Build a legacy that lasts: How to create an endowment that endures

Over the past several years, many nonprofit organizations have become increasingly interested in establishing an endowment fund to help them weather uncertain financial times.

Is an endowment right for your organization? And if so, how do you raise funds for it?

If your organization is simply trying to create a rainy-day fund or raise money for a timebound project, a reserve fund, quasi-endowment, or other restricted funds might be better options than an endowment. But if you are seeking long-term income, an endowment might be right for your organization.

What is an endowment?

An endowment is a corpus of assets set aside so that the original assets grow over time because of investment income. The corpus of the endowment is intended to be preserved, and endowments are legally bound to be used for purposes agreed upon between a donor and your organization. Generally, endowments are created to provide ongoing financial support to an organization and can be permanent or term-based.

Clarify purpose and governance

Before establishing or raising funds for an endowment, it's important to be clear on how it will be used, whether for long-term operating income or to support a permanent program initiative (e.g., funding a scholarship program or a staff position, etc.). Clearly articulate the endowment's purpose and how it aligns with your mission. Once the purpose of the endowment is clear, consider that the fund requires strong governance policies, including:

• An investment policy: Defines objectives, asset allocation within the endowment, and risk tolerance.
• A spending policy: Ensures sustainable annual disbursements from the fund.

In addition, your organization may want to develop or revisit its gift acceptance policy, which should outline acceptable contributions and conditions for donations. Many organizations also draft a windfall policy, which guides the use of significant, unexpected gifts. For example, if your organization received a very large unrestricted gift, would it be used for current programmatic or operating expenses or would some or all of it be put into an endowment?

Concerns around endowment fundraising

Many nonprofit organizations worry that an endowment campaign will diminish donors annual giving. To mitigate this risk, your organization can help donors consider other assets they may be able to donate outside of their regular giving (including appreciated securities, real estate, etc.) and explore ways to support the endowment in their estate planning. For instance, a gift to your endowment might be included in the donor's will or your organization may be noted as a beneficiary of a life insurance policy.

Build a strategic fundraising plan

Many organizations begin fundraising for an endowment in a quiet phase, during which board members or highly engaged major donors make significant gifts. Often organizations raise 20%–70% or more of the endowment s goal before launching a public fundraising campaign. When the campaign goes public, it's important to have a comprehensive fundraising plan that includes strategies for obtaining major and planned/ estate gifts as well as a way to recognize and steward endowment donors.

Tips for effective endowment campaigns

1. Develop a compelling case for support

Design a professional, visually appealing 4- to 6-page document outlining:

• What the endowment will fund
• Gift levels and impact
• How it ensures sustainability for your organization

2. Craft effective messaging

Publicize leadership gifts early to show momentum. Encourage creative giving methods (e.g., securities, real estate, retirement accounts). Highlight why endowment giving matters:

• It supports long-term impact
• It complements annual giving
• It builds resilience for future challenges

3. Identify and cultivate donors

Focus on existing supporters who believe in your mission. Share your strategic plan and case for support to show how a fully funded endowment will support your organization for the long-term.

4. Encourage multi year and planned gifts

Offer flexible giving options monthly, quarterly, or annually. Emphasize long-term thinking and legacy-building.

5. Consider creating a legacy society

Recognize planned gift donors through a legacy society. This fosters loyalty and encourages others to consider long-term giving.

6. Communicate transparently

Transparency builds trust. Regular updates on the endowment campaign as well as fund performance, usage, and impact keep donors engaged.

7. Monitor and evaluate

Ongoing evaluation of the endowment and its policies ensures alignment with goals. Conduct regular financial reviews and adjust policies as needed to achieve long-term objectives.

The long game
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Establishing and raising funds for an endowment is a long-term initiative, with benefits that may take several years to materialize. However, having an endowment is an excellent way to secure your organization's future and sustain its mission for years to come.