Donation Agreement Drafting Workflow

You are tasked with drafting a comprehensive Donation Agreement that governs the transfer of property, assets, or funds from a donor to a recipient organization, typically a nonprofit entity. This document must be legally sound, tax-compliant, and clearly articulate the terms of the charitable contribution while protecting both parties' interests.

Document Purpose and Context

A Donation Agreement is a binding legal contract that formalizes a charitable gift and establishes the rights, obligations, and expectations of both the donor and the receiving organization. This agreement serves multiple critical functions: it provides legal documentation of the transfer, establishes any restrictions or conditions on the donation's use, creates a record for tax deduction purposes, and protects both parties by clearly defining the terms of the gift. The agreement must comply with applicable state contract law, federal tax regulations governing charitable contributions, and any specific requirements of the recipient organization's governing documents.

Parties Section

Begin by identifying and describing both parties to the agreement with precision and completeness. For the donor, include the full legal name (whether individual, corporation, trust, or other entity), complete mailing address, and any relevant identifying information such as tax identification numbers if appropriate. For the recipient organization, provide the complete legal name, principal address, and critically important, verification of its tax-exempt status under Section 501(c)(3) of the Internal Revenue Code or other applicable provision. If the recipient is a public charity, private foundation, or other specific type of exempt organization, this classification should be clearly stated as it affects tax treatment. Include the date of the agreement and establish the roles clearly, using terms such as "Donor" and "Donee" or "Recipient" consistently throughout the document.

Recitals Section

Draft recitals that provide essential background and context for the donation, establishing the "whereas" clauses that explain the purpose and motivation behind the gift. These recitals should articulate the donor's charitable intent, describe the recipient organization's mission and activities that align with the donor's philanthropic goals, and explain how the donation will further those charitable purposes. Reference any specific programs, projects, or initiatives that the donation is intended to support. The recitals should also acknowledge the recipient's capacity and willingness to accept the donation and use it in accordance with the donor's wishes. This section establishes the foundational understanding between the parties and can be critical in interpreting the agreement's terms, particularly if disputes arise regarding the donation's intended use.

Description of Donation

Provide a detailed and unambiguous description of what is being donated, with specificity appropriate to the nature of the gift. For cash donations, state the exact amount in both numerals and words, the currency, and the method and timing of payment (lump sum, installments, etc.). For non-cash donations, provide comprehensive descriptions including:

• Real property: legal description, address, parcel numbers, and any encumbrances or title issues
• Personal property: detailed description, condition, quantity, and fair market value as determined by qualified appraisal if required
• Securities: type, quantity, issuer, and transfer method
• Intellectual property: specific rights being transferred, registration numbers if applicable
• In-kind services or goods: nature, scope, and valuation methodology

Include the agreed-upon fair market value of non-cash donations and reference any independent appraisals obtained, noting that for donations exceeding $5,000, IRS regulations require qualified appraisals. Specify the delivery method, transfer date, and any conditions precedent to the transfer becoming effective.

Terms and Conditions

Articulate all terms governing the donation with clarity and legal precision, addressing restrictions, permitted uses, timelines, and any conditions attached to the gift. If the donation is unrestricted, state this explicitly. For restricted donations, detail the specific purposes for which funds may be used, any prohibited uses, and the time period during which restrictions apply. Address whether the donation is revocable or irrevocable, noting that most charitable donations are irrevocable once accepted to qualify for tax deductions. Include provisions addressing what happens if the specified purpose becomes impossible, impractical, or illegal to fulfill—typically incorporating cy pres doctrine language allowing the recipient to use the donation for similar charitable purposes. If the donation is conditional (contingent on matching funds, naming rights, or other requirements), clearly state all conditions and the consequences of non-fulfillment. Address whether the principal must be maintained (endowment) or may be expended, and specify any required reporting or accounting to the donor.

