Endowment Donor Agreement

Endowment Donor Agreement: What You Need to Know

When it comes to charitable giving, endowments are becoming an increasingly popular choice for donors. An endowment is a sum of money that is invested, with the income generated used to support a charitable cause in perpetuity. Endowments provide a stable, long-term funding source for organizations and help ensure that they can continue to make an impact for years to come.

If you’re considering making an endowment gift, it’s important to understand the terms of the donor agreement. A donor agreement spells out the terms and conditions of the gift, including how the endowment will be invested, how the income will be used, and what happens in the event that the organization goes out of business or is no longer able to use the funds as intended.

Here are some key elements of an endowment donor agreement:

1. Purpose of the Endowment: The donor agreement should clearly state the purpose of the endowment, including the name of the organization that will benefit from the gift and the specific cause that will be supported.

2. Investment Strategy: The agreement should also outline how the endowment will be invested. Endowments are typically invested in a diversified portfolio of stocks, bonds, and other assets to generate income over time. The donor agreement should specify the investment strategy and any restrictions on how the funds can be invested.

3. Use of Income: The agreement should specify how the income generated by the endowment will be used. Most endowments are set up so that a portion of the income is reinvested to help grow the endowment, while the rest is used to support the designated cause. The agreement should also specify whether the organization has the ability to use the principal of the endowment in case of emergency.

4. Duration of the Endowment: While endowments are intended to provide funding in perpetuity, the donor agreement should specify the minimum duration of the endowment. This can range from a specific number of years to a lifetime or longer.

5. Contingencies: The agreement should also address contingencies, such as what happens if the organization dissolves or is no longer able to use the funds as intended. In these cases, the donor’s wishes should still be honored, so the agreement should specify a successor organization or cause the funds should be directed to.

By understanding the elements of an endowment donor agreement, you can ensure that your gift is used in the way you intended and that it will have a meaningful impact for years to come. Be sure to work with an experienced professional, such as an attorney or financial advisor, to help draft the agreement and ensure that it meets your needs and goals.