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Concept
Financial endowment
Summary
A financial endowment is a legal structure for managing, and in many cases indefinitely perpetuating, a pool of financial, real estate, or other investments for a specific purpose according to the will of its founders and donors. Endowments are often structured so that the inflation-adjusted principal or "corpus" value is kept intact, while a portion of the fund can be (and in some cases must be) spent each year, utilizing a prudent spending policy.
Endowments are often governed and managed either as a nonprofit corporation, a charitable foundation, or a private foundation that, while serving a good cause, might not qualify as a public charity. In some jurisdictions, it is common for endowed funds to be established as a trust independent of the organizations and the causes the endowment is meant to serve. Institutions that commonly manage endowments include academic institutions (e.g., colleges, universities, and private schools); cultural institutions (e.g., museums, libraries, and theaters); service organizations (e.g., hospitals, retirement homes; the Red Cross); and religious organizations (e.g., churches, synagogues, mosques).
Private endowments are some of the wealthiest entities in the world, notably private higher education endowments. Harvard University's endowment (valued at 46.8 billion .
Most private endowments in the United States are governed by the Uniform Prudent Management of Institutional Funds Act which is based in part on the concept of donor intent that helps define what restrictions are imposed on the principal and earnings of the fund. Endowments in the United States are commonly categorized in one of four ways:
Unrestricted endowment can be used in any way the recipient chooses to carry out its mission.
Term endowment funds stipulate that all or part of the principal may be expended only after the expiration of a stated period of time or the occurrence of a specified event, depending on donor wishes.
Official source
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