Donating To or Setting Up an Endowment
There are basically 2 ways to get involved with endowments: (i) by donating to or (ii) setting up your own endowment.
Donating to an Endowment
Because there are currently so many endowments out there right now (and institutions are always looking for new donors) most people choose to donate to an endowment. Donating to an endowment is also the easiest and quickest way to give back. You simply have to find an institution that you would like to contribute to and add your funds to its endowment. You may even be able to add some restrictions to the endowment depending on its nature and the size of your contribution. The key to contributing to an endowment is that you really believe in its purpose.
Setting Up an Endowment
If you have the financial resources, you may elect to actually set up your own endowment for a university or other institution. There are both advantages and disadvantages to setting up endowments. One obvious advantage is that you can create the endowment to do just about anything you want (within reason) with the consent of the institution you’re donating to. For example, you could set up an endowment to pay for all painting required on campus each year. Many people also choose to set up an endowment upon their deaths in a written will, trust, or other legal document. Endowments are a great way to carry on a legacy.
Generally, there are 5 different things you would want to do if you set up an endowment:
- Name the endowment
- Restrict the endowment’s use for a particular purpose(s)
- Set guidelines for how much of the interest can be used on a yearly basis
- Create exceptions for when the endowment principal can be used under special circumstances; and
- Set forth how the principal in the endowment should be invested (this is obviously an important step in which financial experts can help you)
You’ll also want to make sure that the endowment complies with the state laws (and other applicable laws) in which it will operate. So, you’ll likely want to find an accountant and/or attorney to set up and/or review the endowment for you.
Finally, let’s wrap up this article with the main points.