When a donor makes a designated donation—a gift restricted for a specific purpose—they may later wonder if they can change how the funds are used. While donor intent is important, the ability to modify a restriction depends on several factors, including the charity’s policies and legal considerations.
Are Gift Restrictions Legally Binding?
Yes, in many cases. When a donor designates a gift for a specific program, project, or purpose, the nonprofit is legally obligated to honor that restriction. Once a gift is made, the charity—not the donor—controls the funds, meaning the donor cannot unilaterally change the terms.
Options for Changing a Gift Restriction
Although donors cannot typically alter restrictions after making a gift, there are a few ways to adjust how the funds are used:
1. Requesting a Change from the Nonprofit
A donor may reach out to the nonprofit and ask if the restriction can be modified. Some nonprofits may agree, especially if the original project has changed or the donor’s new preference aligns with their mission. However, the nonprofit is not obligated to approve the change.
2. Using a Gift Agreement
For large or complex gifts, nonprofits and donors often create written gift agreements outlining how funds will be used. Some agreements include provisions for modification, allowing donors to request a change under certain conditions.
3. Cy Pres Doctrine (Legal Modification)
If a restricted donation can no longer be used as intended—for example, if the designated program no longer exists—the nonprofit may need to seek legal approval to modify the restriction under the cy pres doctrine. This legal principle allows courts to redirect restricted funds to a similar charitable purpose when the original use is no longer feasible.
Best Practices for Donors
Be sure of your designation before making a restricted gift.
Discuss flexibility with the nonprofit in advance if you anticipate possible changes.
Consider unrestricted giving to allow the nonprofit to use the funds where they are most needed.