Gift Agreements - for Dept. Leadership

Why a Gift Agreement?

"Ethical standards are designed to enable the donor, the charitable organization and the donor’s advisors to structure a gift that achieves a fair and proper balance between the interests of the donor and the purposes of the charitable institution.” - The Preamble of “Model Standards of Practice for the Charitable Gift Planner”

In other words, a well written gift agreement is the best way to ensure that the donor and the organization have the same understanding about and agree to all the various aspects of the major gift.

Gift agreements prevent misunderstandings and are a wonderful way to show your donor how important they are to your organization. 

Any gift that reaches the minimum level of a ‘major gift’ as defined by your organization deserves to have a gift agreement completed and signed.

It is almost always the MGO who has the first gift agreement discussion with the donor. In fact, many times the MGO will be able to complete the gift agreement without assistance. However, regardless of the size of the gift commitment or how simple the agreement may be, it is imperative the charity identify one person in the organization that will review and approve all gift agreements.

The charity must have very clear guidelines for the gift agreement and the gift agreement process. It is critical that the development staff, the Chair of the Board, the CEO, the CFO, the finance office and key volunteers all be well acquainted with the process of implementing of gift agreements.

The goals of the written gift agreement address the following:

1.  To clearly set forth the donor’s intentions.

2.  To include specific, realistic and measurable restrictions on the charity’s use of the donation. Never overpromise and underdeliver.

3.  To be clear when describing when and why the charity may alter how the funds may be used. For example, if the original purpose of the fund is no longer relevant or the fund falls below some level.

4.  To clearly state the process for modifying no longer relevant restrictions originally placed by the donor. It behooves all parties to recognize that circumstances may change and that planning for potential change now can avoid future costs of time, money and mission drift. This is especially important for gifts to the endowment, but can be also true for gifts that may be expended in a shorter term. The more broadly the donor sets the goals at the inception of the gift, the less of an issue any future change will be.

5.  Can the charity manage the gift within the proposed restrictions in a cost-effective manner consistent with the mission of the charity?

6.  Is the charity willing to accept the asset which is being proposed to fund the gift? Your gift acceptance policy document should be able to provide all the guidance needed to work through this issue.

7.  How will the charity account for the gift? Be very careful about accepting any restriction that requires a variation from your standard operating procedures (SOP). As this work needs to be done in the business office it is often the case that the development office does not have the control necessary to assure the conditions are met. There is a lot of potential here for things to get mixed up. 

8.  What reports will be provided to the donor or the donor’s family/designates about the charity’s use of the gift? Who receives the report? What is the frequency of the reporting? Often it's safe to presume the reports will be required only to immediate family.

9.  What recognition of the gift should be given to the donor? 

  • Is the recognition consistent with recognition guidelines listed in the charity's policy and procedure manual?
  • If the donor’s name is to be put on a space or a building, what happens to that recognition when the building is remodeled or is torn down?
  • Will the recognition be given only when the gift has been completed or is it to be given immediately? If recognition is to be given immediately, what happens to that recognition if the commitment is not satisfied in full?

10.  Are there expectations (do not agree to restrictions) on the charity’s investment of the donated property? If the gift is funded with an interest in a family business, is there a presumed buyer to purchase the interest? How assured can you be of the presumed purchase price? Any restrictions on the rate at which dollars may be taken from the fund that is in variance to the normal spending policy as determined annually by the board, should be avoided.

11.  After the donor is no longer involved, who may later modify the donor’s restrictions? Be creative, but it is often best to only carry through immediate family and after that it is up to the charity. We also recommend researching local laws before making any decisions. 

12.  This may seem extreme, but include a clause identifying who, if anyone, has standing to bring suit.

13.  “Sunset” clauses are highly recommended for consideration (set an end date for the fund). Under what circumstances can the gift agreement be terminated?

Here's another take on Gift Agreements written from the MGO perspective:

Gift Agreements for MGOs

Check out some Sample Gift Agreements Here:

Sample Gift Agreement: Capital

Sample Gift Agreement: Endowments