BENEFITS OF AN ENDOWMENT
An ideal option for long-term stability, endowments offer nonprofits various benefits to achieve their financial goals and further their impact, including:
- A stable and reliable source of income
- Enhanced trust with donors, clients and staff
- Increased giving options for donors
STARTING AN ENDOWMENT
Establishing the policies that your endowment will be governed around, and the continuous management of an endowment, can come with its own set of unique set of challenges. To simplify the process, the following outlines the steps and considerations when starting an endowment.
Evaluate your organization’s readiness to start an endowment.
Define the purpose of your endowment.
Outline the policies for your endowment.
- Spending policy: The percentage of the fund that your non-profit can withdraw every year
- Gift acceptance policy: The types of gifts that can be accepted by an endowment
- Investment policy: The types of investments the manager can make, the level of risk the manager can take and the target return
Secure funding for the endowment.
This can be achieved through a variety of different avenues.
- Foundational gifts
- Surplus funding
- The selling of assets
Establish the investment account and where the assets will be held.
MANAGING AN ENDOWMENT
Ongoing maintenance and management is required for a fund on an annual basis. At a minimum, you should:
- Consistently review the allocation of assets to maximize returns
- Determine annually what to do with the surplus earnings and principal, including reinvesting funds or increasing operational budget
The tax and foundation planning information offered is general in nature. It is provided for informational purposes only and should not be construed as tax or legal advice. You are encouraged to consult an attorney or tax professional regarding your specific tax and legal situation.