CT law firms start philanthropy practice groups as sophisticated donors flood market

Karen Clute, attorney, Wiggin & Dana,

Brad Gallant, former president, Connecticut Bar Association and attorney, Day Pitney LLP

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By Matthew Broderick

As an attorney with New Haven law firm Wiggin & Dana, Karen Clute is no stranger to the legal needs of nonprofit organizations. In fact, not-for-profit institutions — from hospitals to universities to private schools — comprise a sizable portion of the firm's clientele throughout Connecticut and New York.

“We help nonprofits and individuals with a range of charitable issues from simple bequests to starting a foundation,” Clute said. “It's important work because, in addition to the social impact, nonprofits are a significant sector in the state's economy.”

The nonprofit sector has become such a significant client base for Wiggin & Dana that it recently established a Philanthropy Practice Group, led by Clute, featuring the legal expertise of nearly 25 lawyers, including estate planners, corporate lawyers and litigators. And their experience isn't wholly unique. There's been a recent emergence of philanthropy practices at Connecticut law firms, a trend that not only reflects a strategic growth area for the legal industry, but also the evolution of more sophisticated donors, with Baby Boomers driving the activity, according to Clute.

“Boomers have an interest in making substantial gifts and with their entrepreneurial mindset, they want to be involved in how their money is used,” Clute said. “They don't want to just write a check.”

Maggie Osborn, president of the Connecticut Council for Philanthropy, agrees. As the head of an organization that tracks charitable giving trends statewide, Osborn said she's seen firsthand the movement towards deeper donor involvement.

“We're seeing a shift toward new models of philanthropic investment,” Osborn said, “including venture capitalist, B-corps [for-profit businesses designed to benefit a social cause] and personal or family foundations.”

And that's good news for Connecticut nonprofits since individuals accounted for nearly 74 percent of the $4.6 billion in charitable contributions in the state, according to the Connecticut Council for Philanthropy's most recent 2012 report.

It's a significant allotment of money that has placed nonprofits under greater scrutiny from donors and the Internal Revenue Service, which in recent years has put more stringent filing requirements on nonprofit organizations to maintain their tax-exempt status.

That's been a good thing, according to Brad Gallant, former president of the Connecticut Bar Association and an attorney with Hartford law firm Day Pitney LLP, which also has a philanthropy practice. “There were hundreds of thousands of nonprofits nationwide that had never filed returns with the IRS,” Gallant said. “That casual [regulatory] approach to monitoring nonprofits is fading and the result is fewer small, informal charities and more professionally run ones.”

He noted that many nonprofits — especially larger ones — have many of the same legal needs as for-profit businesses including real estate concerns, employments issues, intellectual property, insurance questions, and litigation.

In addition to the day-to-day concerns, some nonprofits face challenges that are compounded by complex charitable gifts — such as donations of real estate or a closely held business — that can raise significant legal questions.

“It's not only about helping the organization get the right market value for certain types of gifts, but how to convert it to something the nonprofit can use,” Clute said.

That can be a big challenge. While Clute said her donor clients often want to leave a legacy, she understands the benefitting organizations need a measure of flexibility. “I encourage my clients to think beyond the immediate goal of their charitable gift and think about the use of their gift in perpetuity,” she said.

Clute also said donors need to think more about the impact of their giving on a charity. “An institution like Yale University, for instance, can manage multi-million dollar gifts,” Clute said. “But for a smaller charity [a gift that size] might fundamentally alter the nature of the organization.”

Clute says a big mistake donors make is waiting too long to make their charitable gift. “I encourage my clients to make gifts during their lifetime so they can see the impact,” she said.

The emergence of philanthropy practice groups indicates more people are thinking earlier and in new ways about charitable giving, said Osborn, whose council has opened its membership to law firms. She says she wants to increase transparency, share best practices, and ensure ethical behavior of organizations and donors to increase investment in the public good.