By definition an Endowment Fund is a permanent investment account which produces earnings that are used to meet annual operating expenses, supplement important programs and services, and make possible other activities that enhance the overall quality of a nonprofit organization. In addition, it provides a financial cushion for today as well as tomorrow, ensuring a regular income to support operating expenses for ongoing programs or special needs.
A substantial permanent endowment helps The Foundation for Evangelism to ensure that funds will be available to develop generations of leaders with a passion for evangelism. The Foundation’s endowment, similar to those of other nonprofit organizations, was negatively affected by the 2008/09 stock market decline. To help provide a greater financial cushion against future downturns in the stock market and the economy, building our endowment – as a permanent base of support – remains one of our highest priorities.
The income of our endowment fund, computed in accordance with the endowment spending policy established by our Trustees is used annually and is historically less than the fund’s total earnings (including unrealized gains) each year. The undistributed earnings are retained in the endowment, which allows the fund to appreciate over time with the objective of maintaining its value against inflation. Portions of The Foundation for Evangelism endowment have been designated by donors for a specific use; the remainder is unrestricted, and the income is used to meet a variety of institutional needs. In addition to being carefully managed according to a written investment policy, our endowment fund has grown over time primarily through bequests, remainder interests in charitable trusts, charitable gift annuities, life insurance and other estate-related gifts. The current market value of our endowment is slightly more than $22,000,000.
Giving to an endowment remains a popular option for friends of The Foundation for Evangelism because it is an ideal method for ensuring that grants they have helped to underwrite continue to receive an appropriate level of funding now and in the future. Some of our donors have chosen to build endowment funds by contributing gifts during their lifetime, as a single gift, multiple gifts over a period of years or a combination of outright and estate gifts. These funds may bear the names of the donors, their family members or close friends, and serve to honor or memorialize these individuals.
Estate Planning and Endowment Giving
Equally as important as acquiring assets over one’s lifetime is the process of making decisions about the distribution of those assets through one’s estate plans. This process can be a rewarding experience, for careful and thoughtful estate planning requires us to examine what is important in our lives and how we wish to be remembered after we are gone.
The first step in planning our estate is writing a will. In some cases, an individual may also create a “living trust”, which provides for the distribution of property at death. Without these instruments, we forfeit the opportunity to make decisions about how our money and property will be distributed — the courts will decide for us according to state law. These instruments continue to give us control of our resources, and we can derive the satisfaction of constructing a plan of distribution according to our wishes. Providing for our family and making provisions to benefit others through bequests for charitable institutions such as The Foundation for Evangelism can be a source of deep satisfaction.
The generosity and commitment of loyal donors to build and strengthen our endowment is appreciated not only by those who are presently served, but also by future generations who will need and benefit from the programs and services we provide for years to come.
Establishing a Named Endowment by Will
The easiest and most frequently utilized way to make an estate gift to endowment is by a bequest in your will or living trust. Your attorney can assist you in choosing the appropriate wording for your particular circumstances in order to accomplish your wishes. You (or your attorney) should also talk with the development staff at The Foundation for Evangelism prior to executing your will or trust, in order to assure that the provisions governing the endowment are consistent with the Foundation’s policies and practices regarding the management of endowed funds.
Here is sample wording for review by you and your attorney:
1. Unrestricted Bequest to Endowment: I give % of my estate (or the sum of $ ) to The Foundation for Evangelism, 125 N. Lakeshore Drive, Lake Junaluska, NC 28745, to establish the (name) endowment, the income of which, computed in accordance with the organization’s spending policy, may be used for the organization’s general purposes as determined by the Board of Trustees.
2. Restricted Bequest to Endowment: I give to The Foundation for Evangelism, 125 N. Lakeshore Drive, Lake Junaluska, NC 28745 % of my estate (or the sum of $ ), to establish the (name) endowment fund, with the income therefrom computed in accordance with the organization’s spending policy to be used for (purpose). If in the opinion of the Foundation’s Board of Trustees it becomes impractical or inadvisable to use the fund for such purpose, the Board may apply the fund to another purpose, taking into consideration my intentions as expressed above.
3. Bequest of Residuary Estate: I give the residue of the property owned by me at my death, both personal and real and wherever located, to The Foundation for Evangelism, 125 N. Lakeshore Drive, Lake Junaluska, NC 28745, to establish the (name) endowment, the income of which, computed in accordance with the organization’s spending policy, may be used for the organization’s general purposes as determined by the Board of Trustees, or to establish the (name) endowment fund with the net income to be used for (purpose).
