Endowments and Planned Gifts: What and Why?

Endowments and planned gifts are separate concepts that work hand in hand for donors and nonprofit organizations.

Planned gifts are contributions made as a result of a process to choose the most appropriate gift for the most important purpose in the most advantageous time frame for the donor, the charity and the donor’s heirs. Gift planning, as this process often is called, is the preparation and design of charitable gifts to maximize benefits for both the donor and the organization.

An endowment is what you do with the gift, rather than the planning for the gift or the gift itself. A true endowment gift is permanently invested, not spent for current operations or capital projects. An endowment supports initiatives not for just one year, or even one generation, but in perpetuity, with a portion of the endowment’s value used annually as the donor specifies or as the board chooses.

Contributions to endowments — both those that create new funds and those that add to existing funds — often are attractive to planned-gift donors because they appeal to the donor’s core values, and they provide numerous benefits to the donors as well as to the institution.

Endowment contributions:

* Create a sense of immortality. Because an endowment gift will be invested permanently, it can serve as a permanent tribute to the donor and extend the donor’s values for future generations. It can offer the donor a sense of immortality, a way to define the donor’s place in the cosmic scheme of things through support of an important cause.

* Perpetuate the donor’s values and priorities in the wake of change. An endowment gift can provide assurance that programs that are important to the donor will survive. By creating or adding to a permanent endowment for a designated purpose, the donor seeks to enable and obligate the organization to carry out his or her expressed wishes, so long as it is practical and possible to do so. A restricted endowment can ensure organizational support for the donor’s priorities.