How to start an endowment: A roadmap to long-term stability

Starting an endowment is a defining milestone for any nonprofit that shifts the focus from immediate survival to permanent financial stability. In today’s fast-moving landscape—where planned gifts, stock, and crypto are reshaping philanthropy—endowment funds offer a strategic way to weather economic shifts and build deep donor confidence.

But when is the right time to begin? This guide provides the roadmap, showing you exactly how to start an endowment and secure your mission’s future with confidence.

Quick background on endowment funds

What are nonprofit endowments?

A nonprofit endowment is a dedicated fund where the principal amount (corpus) is invested and held permanently, while the investment earnings (the interest or dividends) are used to support the organization’s mission over the long term. Think of it like a permanent savings account that provides a reliable, annual “paycheck” for your nonprofit.

Endowments are most commonly used by educational, cultural, and healthcare organizations, but any organization—large or small—can create one. The process of creating and then managing the endowment just needs to be prioritized properly.

How do endowment funds work?

In practice, endowments function like this:

1. A donor gives a restricted (and usually large) gift with the express intent of establishing an endowment.
2. The nonprofit uses the gift to establish an endowment fund, typically as a trust. Note that foundations (both private and public) can hold the funds more directly.
3. The nonprofit establishes management practices and various policies to dictate how the endowment will be used, how funds can be withdrawn from it, and more.
4. The nonprofit pulls and uses income from the fund according to the policies’ timetable and restrictions.
5. The principal investment is left untouched, and the fund is actively managed and grown over time.

How do endowment funds differ from reserve funds?

Endowment funds are long-term, permanent investments meant to ensure long-term stability. The principal is typically restricted and stays untouched forever, while only the investment earnings are spent to support the mission. Comparatively, reserve funds are liquid savings meant to be spent in full when needed. Think of them as “rainy day funds.” They provide immediate flexibility when needed and act as a safety net for emergencies, cash flow gaps, or specific one-time projects.

What are the types of endowment funds?

There are several key types of endowments to understand. You’re likely to encounter these categories as you work to create your own:

• Restricted endowment. An endowment fund from which withdrawals can only be used for a specific purpose designated by the donor or board.
• Unrestricted endowment. An unrestricted fund from which withdrawals can be used for any purpose.
• Permanent endowment. A catch-all term for any large gift intended to serve as a long-term source of funding through the permanent retention of the principal investment.
• Term endowment. A shorter-term endowment that allows the withdrawal of the fund’s principal after a certain amount of time has passed.
• Quasi-endowment or board-designated endowment. Restricted or unrestricted long-term (but not permanent) funds established by a nonprofit board of directors with policies that can be changed over time as needed, sometimes referred to as “funds functioning as endowments.”

These terms can overlap. For instance, a permanent endowment may be designated as restricted or unrestricted. As you develop a plan to create an endowment, your team will need to carefully consider and potentially work with donors to determine exactly how you want to structure it to best support your goals.

Is creating an endowment fund the right choice for your nonprofit?

Here’s the big question to answer before moving forward: Should your nonprofit create an endowment? Is it the best way to reach your organization’s financial goals?

Even when they fully understand what endowment funds are and how they work, many nonprofit professionals still think of them as a kind of endgame that eliminates the need for annual fundraising. This is not true. ‍

Nonprofit endowments do not offer magic spells that make the challenges of fundraising simply disappear.

However, endowments can relieve some of your fundraising pressures. But they must be prioritized, used appropriately, and weighed against all your other ongoing needs, activities, and practices. So while endowments do help stabilize funding, they also add a new layer of complexity to your operations.

Put another way, an endowment fund should fit into your organization’s larger capital structure—it does not replace that capital structure.

Understanding your capital structure

The golden rule: The first three fund types are your priority. You shouldn’t lock money into an endowment until you have the structure to support stable operations in the short term.

With careful planning and savvy management, endowments will grow and help your programs become self-sustaining, but you cannot plan to over-rely on them to the detriment of your normal fundraising and stewardship efforts.

Creating an endowment might not currently be the right choice if:

• You are looking for a fund to replace annual fundraising entirely.
• Your organization lacks the three basic reserves listed above.
• You need immediate access to your principal capital to stay afloat.

Creating an endowment could be a smart move if:

• You have healthy reserves and are confident in your financial structure.
• You understand that an endowment is a long-term growth tool, not a checking account.
• You’re prepared to continue prioritizing fundraising and stewardship to feed the fund.

‍Next step: If you’re still on the fence, consult with a financial or accounting professional. Establishing this relationship now is vital, as you’ll need their expertise to manage the legal and tax complexities of an endowment once it’s launched.

