Why do donors give to or establish an endowment fund?
- They already care about the organization or its mission. Very few endowment donors give unless they have a deep interest in what the organization does and a relationship with the organization.
- They want to make sure the nonprofit or its programs are sustainable. A donor will give to an endowment or establish an endowment because they care about sustainability and ensuring programs continue indefinitely.
- They have the ability to give.
What are the benefits to the donor?
- Perpetuates the donor’s values and priorities: An endowment gift can ensure that the donor’s values and priorities continue in the wake of change. It can provide assurance that programs that are important to the donor will survive.
- Creates a sense of immortality: Because an endowment gift will be invested permanently, it can serve as a permanent tribute to the donor.
- Endows annual gifts: An endowment gift gives donors the option to perpetuate their annual gifts. This concept is often appealing to the consistent older donor. For example, a donor who gave $1,000 each year to his or her favorite nonprofit, could establish a $25,000 deferred endowment, which, at 4%, generates the same $1,000 annually for the nonprofit following their death.
- Permits additions at a later time: An endowment fund can be added to later. The donor, or the donor’s friends and family, can add to a named fund from time to time by simply identifying the fund as the object of the gift. It makes a handy vehicle for people, especially family members, who wish to make meaningful gifts to people who already have enough “stuff.”
*Adapted from Benefactor Group’s resource, “The Benefits of an Endowment.” https://benefactorgroup.com/the-benefits-of-an-endowment/
What types of endowed funds are offered by the CFO?
- Designated: Provides steady source of income for particular agency/church/program; may have more than one grantee beneficiary if donor chooses. The CFO provides oversight to ensure grants go to proper location.
- Field of Interest: Gives the CFO flexibility to address future needs while still remaining in the donors’ area of interest, i.e. all grants must address educational needs, senior services or the environment.
- Endowed Donor Advised Fund: Grants recommended by the donor. The annual spendable balance can be used for the donor’s regular charitable giving during their lifetime. Can convert fund to another type of endowed fund upon death. Can begin to grow the endowment in donor’s lifetime.
- Unrestricted: Most flexible fund to address future needs. Part of the CFO’s competitive grant process with applications. This is the type of endowed fund to establish if you are wanting to support the CFO as your grantee beneficiary!
- Scholarship: Assists students with higher-education costs. CFO staff handles all the paperwork & back office functions in accordance with IRS. Donors help shape criteria.
When is an endowment right for you as a donor and how do you choose an endowment type?
- You’ve had a large tax event, you are now required to take your required minimum distribution from your IRA, or you want to include a charitable component to your estate plan. An endowment can be a great option for all of those scenarios.
- Sustainability and perpetuity are important to you.
- The type of endowment and the parameters of the fund will depend on your charitable interests and goals. What inspires you to give? What issues matter most to you?
- Think about your beliefs, the population you would hope to help (i.e. children, animals, veterans), your areas of interest (i.e. arts, environment, health care) and geographic reach.
- Questions to ask yourself as you consider your personal giving:
- If you could solve any problem, what would it be?
- If you had $1 million to give away today, where would you give it?
- What do you like about your community and how do you think it could be improved?
- Talk to the CFO to align your determined charitable goals with the right fund type!