One of the most important things philanthropists can do to preserve donor intent is to enter into a gift agreement with leaders of the recipient organization. I recommend that EVERY significant gift be accompanied by a detailed gift agreement.
Gift agreements set appropriate expectations and create mutual understanding between the donor and the organization. In addition, they provide guidance to current and future leaders regarding the use of the gift. For donations to a large institution, gift agreements should be signed by the donor, the President of the organization (or designee) and the President of the supporting foundation.
Typically, the recipient organization or it’s foundation will provide donors with a draft gift agreement using their approved format, which may vary depending on the level of sophistication of staff, governance and gift acceptance policies.
In my experience, University foundations are most likely to have comprehensive and detailed gift agreement formats. Keep in mind, these formatted gift agreements are written from the perspective of the recipient organization and often seek to limit restrictions on the gift, which may or may not be in alignment with donor intent.
Gift agreements include multiple elements. The most important components are 1) a detailed description of how the donor wants his/her gift to be used and 2) a summary of the intended impact the donor wishes the gift to produce. This is often called a “Purpose” statement within the agreement. Other key elements could include, but are not limited to, the following:
1. Amount, term and type of gift – including payment schedule for pledges
2. Type of asset/s to be gifted
3. Description of how changes to the agreement will be addressed
4. Description of all fees and fee schedules associated with the gift (gift fees, management fees for endowed funds, etc.)
5. For endowed or quasi-endowed funds – Description of investment policies, payout rates, distribution schedules, management structure for investments, reporting cycles, etc.
6. Donor Recognition – including preferences for anonymity or details regarding public recognition, for example, naming of facilities, programs, positions, etc.
7. Impact and financial reporting schedules – description of how and when the donor would like to be informed about the use of the gift
8. Alternate use of funds statement – description of how the donor would like their gift to be reallocated should the original purpose no longer be practical or possible to carry out
For all gift agreements, it is prudent to consult with a philanthropy advisor prior to signature to make certain donor intent is fully reflected in the agreement and to avoid any misunderstandings. If you have any questions or would like more information about writing a well-constructed gift agreement, call or send me an email…I’d enjoy the opportunity to help!