How to start an endowment: 11 straightforward steps

So you’ve decided that an endowment is the right choice for your nonprofit— great! The process of starting an endowment will look slightly different for every organization. Generally speaking, you should follow these key steps:

1. Review your organization’s financial management practices.

Before starting an endowment, your financial foundation needs to be in order. An endowment should complement your capital structure, not serve as a band-aid for budget gaps. Start by auditing your current reserves to determine:

• Fund diversity: Which types of reserves (working capital, operating, or strategic) do you already have?
• Replenishment cycles: Are these funds being used and replenished, or are they slowly depleting?
• Mission alignment: Are your current practices creating stability or operational stress?
• Operational philosophy: Are you managing from income or expenses?

The most critical takeaway from your audit is your financial mindset. Sophisticated nonprofit endowments are built on a foundation of “managing from income” (setting budgets based on projected revenue and cash reserves).

Conversely, “managing from expenses” (fundraising to cover money already spent) is a recipe for chronic stress and limited growth. Many organizations view endowment funds as a magic solution to end this cycle, but without a forward-thinking financial approach, an endowment can become a costly distraction.

‍The bottom line: Establish a stable financial foundation today. This provides the breathing room required to manage an endowment responsibly, ensuring it serves as a true engine for your mission's long-term capacity.

2. Assess your organization’s readiness for an endowment.

An endowment is a double-edged sword: it can stabilize your mission or cause financial distress if timed poorly. Consider these four pillars:

1. Strategic priorities: Will predictable revenue free up staff time for big-picture growth, or will the fundraising focus shift too far from immediate needs?
2. Business model performance: Does your revenue model support long-term investment?
3. Board & staff capacity: Is your team equipped to manage the governance an endowment requires?
4. Liquidity: Can you maintain the ability to address short-term emergencies while your capital is locked away?

The readiness checklist

To determine if you are truly ready for starting an endowment, evaluate your organization against these critical questions:

• Do we have a strategic plan and measurable goals?
• Do we clearly delineate between operating and non-operating income?
• Are the board and staff on the same page regarding our financial state?
• Do we have loyal donors ready to act as seed contributors?
• Is at least one board member willing to chair an endowment oversight committee?
• Does our team understand endowment investing, or is training required?

Use these answers to confirm if your nonprofit is ready to proceed or if you need to take preliminary steps to strengthen your infrastructure first.

3. Establish a cash reserve if needed.

During the previous steps, you likely identified a need to either create or bolster your nonprofit’s cash reserve. As the National Council of Nonprofits puts it:

‍Reports such as the Nonprofit Finance Fund’s State of the Sector reveal year after year that a minority of nonprofits...have more than 6 months of cash in reserve. In fact, many nonprofits report that they have less than three months of operating reserves on hand. This may be the reality for many nonprofits, but that does not mean that it is optimal.

‍If you need to focus on your cash reserves first, align with your board and donors about its urgency, and then devise a plan. For example, adjust your budget to proactively allocate incoming revenue to the reserve, like portions of new unrestricted planned gifts. Try soliciting a major gift from a close donor who understands the importance of cash for stable operations. Prioritize building your reserve during your next annual or capital campaign.

If you experience pushback, remember that creating a robust cash reserve is the single best thing you can do to create short-term financial stability for your organization. An endowment helps create stability in the long term.

Plus, keep in mind that a nonprofit’s working capital ratio, a rough gauge of how long its programs can operate without new revenue, is often referenced by potential funders and donors before making grant and donation decisions. Solid short-term financial footing pays off, and it should be prioritized above creating an endowment. 

‍‍Note: With careful strategy, you can try to build both your cash reserves and an endowment at the same time. However, the viability of this approach varies. To go this route, your board can skip ahead to establish a quasi-endowment with a relatively small amount of money (there are no minimum requirements for endowments).

4. Define your purpose for starting an endowment.

With the foundational financial considerations and improvements out of the way, next define your “why” for starting an endowment fund. Answer these questions:

• What are your organization’s goals for starting an endowment?
• Has a donor already expressed the intent to give you a donation to start an endowment, or has the idea arisen internally?
• Do you already know whether the endowment will be restricted or unrestricted?
• If restricted, exactly what will the fund be used for?

Get as specific as possible and document your answers—you’ll need them for the next step.

5. Secure buy-in on the endowment from the board and/or donors.

It’s difficult to change an endowment’s structure and function once it’s established. This means you need to fully align your organization on its purpose now.

Before moving forward, ensure your board and lead donors fully agree on the endowment fund's purpose and its place within your capital structure. Here’s how:

• Educate the board. Confirm that leadership understands how endowment funds function, specifically that they are long-term tools and not immediate spending accounts.
• Manage donor expectations. If a donor has already expressed interest, verify they understand their gift will be invested for permanent growth rather than immediate impact.
• Cultivate key stakeholders. Frame starting an endowment as a milestone in your nonprofit’s operational sophistication. Meet with major donors early to explain the fund’s long-term benefits before making a formal solicitation.

