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Death of heiress Ruth Lilly unleashes more philanthropy

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The deluge of giving that made Ruth Lilly one of Indiana’s leading philanthropists is set to continue long after her burial.

Her death on Dec. 30 at age 94 will trigger the release of hundreds of millions of dollars from her estate, with perhaps as much as $200 million flowing to the fledgling Ruth Lilly Charitable Foundation.

Lilly.

The Indianapolis-based foundation will become a lasting source of grants for Indiana at a time many recession-hit charities are clamoring for help.

“There hasn’t been a new organization on the block in a while,” said Harriet Ivey, executive director of the Nina Mason Pulliam Charitable Trust.

Just a handful of Indianapolis-based foundations have assets of $100 million or more. Although the Ruth Lilly foundation formed in 2002, it has no permanent assets or staff.

Lilly’s six nieces and nephews will oversee grant-making. Their Indianapolis-based attorney, Ed Harris, said he couldn’t comment on the foundation’s plans. Nephew Eli “Ted” Lilly II is the only one of the six who lives in the area, and he could not be reached for comment.

Lilly was reclusive, but she personally supported a variety of causes, many in Indiana. Her priorities are reflected in her foundation’s rules, which require that at least half of all grant dollars stay in the state and that half of giving be directed to these four areas:

• education and financial assistance,

• public appreciation of literature and fine art,

• prevention and suppression of disease and

• raising standards of medical care.

The six Lilly nieces and nephews have been involved in making grants since at least 2006. They essentially passed along the amounts Lilly donated to the foundation, which was $10 million in 2008.

The grants ranged from $10,000 to $500,000 and went to 69 organizations, most of them in Indianapolis.

Finding a niche

Foundations tend to narrow their interests over time. The $255 million Fairbanks Foundation, for example, ramped up its grant-making in 2000, and now concentrates much of its giving in health care.

Foundation President Leonard Betley, who was attorney for radio mogul Richard M. Fairbanks, said he would hesitate to offer the Lilly family guidance on the process.

Every foundation should be different, he said. “They need to generate their own view of the world.”

Lilly’s 2002 estate plan called for the foundation to receive money upon her death from two trust funds. The plan said 90 percent of an estimated $200 million would go to the foundation. The remainder would be split among the American Red Cross of Greater Indianapolis, the Indiana University Center on Philanthropy, the Herron School of Art and the Ruth Lilly Health Education Center.

Lilly’s former personal attorney, Tom Ewbank, guessed the amount going to the foundation will be much less $200 million. After the estate pays taxes and other beneficiaries, Ewbank said, the foundation could receive $125 million to $150 million.

A foundation in that range would have to give out more than $6 million a year to comply with Internal Revenue Service rules. Those rules require distribution of at least 5 percent of assets annually.

Headline-grabbing gifts

The estate plan grabbed headlines in 2003 by bestowing more than $100 million to each of three charities—Indianapolis-based Lilly Endowment Inc.; Americans for the Arts in Washington, D.C.; and the Poetry Foundation in Chicago.

The organizations already have received millions, and Lilly’s death will send another influx of cash to their coffers.

The three big gifts were placed in five separate Lilly trusts, each paying out over different periods, up to 30 years. A significant chunk of the money was in a single trust that terminates upon Lilly’s death.

It’s unclear exactly how much is due because the trustee of Lilly’s estate, PNC Bank, doesn’t provide estimates—even to her beneficiaries. The big trust that’s due to terminate was worth $207 million at the end of 2007, according to the most recent accounting filed with Marion County Probate Court.

Americans for the Arts initially valued its gift at $124 million over 30 years. CEO Bob Lynch wouldn’t say how much his group has received and still expects, but did say, “I think a large part is yet to come.”

Asked how much the multibillion-dollar Lilly Endowment expects, spokeswoman Gretchen Wolfram said, “Don’t have a clue, do not know what to expect.”

The Poetry Foundation, which was transformed by Lilly’s enormous gift, valued its assets at $151 million in 2008—but half of that money remained in the Lilly trusts.

According to Poetry’s 2008 audit, $39.6 million could be due from a trust terminating after Lilly’s death. Because of a lack of timely information about the Lilly trusts, however, Poetry’s auditors gave the lowest possible rating to the accuracy of their estimates.

Ruth Lilly’s long life plus the drop in Lilly stock price might factor into what’s left for the foundation, Ewbank said.

Lilly, whose great-grandfather founded the pharmaceutical giant Eli Lilly and Co., had the bulk of her $1.2 billion fortune in company stock at the time of her 2002 estate plan.

The foundation will be funded by two trusts, the Ruth Lilly Special Trust, which was worth $95 million at June 30, 2008, and a second trust, created in 1997 to benefit the Indianapolis Museum of Art.

The estate plan valued the 1997 trust at $200 million. At the time, Lilly company stock was worth about $75 per share, but now trades around $35 per share.

As Lilly’s trustee, National City Bank, now PNC Bank, diversified her holdings, but it’s unclear how quickly that was done in the 1997 trust, Ewbank said.

Meanwhile, the trust paid about $2 million a year to the Indianapolis Museum of Art. Museum spokeswoman Katie Zarich said the money was applied to the museum endowment. An earlier gift from Ruth Lilly helps support the family’s mansion, Oldfields, on the museum grounds.

Ewbank said the annual payments to the art museum probably lasted longer than anyone expected in 1997. “Nobody ever thought she would live another 12 years.”

Ewbank was edged out of the picture in 2006, when a court appointed Lilly’s nephew Ted Lilly and niece Ruth Virginia Nicholas as her personal guardians.•

 

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