Introduction
Endowments represent a unique and powerful way to make a lasting impact through charitable giving. Unlike regular donations, an endowment is designed to provide ongoing support to your favorite nonprofit, creating an inter-generational charitable impact that endures long beyond your lifetime. By establishing an endowment, your generosity can benefit future generations and ensure that the causes you care about continue to thrive.
What Is an Endowment?
An endowment is a special type of donation, typically in the form of cash or stock, that is structured to grow over time through strategic investing. The principal amount of the endowment is invested, and each year, a predetermined percentage of the fund is disbursed to the nonprofit organization. This allows the endowment to provide a steady stream of income for the nonprofit, supporting its mission in perpetuity.
How Endowments Work
Growth and Disbursement
Endowments are designed to grow your initial donation through thoughtful investment strategies. At Infinite Giving, we focus on making your gift meaningful and impactful while providing the nonprofit with the flexibility to use the funds where they are needed most. Here’s how it works:
Initial Donation: A minimum gift of about $25,000 is suggested to establish a named endowment. Most nonprofits should to seed their own quasi endowment with a portion of their reserves. This is typically at least $100,000.
Investment Strategy: The endowment is typically invested with a 60/40 or 70/30 allocation, balancing growth and stability. This can be adjusted based on the risk tolerance and goals of the nonprofit's board of directors.
Annual Disbursement: Each year, typically 4-5% of the endowment’s value can be disbursed to the nonprofit, providing a reliable source of funding. However, some endowments do not include a disbursement for the first few years so as to let the gift grow in the short term.
Unrestricted but Preference Honored Spending
While the annual disbursements are typically unrestricted, meaning the nonprofit can use the funds where they are most needed, we also honor any spending preferences you may have and will help you create policies around the endowment. This ensures that your donation aligns with your philanthropic goals and the nonprofit’s strategic needs.
The Benefits of Creating an Endowment
1. Perpetual Support
A well-managed endowment can support a nonprofit indefinitely. Your initial donation continues to grow over time, providing a lasting legacy that supports the organization’s mission for generations to come.
2. Impactful Giving
By disbursing a steady stream of funds annually, an endowment ensures that your donation has a meaningful and sustained impact. Nonprofits can rely on this consistent support to plan and implement long-term projects and programs.
3. Flexibility for Nonprofits
While the endowment provides stable funding, it also allows the nonprofit the flexibility to use the funds where they are most needed each year. This adaptability is crucial for addressing evolving challenges and opportunities.
Establishing an Endowment with Infinite Giving
At Infinite Giving, we handle all aspects of creating and managing your endowment. This includes:
Endowment Agreement: We facilitate the agreement between you and the nonprofit, ensuring all terms are clear and mutually beneficial.
Fiduciary Management: We join the nonprofit in managing the endowment, ensuring that the funds are invested wisely and ethically.
Investment Strategy: Our team develops and implements an investment strategy designed to grow the endowment while minimizing risk.
Annual Disbursement: We oversee the annual disbursement of funds, ensuring that the nonprofit receives its designated support each year.
Customizing Your Endowment
Interested in discussing additional options, making a larger gift, or exploring different forms of endowment? Endowments can take several different forms and your gift is impactful in all of them. We understand that each donor's goals and circumstances are unique. Endowments can be tailored in various ways to match your specific intentions and impact areas.
Reach out to your favorite charity, or one of our Nonprofit Investment Advisors, and we can help you discover the ultimate legacy of giving.