What’s the Difference Between a Bequest and an Endowment?
A bequest is when you leave something in your will. You bequeath Aunt Martha’s ring to your daughter, your pool table to your son, and your house and cash assets to all of your children divided equally, with maybe a little something going to the grandkids.
As you are thinking about this, you might start to think about your alma mater, synagogue, or the camp you attended growing up.
Think of a bequest as an outright gift. In your will, along with Aunt Martha’s ring, you can give a gift of whatever amount you’d like to the camp. They will be thrilled and most likely spend it immediately.
If, however, you’d like to give an annual gift in perpetuity to the camp, you could set up an endowment fund that grows over time.
By way of example, let’s say you have given $500 to the camp every year, and you’d like to keep doing that after your lifetime. If you set up an endowment fund in the amount of $12,500, and it earns 4% annually, the camp will receive a distribution of approximately $500 from your endowment fund each year.
Chances are high that that the amount the camp receives will increase over time as the endowment grows through prudent investments. Most community foundations and many established charities have investment committees that manage assets to grow and keep up with, or even exceed, the rate of inflation. An endowment can be set up during ones lifetime or by bequest.
Many people choose to direct a portion of the wealth they have accumulated toward the charitable and community causes they embrace. Some begin carrying out their legacies during their lifetimes. Others do it through their estates. Whether they choose to carry out their legacy now or later, development of a legacy plan is recommended. This is often prepared in consultation with a representative of a community foundation who will seek to learn about you, what you care about, and your goals.
Among the topics of discussion might be outright bequests or perpetual endowment gifts to charitable organizations and/or synagogues and provisions for camperships, senior services, youth trips to Israel, scholarship or award funds to honor someone important to you, or agencies that played an important role in your life.
Bequests and endowments are methods of charitable giving that enable you to express your personal values by integrating charitable and financial goals. Simply put, they offer opportunities for donors such to make gifts, distinct from their annual contributions, to organizations and causes whose missions they support. Bequests and endowments are not just for the wealthy. They are the means by which ordinary people make extraordinary, impactful gifts.
You probably have a CPA and an attorney. Why not also consider a philanthropic advisor to learn more about the tools of charitable giving and ways to achieve your charitable objectives?
Article appears as originally published in the Ohio Jewish Chronicle, August 6, 2015.Jackie Jacobs is the Chief Executive Office of the Columbus Jewish Foundation, the Central Ohio Jewish community’s planned giving and endowment headquarters.