A growing number of states now give donors a way to enforce the conditions they place on charitable gifts. The issue drew new attention this week after a report found that donors and their estates rarely have legal recourse when a charity departs from a gift agreement. For anyone planning a significant gift, the findings show why careful drafting matters.
The Problem With Enforcing a Gift
According to The Chronicle of Philanthropy, a new Philanthropy Roundtable report concludes that donors seldom have a legal remedy when a charity fails to honor a gift agreement. One example involved a $1.8 million gift to Dartmouth College for maintenance of its golf course. The donor’s estate sued to redirect the money to a foundation, and the court found the estate lacked standing.
Under traditional rules, enforcing charitable gifts usually falls to the state attorney general. Those offices often have limited time and resources for these disputes, and many donor concerns go unaddressed.
How Donor Intent Laws Work
Kansas passed a Donor Intent Protection Act in 2023, and similar laws have since passed in Kentucky, Georgia, and Montana. The model legislation includes several limits.
- A donor or the donor’s legal representative may sue within a fixed period after discovering a violation.
- The law applies only to endowment gifts with donor-imposed restrictions.
- The parties must allow 90 days for informal resolution before anyone files suit.
- Remedies must fit the charity’s mission, and funds cannot be returned to the donor.
Critics argue these laws could burden charities and invite weak claims. Supporters respond that without them, donors have no practical way to hold an institution to its promises.
Drafting Gifts That Hold Up
The donor’s own documents still matter most. A written gift agreement should state the purpose of the gift, how the funds may be used, and what happens if that purpose can no longer be met.
Choosing the Right Vehicle
Some donors keep more control through a private foundation, where family members can serve on the board and direct grants over time. Others use a donor-advised fund, which is simpler to administer. In exchange, the donor holds advisory privileges rather than legal control over grants.
A charitable trust can pay income to the donor or family during life and pass the remainder to charity under written terms.
Gifts Made at Death
Bequests in a will or trust carry the same risk, since the donor will not be there to object. Naming an alternate charity or a fallback purpose gives the estate and the court a clear path if the original plan cannot be carried out.
Retirement accounts deserve separate attention. Naming a charity as an IRA beneficiary can be tax-efficient, but the beneficiary form should match the purpose described in the rest of the plan.
Charitable bequests generally qualify for the federal estate tax charitable deduction, so gifts made at death can also lower estate taxes.
Putting Your Intentions in Writing
The strongest protection for a charitable gift is a document that leaves little room for interpretation. Before signing, donors should settle how the funds may be used, whether the restriction should expire, and which charity or purpose takes over if the original one no longer fits.
These terms are easiest to negotiate before the money changes hands. A charitable giving lawyer can raise them with the charity’s development office while the donor still has leverage, then confirm that the bequest language in the will or trust matches what was agreed.
If a restricted gift is part of your plans, Estate Planning Pros can review the terms with you and coordinate them with the rest of your estate. Contact us to schedule a meeting with a charitable giving lawyer on our team.