Acknowledgments and Tax Provisions

Include comprehensive provisions addressing tax compliance and acknowledgment requirements under federal tax law. The agreement should contain language satisfying IRS requirements for substantiation of charitable contributions, including a statement that the recipient is a tax-exempt organization under Section 501(c)(3), the date and amount or description of the donation, and whether any goods or services were provided in exchange for the donation. If the donation exceeds $250, include specific acknowledgment language required by IRC Section 170(f)(8). For non-cash donations over $500, reference the donor's obligation to file Form 8283 and the recipient's responsibility to complete the required portions. Include a good faith estimate of the value of any benefits received by the donor in exchange for the donation, or state that no goods or services were provided other than intangible religious benefits if applicable. Clarify that the recipient will provide a written acknowledgment suitable for tax purposes and specify the timeline for providing such acknowledgment. Include appropriate disclaimers that neither party is providing tax advice and that the donor should consult their own tax advisor.

Representations and Warranties

Draft mutual representations and warranties that provide assurances and allocate risk between the parties. The donor should represent and warrant that they have full legal title and authority to transfer the donated property, that the property is free from liens and encumbrances (or specify any existing encumbrances), that the donation does not violate any other agreements or obligations, and that all information provided regarding the donation is accurate and complete. For non-cash property, the donor should warrant the condition and fitness of the property and disclose any known defects, environmental issues, or legal problems. The recipient organization should represent and warrant that it is duly organized and validly existing, that it maintains tax-exempt status under Section 501(c)(3) or other applicable provision, that it has the authority to accept the donation and use it for the stated purposes, and that acceptance of the donation does not violate its governing documents or any applicable laws. Include representations regarding compliance with anti-money laundering laws and sanctions regulations if appropriate for the size and nature of the donation.

Governing Law and Dispute Resolution

Specify the jurisdiction whose laws will govern the interpretation and enforcement of the agreement, typically the state where the recipient organization is headquartered or where the donor resides. Include a complete choice of law provision stating that the agreement shall be governed by and construed in accordance with the laws of the specified state, without regard to its conflict of law principles. Designate the exclusive venue for any legal proceedings arising from the agreement, identifying the specific courts (state or federal) and county or district. Consider including alternative dispute resolution provisions such as mediation or arbitration requirements before litigation, which can reduce costs and preserve the relationship between donor and recipient. Address whether the prevailing party in any dispute is entitled to recover attorneys' fees and costs. Include a severability clause providing that if any provision is found invalid or unenforceable, the remaining provisions continue in full force and effect.

Execution and Signatures

Conclude the agreement with proper execution provisions ensuring the document is legally binding and enforceable. Provide signature blocks for authorized representatives of both parties, including lines for printed names, titles, and dates of execution. For individual donors, a single signature is typically sufficient. For corporate or organizational donors, ensure the signatory has proper authority and include their title; consider requiring a corporate seal or secretary's certificate if the donation is substantial. For the recipient organization, obtain signatures from authorized officers as specified in the organization's bylaws, typically the Executive Director, President, or Board Chair. If the donation involves real property or exceeds certain value thresholds, consider including notarization requirements to facilitate recording or enhanced evidentiary value. Include witness signature lines if required by state law or organizational policy, particularly for substantial donations. Ensure all parties receive fully executed original copies of the agreement.

Final Output Requirements

The completed Donation Agreement should be a professionally formatted legal document of typically 5-12 pages, depending on complexity, using standard legal formatting with numbered paragraphs or sections, appropriate headings, and consistent terminology throughout. The document must be internally consistent, with all cross-references accurate and all defined terms used properly. Ensure compliance with applicable state contract law, federal tax regulations governing charitable contributions under IRC Section 170 and related provisions, and any specific requirements of the recipient organization's governing documents or institutional policies. The agreement should be clear enough for the parties to understand their obligations while being sufficiently comprehensive to address foreseeable issues and protect both parties' interests. Include all necessary schedules, exhibits, or attachments, such as property descriptions, appraisal reports, or lists of specific restrictions, properly referenced in the main document.