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Gift Agreement and DAFs

  • 1.  Gift Agreement and DAFs

    Posted 01-08-2020 02:11 PM

    I am drafting a gift agreement for a named endowment fund. The donor will be directing funds from his DAF in installments...

    How have others handled this? Do you typically include non-binding LOI language within the gift agreement? Create an addendum, which is referenced in the gift agreement? If anyone has an example, that would be much appreciated.

    Thank you,

    Cecily Macy
    Vice President of Development
    Pennsylvania Academy of the Fine Arts

  • 2.  RE: Gift Agreement and DAFs

    Posted 01-08-2020 02:18 PM
      |   view attached
    You cannot make this a legally binding agreement unless the donor agrees to personally pay any amounts not provided by a third-party.  Therefore they cannot execute a gift agreement that "binds" that third party.  As such, you also cannot "book" a pledge for the amount without the donor agreeing to personally pay.  All you really can do is note the donor's hopes to secure funding.

    Attached is a paper I prepared on this topic some time ago.  It references all the legal and accounting aspects of this.  You certainly can develop your own protocol.


    John H. Taylor
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987


  • 3.  RE: Gift Agreement and DAFs

    Posted 01-08-2020 03:21 PM
    John, can the school sign a contract with the donor whereby the donor is obligated to fund the DAF and then advise the gifts? I understand this still isn't a pledge and can't be booked. However, it seems that you would at least have an enforceable agreement, even if it's not a gift agreement per se. Is that what you were alluding to when you said they could develop their own protocols? That such an agreement may be acceptable for the purposes of establishing a named endowment, even if it's not officially a countable pledge?

    Thank you,
    Isaac Shalev
    CRM Expert
    Sage70, Inc.
    (917) 859-0151

    Schedule a 30-minute consultation now:

  • 4.  RE: Gift Agreement and DAFs

    Posted 01-08-2020 03:33 PM
    I do not think that would work as you would be a third party essentially acting as an agent for the DAF if the funding did not happen.  Furthermore, even if you could force the donor to fund a DAF, once they do the money isn't there.  They must irrevocably relinquish control of the asset.  So, no.  I do not think this would work.

    By developing their own protocols I was referencing their own agreement templates that either make the donor personally responsible for the entire amount, or non-binding agreement templates that cannot be booked or enforced, but could be used to document an intention.


    John H. Taylor
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987

  • 5.  RE: Gift Agreement and DAFs

    Posted 01-08-2020 03:52 PM

    Interesting discussion.


    It occurs to me that gift agreements can serve multiple purposes. 


    CASE reporting standards being what they are, one set of issues is to get an irrevocable promise to give so that the pledge can be counted in the first column of campaign reporting.  If that's not an issue, a statement of intent may serve as well, without trying to force the square intent-to-recommend-from-a-DAF peg into the round irrevocable-commitment hole.


    Since the agreement in view was an agreement to create an endowed fund, that might also bring in a different set of issues, depending on how willing the DAF (well, the sponsoring organization, really) is as a third party to give what is after all their money to an endowment the terms of which have been defined by an agreement between the qualified charitable organization and the separate person who funded the DAF/advises the distribution.


    My US$0.02 worth; the usual disclaimers apply.


    Good luck!




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