Over the years, I have heard horror stories of donations that ended up being a headache for the nonprofit. While these donations can be significant, the unexpected cost to the organization can negate the value of a gift.

My own experience was with a retained life estate. This is when a person deeds a piece of property – house, farm, etc. – to a nonprofit for an immediate tax return but retains the right to live in that property until death. Typically, the agreement states who will pay expenses including real estate taxes, insurance, utilities, maintenance and major and minor repairs to the property.

Unfortunately, the donor’s funds did not stretch far enough, and his health did not allow him to do (or fund) basic maintenance on the property. The organization ended up paying taxes and doing urgent repairs while the property deteriorated and lost value. Quite by accident, they learned that the property was in violation of a local ordinance and had to immediately invest time and money to fix the problem.

In a brief submitted to the Supreme Court of the United States in March of 2021, this sentence appears: “A gift to charity is fundamentally a matter of trust: trust that money placed in the hands of another, over whom the donor has few direct means of control, will go to its promised good purposes.” Similarly, the charity must trust that the donor will fulfill any responsibilities tied to the donation. 

But I suggest that a nonprofit has a duty to a potential donor to ensure that he or she has the capacity to fulfill those obligations and that the nonprofit will be protected should an expected situation arise. So, what’s the solution?

It’s a simple answer – a Gift Acceptance Policy. This document lays out requirements for any and all types of donation from cash to patents, real estate to jewelry, stocks to rights to oil, gas or minerals and anything else that may someday be offered to your nonprofit.

If your organization does not have a comprehensive gift acceptance policy and you aren’t sure where to begin, don’t think you have to “reinvent the wheel.” There are many quality examples online. Type “gift acceptance policy rescue mission” (or the niche your nonprofit fits in) or “gift acceptance policy template” in your internet search bar, and half your job will be done with just a simple search. 

Review the policies from organizations you trust, organizations in similar niches (i.e., if you are a school, look for ones from schools) and “best practice” templates. Some are dozens of pages long while others are a single page. You want to be sure your policy has enough detail to cover most eventualities and includes “catch-all” paragraphs at the end: Who pays for appraisals and legal fees? What if a proposed gift is outside your mission? How will you treat donor designations? How will you use undesignated estate gifts? What restrictions will you put on naming rights (length of time it will be in effect, actions in the case of a name that can bring bad will to the organization, etc.)? Who will make the determination on potential gifts not covered in the policy? How will changes to or deviations from the policy be handled?

Because a gift acceptance policy can lead to difficult decisions (e.g., outright rejecting a gift), it is important to have your board review it and vote on its acceptance. This also is helpful when you are explaining to a donor why you cannot accept a specific gift – “I’m so sorry, but our board of directors does not allow the organization to accept gifts of XYZ. May I instead suggest….”

But what if it’s too late? You are already dealing with a gift that has “gone bad” for whatever reason. At the same time, you are writing (or updating) your gift acceptance policy, determine what you can do to redeem the situation. This may require consulting with a lawyer or other professional, but understanding any legal issues can help you weigh your next steps. Identify multiple options when possible. And if all else fails, pay for the sidewalk repairs (or whatever) and chalk it up to an expensive learning opportunity.

My best advice when things go wrong? Figure out what went wrong. Figure out how you are going to fix it. Figure out what you’re going to do to make sure it never happens again. And then get busy implementing that solution.