Understanding the Difference
Understanding the Difference
In a congregation, we are likely to receive two kinds of gifts: restricted (designated) and unrestricted (undesignated).
We need to understand the difference and faithfully honor the intent of the giver.
This is not simply our moral and ethical duty. It is also a legal obligation, with serious consequences if we fail to do so.
Gifts Without Donor Restrictions
Every dollar given to a church creates an obligation. The church must use that dollar for the uses intended, implied, or legally restricted by the donor.
At the most basic level, this applies to the regular offerings received by the church. We have an obligation to faithfully steward these gifts so that they can translate into ministry.
These gifts have no donor restrictions other than that they be used for ministry. They typically comprise the majority of a congregation’s resources.
Gifts With Donor Restrictions (Purpose or Timing)
Most congregations also raise funds for specific purposes. These might include:
- a Week of Compassion offering
- a capital campaign
- donations for a youth mission trip
Congregations should take care to use money raised for a named purpose entirely for that purpose.
For example:
- If the Week of Compassion offering is larger than in past years, a congregation may not take some of the “excess” to meet another budgeted need.
- If a congregation raises money to install an elevator, it should not use those funds for other purposes if it fails to raise enough funds or later decides not to complete the intended project.
For specific capital projects, there may be reasonable doubt about raising all the funding needed. In these cases, a congregation may be well advised to articulate contingency plans as part of the campaign.
Formal Donor Restrictions (Legal Documents)
A donor may formally state restrictions on a gift in a legal gift document.
A congregation and the donor may jointly decide to modify such a document. However, congregations should take care to ensure that the donor fully agrees with any revisions.
When these gifts are testamentary, congregations should use them for other purposes only with the approval of their state’s Attorney General.
Restrictions Based on Solicitation
A donor’s response to a congregation’s solicitation materials may also create restrictions on a gift.
Sometimes circumstances prevent a congregation from using the gifts for the intended purpose. In these cases, a congregation would be wise to consider its legal obligation to return those gifts to the donors.
Permanent Endowment Gifts
Many congregations have benefited from endowment gifts. Members often make these gifts at death, and they can provide a lasting blessing to the church.
Testamentary gifts can be:
- Unrestricted:
“I give 10% of my residual estate to First Christian Church of Sunny Town, Florida.” - Restricted by permanence but not purpose:
“I give $100,000 to my congregation, First Christian Church, the annual income from which may be used for any purpose determined by the congregation.” - Restricted by time and purpose:
“To First Christian Church, the residual of my estate, to create an endowment that will provide income to be used for building maintenance needs of the congregation.”
As you can see, donors articulate their gifts in many different ways.
It is always a good practice to:
- Request a copy of the actual bequest language
- Seek help in understanding whether the language creates restrictions
Many congregations have well-thought-out policies that state how they will use testamentary gifts.
These policies can:
- Encourage testamentary giving
- Provide clarity and confidence to donors
However, congregational policies—whether in bylaws or approved documents—never override or limit any restrictions the donor puts in place.
Additional Resources
For Disciples congregations, the Christian Church Foundation is a valuable resource to help:
- Create or review permanent fund policies
- Understand restrictions created by testamentary gifts
The Foundation offers, at no additional cost, to maintain important donor documents when those endowment gifts are invested through the Foundation’s investment funds.
Our thanks to Ruth Weaver, Senior Vice-President Emerita of the Christian Church Foundation, for her contributions to this article.
Related articles: How Much Is Enough, Assessing Gifts At Risk