ORGANIZATIONAL ENDOWMENT FUNDSORGANIZATIONAL ENDOWMENT FUNDS

What is an Organizational Endowment Fund?

Through the Lutheran Community Foundation, nonprofit organizations and congregations can create an endowment fund into which both the organization and its supporters can direct gifts. The organization may then request distributions, directing grant dollars to the programs it designates. The Foundation assumes the complexities of administering the endowment fund, which include accounting, investment and reporting responsibilities.

An organizational fund can be established for general endowment purposes, or can have specific purposes such as supporting outreach efforts, building maintenance or education ministries. Within the endowment fund, sub-funds can be created to support specific purposes designated by the organization or by a donor giving to the fund.

Target Audience

  • Organizations, small and large, interested in creating and building an endowment for charitable purposes of their choosing.
  • Organizations seeking a simple, flexible endowment option to relieve endowment committee members of substantial record-keeping burdens.
  • Organizations seeking to offer supporters a full range of charitable gift and fund arrangements, including charitable gift annuities and charitable remainder trusts, along with professional expertise to aid supporters in making these gifts.
  • Organizations wishing to accommodate supporters who wish to make truly anonymous gifts.

Tax and Financial Benefits of an Organizational Fund

An organizational fund at the LCF can be established for $25,000 or more with gifts from the organization and/or its supporters.

Benefits to those who give. Gifts to the endowment fund can be made using cash, publicly traded securities, real estate, closely held stock and retirement assets. Gifts can also be made through charitable life insurance, bequests, beneficiary proceeds, charitable gift annuities, charitable remainder trusts and life estate reserved. In each case, Foundation staff works with individual supporters to structure gifts that provide the donor with maximum deductibility for income, gift and estate tax purposes.

Benefits to the organization. Endowment committee members are relieved of administrative burdens, freeing them to concentrate on promoting and building their endowment fund. As endowment fund assets are no longer technically owned by the organization, they are not subject to claims against the organization. The LCF provides fundraising ideas and resources, many of which are featured on the blog Endowment Fund Roundtable.

Benefits to you, the Professional Advisor

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More about Organizational Funds

Benefiting charities. Grants can be requested to any IRS-qualified charity.

Grant distributions. In many instances, the LCF distributes only a portion of the organizational fund’s value each year, enabling it to continue to grow and provide a permanent source of support to recommended charities. Organizational endowment funds, however, have the added flexibility to request grants in any amount, as long as a $25,000 minimum is maintained.

Fundraising support. In addition to sharing resources such as bulletin inserts and newsletter articles, the LCF assists the organization in designing a brochure to promote the endowment fund. LCF staff is also available for phone consultations on strategic planning and gift design for potential donors.

Fees. A 1% annual administrative fee is assessed to the endowment fund to cover program and administrative costs.

 

How to Establish an Organizational Fund at the LCF

  1. An organizational fund at the LCF is typically established by action of the voting members of a congregation or by action of the Board of Directors of the nonprofit organization. The specific form of the action should be consistent with the requirements of the governing documents of the organization. Often, a bylaw is drafted that describes the endowment fund, its purpose and its governing structure. The following steps can take be taken once the bylaw is in place.
  2. Complete and return the Fund Workbook/How to Establish your Endowment Fund and send it to the LCF.
  3. The LCF drafts a Fund Agreement and sends it to the designated representative from the organization for signing. The financial representative also receives a copy.
  4. Once the organization is satisfied with the Fund Agreement, it is signed by the designated representative on behalf of the organization and returned to the LCF.
  5. The initial gift to the new fund can be sent with the signed Fund Agreement, or can be sent later.

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