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Endowments Unveiled: Five Quick FAQs

The term “endowment” can often feel intimidating, even to experienced fundraising and planned giving professionals—not to mention donors without the same background. However, understanding endowments is crucial for ensuring an organization’s long-term sustainability, and it doesn’t have to be hard.

Let’s demystify this important concept by answering five of the most frequently asked questions about endowment funds at the Athens Area Community Foundation.

What exactly is an endowment?

The term “endowment” refers to a dedicated pool of assets that are invested by a non-profit third party, in our case by the Community Foundation. These assets are carefully managed and tracked separately, with a portion (usually a small percentage) distributed annually to support the organization’s mission. The remainder of the assets stay invested to grow over time, with the goal of using the funds to support the organization in perpetuity.

Why are endowment funds so important for organizations’ future?

Endowment funds are essential because they create a steady income stream that helps an organization fulfill its mission, not just today, but for decades to come. This consistent support allows organizations to adapt to changing needs and fluctuations in the fundraising environment without seeking new donors.

Additionally, as an endowment grows, it can provide even greater support each year, helping the organization to expand its impact over time.

Can donors stay involved after they make an endowment gift?

At the Athens Area Community Foundation, we make it a priority to keep donors informed about the positive changes happening in the community, thanks to distributions from their endowment fund.

Beyond a donor’s lifetime, we’re also committed to keeping their children and grandchildren updated, ensuring that the donor’s legacy continues to be honored and celebrated through future generations.

Who determines how endowment distributions can be used?

Each year, an organization’s board of directors carefully reviews the income generated by the endowment as part of the budget process. It’s clearly identified where the endowment income flows into the budget.

Typically, the board, along with staff, will develop and oversee a budget that aligns with the organization’s mission for the upcoming year. This collaborative approach ensures that endowment funds are used effectively to further the organization’s goals.

How can a donor make an endowment gift?

Donors have several options when it comes to making an endowment gift. While a cash donation is always welcome, transferring appreciated stock or real estate can offer greater tax benefits. Additionally, donors can work with estate planning and financial advisors to structure a bequest to the endowment fund. The Community Foundation staff is here to assist donors in designing a gift that meets both their tax and charitable giving goals and to help their advisors make the best decision possible.

For instance, we often recommend making a bequest through an IRA beneficiary designation, which offers multiple tax advantages. And if a donor is over 70 ½ years old, making a “Qualified Charitable Distribution” directly from an IRA to the organization’s endowment fund is an effective way to reduce income tax and satisfy Required Minimum Distributions.

Want to Make a Lasting Impact?

If there’s a cause you’re passionate about, consider contributing to an endowment. Our team is here to listen to your interests and help you structure a gift that will make a difference both now and for the next 100 years. Get in touch with us today.