The first step is to ask when circumstances might change, then do what any business does and work out a payment plan. Litigation is usually a bad idea.

To avoid being caught in such a situation, nonprofits are increasingly devoting staff resources to keeping an eye on news of major donors and their company’s activities. But even before the media gets wind of trouble, friends and business associates of an affluent donor might have a glimmering of something amiss, as well as insight into the reputation of a potential donor and whether this is a person who is likely to exaggerate finances. Hence the incentive to call. Although most sophisticated nonprofits accept that reversals of fortunes can happen, "If someone’s in trouble, people know about it," Volpe says. "Their peers know about it."

Therefore, philanthropists may face questions about their peers as charities increasingly scrutinize new donors. "I don’t think anyone likes to talk about it in polite company in quite that sense, but in some measures, at that level of giving, it’s no different than somebody at a private equity company checking out a potential investor," says Hildy Simmons, a former head of the Global Foundations Group at JPMorgan Private Bank in New York who now works independently with donors as a philanthropic advisor. "You want to know who you’re doing business with."

Elizabeth Harris is a staff writer for Worth.

Illustration by Jm Frazier.