What is the legal definition of endowment?
There is no legal definition. The commonly accepted meaning for ‘endowment’ is a fund which is kept in perpetuity to provide interest and dividend earnings for the benefit of a charitable cause. Should all organizations have an endowment? No. Organizations that are formed in support of short-term causes or particular events do not need endowments. Similarly, organizations which are in financial crisis, do not have a donor base, or lack any credible record of accomplishments are unlikely candidates for an endowment. With these exceptions, however, most other organizations will benefit from an endowment fund and should have one. How does endowment fit into an overall organizational financial plan? To be healthy and stable, an organization needs to meet its current operating budget with specific strategies. In addition, an organization should have an operating reserve account that can cover its expenses in an emergency. Then, based on some fundamental criteria for definition of endowment
There is no legal definition. The commonly accepted meaning for endowment is a fund which is kept in perpetuity to provide interest and dividend earnings for the benefit of the organizations charitable cause. While the Community Foundation holds income-only endowments, it typically spends 5% of income and principal to insure payouts to the nonprofit agencies and other charitable beneficiaries during good times and bad, and relies on growing values over the long term to provide perpetual support for its beneficiaries.
