Gifts to charity, whether an outright donation, a restricted endowment fund, or a planned gift through a trust, come with legal obligations that don’t disappear once the funds are received. This post covers what organizations and donors should understand about accepting, managing, and structuring charitable gifts.
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What should a gift acceptance policy cover?
A gift acceptance policy sets out what types of gifts an organization will accept, such as cash, securities, real estate, and more complex assets, and under what conditions. It should also address how the organization handles gifts with donor-imposed restrictions, and what process is followed for gifts that fall outside normal parameters, such as an unusual asset type or a restriction the organization isn’t sure it can honor.
Organizations without a formal policy often end up negotiating gift terms on an ad hoc basis, which can create inconsistency and, occasionally, obligations the organization didn’t fully evaluate before accepting the gift. A written policy, reviewed periodically, gives staff and boards a clear framework to work from and a gracious way to decline gifts that do not suit the organization.
How should restricted gifts be managed?
Once a donor restricts a gift to a specific purpose, the organization has a legal obligation to honor that restriction, track the funds separately, and use them consistently or in a manner consistent with the donor’s intent. This obligation continues indefinitely unless the restriction is modified through a proper legal process, not simply because the original purpose becomes less relevant to the organization’s current priorities.
When circumstances make a restriction impossible or impractical to fulfill, releasing or modifying it generally requires either donor consent or, in some cases, a court process. Organizations that redirect restricted funds without following the proper process expose themselves to real legal risk, even when the redirection seems reasonable in the moment.
What governs endowment management?
Most states have adopted a version of the Uniform Prudent Management of Institutional Funds Act (UPMIFA), which sets standards for how organizations invest and spend endowment funds, including guidance on when it’s appropriate to spend below the original gift’s value in unusual circumstances. Endowment policies should be documented clearly and reviewed periodically against both the organization’s investment practices and any donor-specific restrictions tied to individual endowed funds.
What are the common vehicles for planned and charitable trust giving?
Charitable remainder trusts, charitable lead trusts, and donor-advised funds are among the most common structures for donors looking to combine charitable giving with tax or estate planning goals. Each works differently: a charitable remainder trust pays income to the donor or other beneficiaries for a period before the remainder passes to charity, while a charitable lead trust does the reverse, and donor-advised funds offer more flexibility with fewer formal requirements but less direct control once the gift is made.
Organizations that regularly receive planned gifts benefit from understanding these vehicles well enough to guide donor conversations, even though the trust or fund itself is typically structured by the donor’s own advisors.
Jova Law advises nonprofits on gift acceptance policies, restricted fund management, and endowment governance. Learn more about our Charitable Contributions, Trusts & Endowments practice.