Endowment – a good way to share your fortune

2007-03-08 10:33:40

( Financial )



Endowment is defined as funds which is given by individuals or groups to charitable organizations for the purpose of supporting a particular or specific endeavor. Endowment is supported by rich families in America.

Many rich families give endowment funds because they want to associate their family name to a worthwhile project or program with enduring worth. It then becomes a family tradition that is passed on from one generation to the next with the succeeding generations adding gifts to their beneficiaries. Types of endowment opportunities are general endowment funds, endowed scholarships and grants, proposed buildings and programs, special initiative endowments, campus beautifications projects and building components.

When funds go to endowments, which are usually categorized as restricted gifts, donors are assured that their funds go 100% to projects or activities they want to support. However, some institutions also accept unrestricted gifts which are not limited to a specific purpose. These gifts provide funds for areas of greatest need. Endowment compensation are sometimes supported and included in their programs.

Some institutions have endowment policies of requiring a minimum of $100 as contributions to the endowment fund. However, the minimum level to establish a named endowment is $10,000, depending on the purpose of the endowment. Most institutions are actively campaigning and soliciting funds from ordinary citizens who would wish to share a little of their money to fund their projects. Also financial statements of endowment funds are audited annually and can be obtained from officials of these institutions. . These officials are responsible for proper accounting and financial management of these funds.

Individuals can contribute annually through gifts or pledge. Gifts can be in the form of cash, real estate, stocks, bonds and mutual funds, equipment and personal property. Planned gifts on the other hand are paid-up life insurance policies, retirement savings and bequests. Others can give charitable gift annuities, charitable reminder trusts, charitable lead trusts and retained real estate.

The law requires institutions receiving endowments to follow the donors’ wishes on where they want to use their money. It is usually the head of the institution like the chancellor, dean or president who manage and strictly enforce the donors’ wishes. Endowment may be spent in full or invested to provide support for its beneficiaries for years to come. For endowment claims, it is best to talk to officials of the institution.

Endowment funds should not be used to support operating costs of recipient institutions. Funds for operating expenses are sourced from unrestricted funds or from bank interest of endowments under time deposit. Most endowment funds are professionally invested and managed by external investment advisors.
Endowments are also tax deductible under Section 170 (b) of the Internal Revenue Code. They are qualified to receive maximum tax benefits given to charitable activities under the federal income, estate and gift tax laws. It is also tax-exempt under Section 501 (c)(3) of the Internal Revenue Code.


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