Paul Yeghiayan, CFRE
Senior Consultant
Most boards have never discussed what they would do if an unexpected bequest arrived. They believe the question is open.
It isn’t. A board with no policy on unrestricted estate gifts has decided, by default, to spend them. Not carelessly. The gift will go to the roof in need of repair, the budget deficit, the program that has been waiting. Those are real needs, and a board facing them with a check in hand will meet them. That is what unrestricted money does in an organization that needs it.
The board will have chosen the present over permanence without ever knowing it had a choice.
Spend It or Endow It? What the Bequest is Worth
Spent on an immediate need, such as a new roof, a $500,000 bequest is $500,000, once. Designated to endowment with a four percent spending rate, the same gift produces about $20,000 in its first year. A spending rate is set below the return the fund is expected to earn, so that over time the fund grows, the annual payout grows with it, and the organization keeps drawing from a gift that is still there. Returns vary and some years fall short, but that is the design: a gift received once, spent every year.
The roof still needs fixing. The question is whether the board decided in advance that the roof gets all of it.
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The Decision Most Boards Skip: Board-Designated Endowment Explained
An unrestricted bequest can be spent on anything. If a board wants any part of it to last, it must allocate that part to a board-designated endowment, often called a quasi-endowment, because only a donor can create a true endowment and this donor did not. The gift has no future protection except what the board gives it.
The board can give it that protection before the gift exists. A short policy can set the order in which an unexpected estate gift is applied. For instance, often boards will prioritize bringing reserves to target, then to any capital needs that the board has already identified in writing, and the remainder to quasi-endowment. Departing from the order should require a supermajority board vote and a written reason in the meeting minutes.
Some board members will say the donor left the gift unrestricted so the board could decide. That is exactly right. The policy is the board deciding. It does so in advance, when it can weigh the mission’s future against its present without the check on the table.
Adopted before any gift is on the table, this is a decision made on principle. Taken up after the unrestricted bequest arrives, it is a decision made under pressure, and pressure usually wins.
What a Bequest Policy Reveals
Drafting it exposes what else is missing. A reserve target, if the board has never set one. An endowment policy with a spending rate, if none exists. Often the bequest policy is the first time a board has been asked to say, in writing, what it believes about permanence.
It also gives the organization something to tell donors. “Unrestricted estate gifts are directed to endowment once reserves are met” is a sentence that belongs in a legacy conversation and on the planned giving page. It answers a question many legacy donors have and few ask—what will actually happen to my gift?
The Bequest Will Come
Bequests accounted for about 10% of charitable giving in 2025, according to Giving USA. Most established organizations will eventually receive an unexpected bequest.
When it comes, the board will need to decide what to do. The only question is whether it decides on purpose.
Benefactor Group helps nonprofit boards build the endowment policies, gift acceptance guidelines, and planned giving strategy that turn moments like this into durable impact. Let’s talk.