purposesand it is questionable whether it is proper to apply thoseresources for private deed which records an intention to pass the physicalpossession of the gift at a later date should be registered underthe Bills of Sale Act, 1898 (NSW), (or its equivalent in otherStates).

8 Non-registration does not affect the validity of the giftas regards the museum and the donor, but an unregistereddeed of gift may be voided by any creditors of the donor.(iv) Conditional Gifts(a) LegalityTo be valid, the condition must be possible to fulfil and must notbe illegal or against public donor can impose conditions on a gift that are eitherprecedent or subsequent. Conditions precedent must be fulfilledbefore the passing of legal title in the gift can be complete; (forexample, "I will give you this collection if you name the newwing of the museum after my grandmother").4. Simpsons SolicitorsTelephone: (61 2) 9247 3473 Suite 1202 Facsimile: (61 2) 9247 3442135 Macquarie StreetSydney NSW 2000 AUSTRALIAC onditions subsequent are those that bind the donee after thegift is complete; (for example, the condition that the item be onpermanent display). If a condition precedent is breached, title never passes and thedonor remains the owner.

9 If a condition subsequent isbreached, subject to any contrary intention expressed in thedeed, the gift is at an end and thereafter, the museum will onlyhold the item as a trustee for the donor. Such conditions can bevery onerous on the museum and they are frequentlyhonoured largely in the breach. This is very dangerous if themuseum is not to be exposed to later claims for the return ofthe gift.(b) The Power To AcceptCareful consideration must be given to the statute or ruleswhich govern the museum to ensure that the power to acceptsuch gifts is present, and if so, the procedure that must beadopted. In most statutory museums the decision to accept aconditional gift is one that only the Trustees can make. Somehave delegated this to the director, but in no case should thedecision be made at curatorial level. The obligations imposed bysuch conditions can haunt an administration long after thecurator has gone to greener pastures.

10 (c) Tax Deductibility As a ConditionMuseums are sometimes offered gifts on the condition that thedonor will obtain a tax deduction under the Taxation IncentivesFor The Arts Scheme. These are somewhat difficult under theScheme, for property in the item must have already passed tothe museum before the deduction can be claimed. Of course, thegift may be subject to the condition that, if a deduction isrefused, the gift will fail and the item shall be returned to thewould-be donor. However this will be unattractive to mostdonors because all conditions attaching to gifts under the5. Simpsons SolicitorsTelephone: (61 2) 9247 3473 Suite 1202 Facsimile: (61 2) 9247 3442135 Macquarie StreetSydney NSW 2000 AUSTRALIAS cheme must be disclosed to the Commissioner of Taxationwho may then take the condition into account whendetermining value of the gift and thus the amount of is much more simple to have a rule that the museum will notaccept such a condition and that potential donors must rely ontheir own taxation advice as to the likelihood of any deduction.