Donor Intent

Donor intent is the purpose, condition or limitation a donor attaches to a charitable gift, together with the legal machinery that decides whether a charity must follow it, may depart from it, or may have it modified by a court. In practice the phrase covers three separate questions that get run together: what the donor actually said, whether that statement is legally a restriction, and who can do anything about it later.

It is worth saying plainly that "donor intent" is not a defined term in federal tax law. Neither is "variance power," the phrase practitioners use for a community foundation's authority to override a restriction. The regulation that creates that authority, 26 CFR 1.170A-9(f)(11)(v)(B), is headed "Powers of modification and removal" and never uses either phrase. The same is true of the traditional labels "cy pres" and "deviation," which describe two different judicial moves and appear in neither the federal regulation nor California's statute on the subject. The concepts are real; the vocabulary is professional usage layered on top of them.

A restriction has to live in a record. The instrument of transfer, the gift agreement, the terms of a fund, the language of a will: these are what a charity's lawyers read years later. An oral understanding with a development officer who has since left is not one of them. This is the single most common gap between what a donor believes they arranged and what the charity is obliged to do.

A community foundation is required by federal tax regulation to be able to override you. To be treated as a single publicly supported organization rather than a pile of separate funds, a community trust's governing body must have the power, under 26 CFR 1.170A-9(f)(11)(v)(B)(1), "to modify any restriction or condition on the distribution of funds for any specified charitable purposes or to specified organizations if in the sole judgment of the governing body (without the necessity of the approval of any participating trustee, custodian, or agent), such restriction or condition becomes, in effect, unnecessary, incapable of fulfillment, or inconsistent with the charitable needs of the community or area served." A donor writing a restricted fund at a community foundation should understand that this power is not something the foundation negotiated for. It is a condition of its own tax classification, and a foundation that gave it up would jeopardize that classification.

State law decides when a restriction can be released or changed, and there are more routes than donors expect. California's enactment of the Uniform Prudent Management of Institutional Funds Act, at Probate Code section 18506, is a workable illustration of the pattern. Subdivision (a) lets the institution release or modify a restriction if the donor consents in a record, though not so as to allow the fund to be used for a non-charitable purpose. Subdivision (b) lets a court modify a restriction on management or investment where it "has become impracticable or wasteful," where it impairs management or investment, or where circumstances the donor did not anticipate mean modification will further the fund's purposes; any such modification must, to the extent practicable, be made "in accordance with the donor's probable intention." Subdivision (c) reaches further, letting a court modify the purpose itself where a particular charitable purpose or restriction "becomes unlawful, impracticable, impossible to achieve, or wasteful," in a manner "consistent with the charitable purposes expressed in the gift instrument." Those two subdivisions are the statutory versions of what practitioners call deviation and cy pres respectively: (b) changes the means, (c) changes the end.

And there is a route with no court in it. Under subdivision (d), an institution that determines a restriction is unlawful, impracticable, impossible to achieve or wasteful may release or modify it 60 days after notifying the Attorney General and the donor, if the fund is worth less than $100,000, more than 20 years have passed since it was established, and the property is used consistently with the charitable purposes expressed in the gift instrument. That is how a small, ancient, narrowly written fund gets unstuck.

Notice runs to the Attorney General, and that tells you who enforces. Every court route in the California statute requires the institution to notify the Attorney General and give that office an opportunity to be heard. The donor is entitled to notice only on the small-and-old route in subdivision (d). Whether a donor personally has standing to sue a charity to enforce a restriction is a question of the governing state's law and is not something to assume; the statutory design routes supervision through the state's charity regulator. A donor who wants a personal enforcement right has to negotiate for it in the gift agreement, and get it in writing, before the money moves.

The practical implication runs against the instinct. A donor who writes the narrowest possible restriction, naming one program at one institution in one city, has not protected the gift; they have raised the probability that the purpose becomes impracticable and a court or a governing body changes it anyway. A restriction stated at the level of the purpose, with the specific program given as the donor's preference rather than as a condition, survives changed circumstances better and is easier for the charity to honor.

A restricted gift moves through four stages, and a donor has a say in only the first two.

Stage one, drafting. The donor and the charity agree on the purpose and put it in a gift instrument. This is where every later question is decided: whether the language is a binding condition or a statement of preference, whether the fund is endowed or spendable, what happens if the named program ends, and who is entitled to notice or a report.

Stage two, transfer. The gift is made. From this point the charity owns the property, subject to the restriction. The donor is not a co-owner and, in the usual case, not a party who can direct the money.

Stage three, administration. The charity spends within the restriction and, where the fund is endowed, spends only part of it each year. Most restricted gifts never leave this stage.

Stage four, the restriction becomes a problem. The named program closes, the disease is cured, the building is demolished, the eligible group no longer exists, or the fund is too small to do the job. Now the routes above apply: donor consent if the donor is alive and willing, a court on the statutory grounds, the community trust's own modification power, or the notice procedure for small old funds.

A hypothetical shows the last stage. Suppose a donor leaves $60,000 in 1998 to endow a prize for the best student essay on the local canal system, and the department that taught the subject closed in 2011. By 2026 the fund is worth $95,000, more than 20 years have passed, and no essays have been submitted for years. Under a statute like California's subdivision (d), an institution that determines the restriction has become impracticable could notify the Attorney General and the donor at the last address it has on record, wait 60 days, and redirect the fund to a prize consistent with the original charitable purpose, without a court. Change one fact, make the fund $400,000, and the same institution has to go to court instead. The figures are hypothetical; the thresholds are California's.

Pros of a written restriction

• It makes the purpose enforceable rather than aspirational, and it survives the departure of everyone who was in the room.
• It lets a donor fund something specific that the charity would not otherwise prioritize.
• Naming the purpose rather than the mechanism gives the charity room to keep honoring it as circumstances change.
• A well-drafted agreement can add reporting obligations and a named contact, which is the practical way a donor stays informed.

Cons and limits

• A restriction is not a reservation of ownership. Once the gift is complete the charity owns the property, and the donor's later opinion carries no legal weight of its own.
• A community foundation is required by federal tax regulation to hold the power to modify your restriction, so absolute permanence is not available there at any price.
• Enforcement typically runs through the state attorney general, whose office has finite attention and its own priorities.
• The narrower the restriction, the more likely it becomes impracticable and is changed.
• Restricted funds cost the charity money to administer and track, so a small restricted gift can consume much of its own value.