Every year, our team at Arkansas Community Foundation works with people like you to establish endowment funds to support the needs of their communities in perpetuity.
Here are answers to four frequently-asked questions about setting up an endowment fund:
Why does the Community Foundation offer endowment funds to individuals and families?
The Community Foundation serves as the hub of philanthropy for many families in Arkansas. We connect donors like you to community needs you care about. This includes offering the opportunity to make a charitable investment that supports a range of community needs now and in the future. That’s the purpose of an endowment: to provide a steady stream of support, far into the future, to meet community needs as they arise.
How does an “endowment” work?
“Endowment” is the word often used to refer to a designated pool of assets that are invested by the Community Foundation. A portion of the earnings are distributed each year to charitable causes while the rest of the assets remain invested to grow in perpetuity. This growth, in turn, ensures the endowment can provide even more support each year to the causes for which it was established. The Community Foundation team is experienced at managing the accounting, investment, and distribution aspects of endowment funds.
How can I stay involved with my endowment fund after it’s established?
First and foremost, you choose the name of the endowment, and what you want your endowment to support. Then our team will keep you informed about the financial growth, as well as the positive change in the community that is occurring thanks to the distributions from the endowment you’ve established. We can continue to keep your children and grandchildren informed, too, beyond your lifetime. In this way, your legacy continues through the generations.
Who decides where the endowment distributions go each year?
Depending on how your endowment is structured, you may recommend where the grant distributions go each year (Donor Advised) or entrust our team to do that on your behalf (Field of Interest, Scholarship, Etc.). Either way, our independent board of directors reviews and approves these distributions to ensure that they fulfill your charitable goals for establishing the endowment in the first place.
What does it take to establish an endowment fund?
Setting up an endowment fund is as easy as setting up any other type of fund at the Community Foundation. Our team will prepare simple paperwork capturing the name of the endowment fund and any areas of interest you’d like to support. Then, you can transfer cash—or, even better for tax purposes, you can transfer appreciated assets such as stock or real estate. You’ll be eligible for a charitable tax deduction in the year you make the transfer to establish the fund. You can make future transfers to your endowment fund each year, too, to achieve your tax and estate planning goals. Our team is also happy to work with you and your advisors to structure a bequest to your endowment fund following your death. We highly recommend considering a bequest in the form of a beneficiary designation on an IRA because of the multiple tax benefits. Related, if you are over 70 ½, making a “Qualified Charitable Distribution” from your IRA directly to your endowment fund is a very effective charitable planning tool to avoid income tax and also satisfy your Required Minimum Distribution if you’ve reached that age as well.
We look forward to working with you to support your community and your favorite charitable causes for generations to come!