4. Specific Bequest: I give the following property to The Foundation for Evangelism, 125 N. Lakeshore Drive, Lake Junaluska, NC 28745, to establish the (name) endowment, the income of which computed in accordance with the organization’s spending policy may be used by The Foundation for Evangelism for the organization’s general purposes as determined by the Board of Trustees: (describe the property — i.e., collection of rare coins, real estate, jewelry, etc.) __________________________________________________
5. Contingent Bequest: I give the residue of the property owned by me at my death, both personal and real and wherever located, to my wife/husband (or some other designee), if she/he survives me, or if she/he does not survive me, to The Foundation for Evangelism, 125 N. Lakeshore Drive, Lake Junaluska, NC 28745, to establish the (name) endowment, the income of which computed in accordance with the organization’s spending policy may be used by The Foundation for Evangelism for the organization’s general purposes as determined by the Board of Trustees.
Property passing to The Foundation for Evangelism under any of the above forms of bequests in your will would qualify for the estate tax charitable deduction, and as such would not be subject to estate taxes.
Using Retirement Accounts To Fund Charitable Gifts
For persons with assets in retirement accounts such as an IRA, 401(k), 403(b), Keogh, and other corporate or partnership pension and profit sharing plans, there may be significant tax advantages in bequeathing all or a portion of these accounts to The Foundation for Evangelism. If retirement accounts are designated for heirs such as children and grandchildren, over one-half of the total value of the account could be lost to federal income and estate taxes (depending on the applicable income tax and estate tax rates), not including the impact of state taxes. Because of the heavy tax burden when bequeathing tax deferred retirement accounts to family members other than a spouse, it is usually tax advantageous to designate these types of accounts to The Foundation for Evangelism and designate other assets such as appreciated securities or real estate to family members or other heirs.
With respect to gifts made during life, if you are over age 70½, you (and or your spouse) can each make charitable distributions of up to $100,000 in 2011 directly from your IRA without having to report the distributions as income, but it will count as part or all of your required distribution.
Establishing a Named Endowment Through a Life Income Plan
It is possible to fund a named endowment at death while deriving income from the gift during your lifetime. Through charitable gift annuities and charitable remainder trusts funded with cash or other property, you may make a gift that provides lifetime income for you, your spouse, or other family members.
At a time when traditional investments are producing modest returns, a charitable gift annuity enables you to provide a gift to The Foundation for Evangelism for which you and, if you desire, another family member will receive a guaranteed annual income distribution for the remainder of your lives. A portion of the principal used to fund the annuity is a tax-deductible contribution in the year it is given. The income you receive is based on your age (and the age of any other income beneficiary). In addition, a percentage of the annual income is considered a return of principal and is tax free.
If you use appreciated securities or other appreciated property to establish a named endowment, you may wish to consider the advantages of a charitable remainder trust of which there are two types — the unitrust and the annuity trust. With the unitrust, you receive income each year based on a percentage (which is fixed when the trust is established) of the value of the principal of the trust, as revalued annually. If you want to add to the unitrust at a later time, you may do so without creating additional trust instruments.
An annuity trust is much the same as the unitrust, with the exception that the income amount established when the trust is formed does not change. Additional gifts cannot be made to the annuity trust.
In each of these life income plan examples, you may direct that the principal of the annuity or trust create a named endowed fund at The Foundation for Evangelism when you (and your spouse or other income beneficiary) pass away. Depending on your financial circumstances, the funds passing to The Foundation for Evangelism may be funds that otherwise would be payable as estate taxes. Accordingly, creating a charitable trust or an annuity trust may not greatly reduce the total value of the property interests passing through your estate plan to children or other beneficiaries.
In Conclusion
There are a number of ways by which a named endowment may be established through thoughtful estate planning. Your attorney and other financial advisors should be contacted in order to make certain that your charitable wishes are met in a way that accomplishes your objectives for your family and our institution. You (or your attorney) should also talk with The Foundation for Evangelism about your proposed endowment, to communicate your wishes as to the handling of the endowment. An endowment covenant will be prepared for your signature to ensure that your intentions can and will be carried out in the precise manner that you specify.
Thomas Locke – Development Director
TLocke@FoundationForEvangelism.org
Neil Blair – President
NBlair@FoundationForEvangelism.org
125 N. Lakeshore Drive
PO Box 985
Lake Junaluska, NC 28745
800.737.8333
