Over the past several years, many charitable organizations have begun campaigns to have their donors “endow” their annual gifts. Simply stated, this involves leaving a gift in your will of an amount whose investments can create a gift for current use each year, forever.
Here’s how it works: a charitable organization will take the endowed gift amount, spend a fixed amount of the gift annually (this amount is determined by the organization’s endowment spending policy), and reinvest the difference to offset inflation and provide a steady source of income to supplement annual revenues and gifts.
Take, for example, an annual gift of $1500. How much would it take to endow that gift so that a charitable organization could receive that amount indefinitely? If, say, the organization’s policy for spending endowment income is 5% annually, simply divide the annual gift amount ($1500) by the amount called for in the spending policy (in this case 5%) and you get $30,000. Thus, making an endowment of $30,000 would continue the $1500 annual gift indefinitely.
|If your annual gift is ______ ,
|| perpetuate it by giving ________
Applying the above principle to any given situation, we see that at a 5% endowment spending level, twenty times an annual gift amount equals a perpetual gift endowment.
The added benefit is that the spending policy of the endowment allows the asset value, and thus the annual income, to grow to offset inflation. Because of this increase, many people can actually increase their gifts to their favorite charitable organization over the years.
Setting up an endowment could be the most farsighted and enduring act of your lifetime!
What it means to you — it’s a way for you to play a special part in perpetuating a cause that means a lot to you. What it means to the charitable organization — it provides a steady and dependable source of income.
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