Endowed Funds vs. Non-endowed Funds: Which Approach Fits Your Charitable Goals?
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Most of us know two kinds of people.
There is the “do it now” type who jumps in as soon as a need appears and believes that if you have resources, you should use them. If there is a hurricane, this is the person thinking about critical needs in the moment.
Then there is the “build for the future” type who sets money aside and thinks in decades rather than days. If there is a hurricane, this is the person thinking about how support for recovery will always be available — for every hurricane in perpetuity.
Both people are committed to solving problems. The difference lies in their approach philosophy. Neither is wrong, and in philanthropy, we are often balancing the two needs.
In charitable giving, the “act now” mindset aligns with non-endowed funds, while the “build for the future” mindset aligns with endowed funds. Both approaches create meaningful change; they simply operate on different timelines.
So which option is right for you? Let’s explore both structures and how they support charitable goals.
What is an endowed fund?
An endowed fund is designed to last in perpetuity, which means forever. Contributions are invested, and after a period of growth, the fund begins to generate a consistent annual distribution, commonly around 4 percent. By working to preserve the purchasing power of the initial investment, the fund is never depleted and can support a cause year after year.
For example, a $500,000 endowed fund could distribute about $20,000 every year, indefinitely. Over time, that fund may even grant more than its original principal, all while continuing to grow.
It is important to note that endowment is not only about later. The annual distribution begins during your lifetime, which means you see the impact now while also ensuring that support continues for future generations. The distinction is that the immediate dollar amounts are smaller than if you were to spend down the entire gift at once, since the principal is invested.
The benefit of an endowment is both immediate impact and long-term sustainability. The tradeoff is that the dollars flow out more gradually, creating reliable support year after year.
Important Considerations for Endowed Funds
If you are considering an endowed fund, a few strategic decisions will help ensure your gift remains effective long into the future:
#1: Keep the purpose flexible.
If your chosen nonprofit closes in 20 years, where should the funds go? If a medical breakthrough eliminates a disease, what related work should be supported? These scenarios can all be anticipated in the fund’s mission and intent.
If this scenario does take place where the original intent isn’t applicable anymore, having flexible language or a “back-up” intent allows for a seamless shift in community impact while still stewarding a donor’s original intent.
An example of this would be to state that if X happens, then the fund will go to support Y. If cancer X is considered cured and is no longer in need of funding, the fund will go to support another cancer research project (Y).
No one can see the future; that’s why it’s essential to consider the flexibility in an endowment fund’s intent and to choose a steward of those dollars with a track record of trust and impact.
Central Florida Foundation’s core guiding principle is honoring donor intent. We ensure that each donor’s wishes remain the guiding force, while thoughtfully connecting those intentions to current community needs if the original intent is not applicable anymore. In doing so, we preserve and extend the donor’s legacy, even as circumstances evolve, giving peace of mind to those who wish to establish an endowment.
#2: Choose a trusted steward.
Central Florida Foundation has managed charitable legacies for more than 30 years, always guided by donor intent.
#3: Support causes rather than programs.
Programs change over time; core mission areas remain.
#4: Have conversations with nonprofits.
If you want to support a specific organization, open dialogue ensures your gift is both meaningful and practical from their perspective.
Related Reading: Rex and Suzie’s Endowed Fund Story
What is a non-endowed fund?
A non-endowed fund offers the same opportunity to support a cause or organization, but without restrictions on timing or principal. There is no waiting period or untouchable amount, which means the funds can be granted whenever the need arises. Donor-advised funds are usually non-endowed, though they can be structured as endowed if desired.
This model is ideal for donors who want maximum flexibility, allowing them to respond quickly to urgent opportunities. The benefit of a non-endowed fund is speed and adaptability. The tradeoff is that once the funds are spent, the giving stops unless replenished.
Choosing Based on Your Philanthropic Goals
Both models deliver impact. The question is not which one is better, but which one matches your vision.
To determine which path, ask yourself: Does flexibility or sustainability mean more to you and your philanthropic goals?
Achieving Both
Many donors find that a combination of both approaches feels right. By splitting charitable dollars into two “buckets,” they can meet immediate needs while also securing long-term support. The answer is personal, and there is no “correct” approach.
Philanthropic advisors can help clarify your options. Central Florida Foundation regularly collaborates with advisors to design giving plans that align donor intent with community needs, with specialization in creative plans that are crafted around your goals.
Final Thoughts on Choosing an Endowed Fund or Non-Endowed Fund
Endowed and non-endowed funds are not opposites; they are complementary tools. One meets today’s needs, the other builds sustainability for tomorrow. Both have impact now, and communities need both approaches.
When a community has philanthropists who leverage both approaches, resiliency and longevity are both supported.
Ready to Explore Your Options?
Central Florida Foundation has expert philanthropic advisors who can help you design a giving plan that reflects your values, supports the causes you care about, and maximizes your impact, both now and for generations to come. Whether you want to create an endowed fund, a non-endowed fund, or both, we can help you develop an approach that is meaningful to you and impactful for the community.
Since 1994, we have been building community by building philanthropy. We would be honored to be part of your giving journey.
Let’s talk about your philanthropic goals!
Contact me at 407-872-3050 or by email at sjerina@cffound.org.
Steven J. Jerina, CAP®
Vice President of Philanthropic Strategies and Partnerships
Central Florida Foundation
