How a Named Endowment Fund Works
- Donor makes a contribution to establish or augment the Fund & receives an income tax deduction.
- Foundation invests the Donor’s gift for minimal risk & maximum yield.
- Based upon the market value of the investment, the Foundation makes grants to support programs of local charitable agencies and takes a small fee to cover Foundation administrative costs and investment management fees. Any earnings in excess of the distribution are put back into the Fund to offset inflation and grow the Fund.
- The Fund is not a separate Trust and may receive additional contributions of any amount, at any time, by anyone.
Types of Funds That a Donor May Create
If a donor wishes to establish their own Fund, they make a gift of at least $10,000, name the Fund and choose one of five types of Funds:
- Unrestricted Fund – Donor gives full discretion to the Foundation Trustees to make from the Fund grants that show the greatest promise or meet the community's most pressing needs.
- Field of Interest Fund – Donor specifies a broad area of interest in which grants from the Fund will always be made (e.g., education or environmental issues).
- Scholarship Fund – A special type of field of interest fund that requires a minimum donation of $25,000 and pays a 1.5% administrative fee.
- Donor Advised Fund – Donor takes an active role in the grantmaking activity by reviewing proposals and offering recommendations about which requests they would prefer to support; final responsibility for grantmaking rests with the Foundation Board. This type of Fund offers the option of changing the area of interest to which grants from their Fund are made from year to year (e.g., immunizations one year and perhaps an artist-in-residence program for local schools the next).
- Designated Fund – Donor specifies the charitable agency to which grants will always be made (e.g., W.G. Nord Center, Red Cross, Neighborhood House Association, Linden School).