There are two primary ways to give back:
- A permanently endowed fund, where donors can grant out the income within the fund on a yearly basis, allowing the principal grows in perpetuity. These funds are invested from a long term perspective which, if the stock market performs in line with historical guidelines, will allow the principal to grow over time. Donors will then be able to increase the amount that is granted out on an annual basis. This is a great option for donors that are looking to provide support to organizations they care about….forever.
For example, a donor could set up a permanently endowed fund with an initial contribution of $500,000. If the income represents 5% of the balance of the fund, that will allow the donor to grant out $25,000 into the community. The next year the fund may have increased in value to $550,000, which would allow for $27,500 in grants. This pattern continues in perpetuity.
- A non permanent fund, where both the income and principal of the fund can be granted to charitable organizations over a finite time period of time.
For example, after selling a business an individual donates $500,000 to their donor advised fund. The donor could then decide to grant out all of the money the following month, or $50,000 over 10 years.
Because the Community Foundation is a public charity, donors are not subject to a minimum dollar amount that they must grant out in any given year. If they decide to grant out less money, that will simply mean that there are additional funds to be granted out in future years. This applies to both endowed and non-endowed funds.