Donation Agreement

What is a donation agreement?

A donation agreement, also known as a gift agreement, is a legally binding contract that outlines the terms and conditions under which a donor agrees to provide a gift to a nonprofit organization. A solid gift agreement format should include the following key details:

• detailed description of a gift;
• details of the parties involved (i.e., donor and organization);
• terms and conditions for delivery of donation;
• additional requirements (e.g., purpose of donation, irrevocability).

The parties to a gift agreement contract are a donor and a nonprofit organization.

A donor can be an individual or organization that is willing to make a gift or donation. Neither federal nor state law limits the value of such a donation. The most distinctive feature of a gift agreement is that a donor makes a gift for free. It means that a donor cannot accept in return any remuneration, goods, or services from an organization.

An organization that receives a donation or a gift from the public could be an organization with a non-profit status only under Section 501(c)(3) of the Internal Revenue Code of 1986. A nonprofit status may include:

• charity or religious institutions;
• educational institutions (e.g., schools, universities);
• scientific organizations (e.g., research institutions or R&D centers);
• governmental organizations, etc.

The main benefit of a nonprofit status for an organization is that it is being exempted from a federal income tax.

How to draft a donation agreement template?

Drafting a reliable donation agreement template is a challenging task even for a lawyer. Considering the specific legal nature of a donation, understanding key elements of that transfer is a must. Below we made a short breakdown of legal provisions a solid donation agreement shall have:

Types of Donations

Every donation agreement shall provide a detailed explanation of a given donation. Donations can be made in various forms, including

• monetary or cash contribution;
• property donation (e.g., vehicle, equipment, real estate); or
• in-kind contribution (e.g., provision of certain services to an organization for free).

Except for a cash contribution, the gift agreement format should also include the estimated value of such donation.

Revocable vs. Irrevocable Donations

A gift agreement contract may specify whether the donation is revocable or irrevocable.

An irrevocable donation is when the donor cannot demand its return.

Contrary to that, a revocable donation allows the donor to revoke a gift under a limited number of circumstances. Those circumstances may include, for instance:

• Misuse or misapplication of donated funds or property;
• Failure to use the donation for the specified purpose;
• Organization’s loss of nonprofit status;
• Significant changes in the organization’s mission or operations, etc.

Purpose of the Donation

A gift agreement template can either be purpose-restricted or unrestricted.

If a donation is made for a specific purpose, in that case a charitable organization has to use that specific gift only according to the declared purpose. For example, if a donor provides a cash contribution for funding scholarships, such a contribution cannot be used for paying salaries to an organization’s workers. If a donor finds out that an organization fails to use a donation for its dedicated purpose, in such a case the donor has a right to revoke it in full or partially.

If a gift agreement template states that there is no purpose, in that case a donation can be used by an organization for any mission or goal. However, it is vital to understand that such missions or goals should be indicated directly in an organization’s bylaws or other statutory documents.

No Exchange of Goods or Services

A key feature of any valid donation agreement template is the absence of consideration. It means that the donor gives the gift without expecting to receive any goods, services, or other form of remuneration in return.

The tax nature of a gift agreement implies that a donation should be made for free. The gift that is made voluntarily and without compensation is critical for maintaining the tax-exempt nature of the donation. Otherwise the parties may need to reclassify their arrangement as a service contract, sale-purchase of goods, or other contractual arrangement.

Transfer of the Donation

Every donation agreement contract should define when exactly the donor shall make their donation. The donation or gift can be delivered to an organization:

• on the date of signing a donation agreement contract;
• on any other date in the future;
• once specific events or circumstances occur.

Depending on the type of gift, the delivery process of a donation may also differ. For instance, if it is a cash contribution, a gift agreement should also define exactly how the funds shall be transferred.

If a transfer of donation or a gift takes place on the date of signing the agreement, in that case the respective confirmation of a gift’s delivery should be attached to the gift agreement.

How to customize a contract template at Faster Draft?

To customize a charitable donation agreement template, follow a few easy steps below:

1. Click the button Create Document.
2. Answer questions in the questionnaire.
3. Select a document’s format—Donation Agreement PDF or Word.
4. Make a payment.
5. Download, e-sign, print, and use a customized template in seconds.