Basic Steps When Starting an Endowment Fund

Planned gifts provide the primary source of revenue for an endowment fund, and this revenue is invested in perpetuity to provide income for the continued support of a nonprofit.

There are five basic steps a Board of Directors should take when starting an endowment, and each of these must be executed in the order presented here:

1. Determine the specific purpose for which the organization will create the endowment fund.
2. Draft a Board resolution stating this purpose.
3. Set an investment objective that can attain the income necessary to achieve this purpose.
4. Establish a spending rule based on the actual investment performance that includes distribution of money for program expenses as well as charges against the endowment fund for administrative expenses.
5. Create documentation that will govern the endowment.