II. Accepting Cash Gifts
A. Donation Receipting/ IRS Regulations | B. ECC Receipt Forms | C. Restricted and Designated Gifts | D. Christmas and Special Gifts to the Pastor | E. Memorial Funds | F. Stock as a Charitable Gift | G. Real Estate as a Charitable Gift | H. Tangible Personal Property, Partnerships and Royalties as Charitable Gifts

C. Restricted and Designated Gifts
This information may prove helpful for pastors, church leaders and/or ministry board members.

INTRODUCTION

A restricted gift is one with a limitation or condition for use. There are both advantages and disadvantages to restricted gifts. This information may help to increase awareness of all the issues involved in the acceptance and management of restricted gifts from the perspective of both the donor and the ministry.

PRESENTATION

From the designated ministry's perspective:

A restricted gift is one on which the donor has placed a limitation or condition for use. This is the opposite of an unrestricted gift, which the recipient ministry may use at its own discretion for any purpose. Gifts designated for specific projects, programs, funds, etc. fall into the restricted category. Donors sometimes prefer to make a restricted gift, feeling this gives them some assurance that their gift will be used as they intend.

• The truth of the matter is that restricted gifts place a strong moral obligation, as well as a legal obligation, on the ministry receiving them. It is up to the ministry to:
• Make certain the gift is used only as the donor intends (so far as possible).
• Make sure restricted funds are segregated from operating funds and unrestricted funds.
• Make sure that clear and complete documentation is kept on file for current and future church officers and pastors regarding the donor's intent for the gift.
• Invest the funds responsibly in the case of long-term endowment-type gifts.

Covenant Trust Company provides resources for Covenant ministries to assist in the investment and management of restricted funds through either Investment Agency Accounts or the Covenant Endowment Trust (see separate page on each).

There may be some gifts your ministry does not wish to accept, either because you cannot adequately deal with them (e.g. real estate requiring management), or because you cannot honor the restriction the donor wishes to place on the gift. In this case it is better to be up front with the donor, and explain why your ministry may not wish to accept the gift. In the course of this discussion, by determining what the donor really wants to accomplish, other options may become evident. The Office of Estate Planning Services is available as a resource to answer questions of this type.

From the donor's viewpoint:
In some cases, you may wish to designate a specific purpose for your gift. You may have an interest in a special project, or simply feel that you do not want your special gift used for routine expenses. When considering a restricted gift, here are some important things to remember:

• Be certain your restriction is reasonable and fills a legitimate need for the ministry that will receive it.
• You may designate a program, fund or project to receive your gift. However tax law requires that the official board of the charity approve the project as either part of its budget or as an approved project beyond the annual budget.
• You may NOT take a charitable contribution deduction for personal gifts to pastors, missionaries, etc. If you designate a specific person as the recipient, your gift may not be tax deductible. For example, you may make a fully deductible gift designated to ..."help support missionaries in Zaire", or ..."help pay missionary salaries", because these are budgeted items. You MAY designate your gift to '...help support the ministry of John Wilson, our missionary in Zaire'. BUT you may NOT designate your gift to John Wilson personally if you want your gift to be tax-deductible.
• Another open option is the Covenant Endowment Trust, which provides quarterly distributions to your chosen ministry for the purpose you designate. (See Covenant Endowment Trust)
• Depending on the amount and type of your gift, you may need to file IRS Form 8283 with your federal tax return. You should consult your tax preparer for more information.
• For further information, contact the Office of Estate Planning Services at l-800-637-7282.

(All material is presented for educational purposes only, and represents our current understanding based on information received from our tax and legal advisors. It is meant to provide information about the various personal, tax and economic benefits which may result from different estate planning and planned giving ideas. Because situations differ, it is important for you to have an estate plan specifically designed to fulfill your objectives. Nothing in this material is intended as legal, tax or investment advice. Laws and procedures are constantly changing, are subject to differing interpretations and may vary from state to state. If you require legal, tax or investment advice, you should consult a competent attorney, tax or investment advisor.)