Financial endowment

Financial endowment is a donation of money or property to a non-profit organization for the ongoing support of that organization. Usually the endowment is structured so that the principal amount is kept intact while the investment income is available for use, or part of the principal is released each year, which allows for the donation to have an impact over a longer period than if it were spent all at once. An endowment may come with stipulations regarding its usage.

History

The concept of endowment dates back to the ancient world, where endowed foundations were established to fund specific aspects of societies, such as education and healthcare. The Ancient Greeks and Romans were known to have made use of endowments. In the modern era, endowments have become a significant source of funding for a variety of institutions, including universities, museums, and hospitals.

Types of Endowments

There are several types of endowments, including:

• Term endowment: A term endowment is an endowment where the funds are held for a predetermined period of time.
• Quasi-endowment: A quasi-endowment, or funds functioning as an endowment, are funds set aside by the governing board to function like an endowment, but which can be drawn upon entirely if necessary.
• Restricted endowment: A restricted endowment is one that has been given with specific instructions regarding its use. The funds can only be used in a manner that complies with the donor's wishes.

Endowment Policies

Endowment policies are a form of life insurance policy where the policyholder pays regular premiums over a fixed term, and at the end of the term, receives a lump sum from the insurance company. These policies can be cashed in early, but the policyholder will usually receive less than the full amount.

Criticisms

Despite their benefits, endowments have been criticized for a variety of reasons. Some critics argue that endowments can lead to a misallocation of resources, with too much money being tied up in investments rather than being used for the organization's mission. Others argue that endowments can create a culture of dependency, with organizations becoming overly reliant on their endowment income.

See Also

• Charitable organization
• Non-profit organization
• Foundation (charity)
• Trust law