Once your team is aligned, the board should pass an official resolution to formally authorize the creation of the endowment.

6. Align on endowment-related responsibilities.

Once your board aligns on your nonprofit’s desire for an endowment, educate everyone about their new responsibilities. 

‍First, board members must understand that they’ll be held to a fiduciary responsibility, meaning they must put the organization’s and endowment’s financial well-being above their own. This responsibility can be broken down into a few clear-cut duties:

• Act only in the organization’s best interest.
• Manage the assets carefully and carry out financial responsibilities with care.
• Keep clear records of investments, assets, and transactions.
• Keep the endowment’s assets fully separate from all others.

Endowments also bring a range of specific rules and regulations that your organization must comply with. We’ll cover these rules below, but the most important to understand at the early stages of creating an endowment include:

• UPMIFA: The Uniform Prudent Management of Institutional Funds Act (active in nearly all U.S. states) dictates how you can invest and spend restricted funds.
• Foundation payout requirements: If your organization is classified as a private foundation, you are generally required to pay out 5% of your investment assets annually.
• IRS reporting: Ensure you are prepared for the increased complexity of annual Form 990 filings.
• Internal policies: Establish clear bylaws and gift acceptance policies that guide fund management.

‍Pro tip: Because these regulations are nuanced and carry significant legal weight, consulting with a legal professional is non-negotiable to protect your organization’s status.

7. Consult with professionals.

Legal, financial, and investing professionals with nonprofit experience will be invaluable throughout the process of creating and maintaining an endowment.

Consider contracting a legal consultant to help you understand your new regulatory responsibilities, create policies, and implement practices to support them. The services of a financial professional will likely be necessary for establishing the endowment and managing its investments over time. If you have any of these professionals on your board, ask them for help first or explore their lists of contacts to identify potential individuals or firms. 

‍There’s a chance that you may be able to receive pro bono or discounted rates for professional services, so it’s worth asking. 

‍However, be prepared to pay for these services now and down the line as part of the necessary overhead for responsibly creating and running your endowment. You’d ultimately rather pay these expenses than deal with potential legal and reputational damages (not to mention the headaches) that can result from trying to handle such impactful decisions alone.

8. Determine the overall structure of the endowment.

With an aligned team and solid financial footing, you can now begin making more tactical decisions to bring your endowment into focus.

‍The first major decision to make: Will your endowment exist as an account held by your organization, or will you set it up to be managed by a separate legal entity?

• An account held by your organization is the more straightforward approach for most nonprofits. It requires enacting an addendum to your bylaws and following the general steps outlined in this guide. The drawback to this approach is that it can open your organization to direct legal and compliance risks if the endowment isn’t managed properly or fails to comply with reporting regulations.‍
• A separate legal entity is the more complex approach but can bring beneficial legal and tax impacts depending on the size of your organization and its specific circumstances. You’re likely familiar with hospital and university foundations that exist to handle the institutions’ philanthropic and endowment activities. Note that this process is quite intensive, requiring the creation of a fully separate organization with its own board of directors and internal policies and practices.

Consult with your organization’s legal and tax counsel to determine the right move and immediate next steps. If you choose to establish a separate legal entity, be prepared for a protracted process.

9. Find an experienced investment manager for the endowment.

To grow your nonprofit endowment, you will likely need a Registered Investment Advisor (RIA) to manage your investments. While there is no strict order of operations, finding a partner early can simplify compliance and due diligence.

Consider these factors when deciding when to hire professional support:

• Priority of reserves: Before heavily investing in your endowment, ensure your organization has established its simpler capital and cash reserves (see Steps 2 and 3). These liquid funds should be held in FDIC-protected accounts and typically do not require professional management.
• The size of your initial endowment: Professional advising involves costs and account minimums. While some RIAs specialize in smaller endowment funds (with minimums as low as $2,000), others require a higher threshold. Explore exchange-traded funds (ETFs) for a low-cost, flexible start if you are not yet ready for a full-service advisor.
• Board risk tolerance: Boards often default to ultra-conservative savings accounts, but excessive risk intolerance can erode purchasing power over time. Remind your board of its fiduciary duty to grow the endowment for the organization’s benefit. Professional RIAs help balance this risk by building diversified portfolios that align with your mission.

Pro tip: Reach out to peer nonprofits for RIA recommendations. A partner who understands the unique regulatory landscape of starting an endowment will be a valuable asset to your board’s investment committee.

10. Create endowment policies.

Work with your board to establish the official internal policies that will govern how your endowment works. Note that several official rules and regulations will likely need to inform your policies based on your circumstances and jurisdiction—see below for an introduction to these regulations.

A nonprofit’s endowment policies fall into four key categories:

Usage policies

Simply put, usage policies define how the fund can be used, i.e. their restricted or unrestricted purposes that you defined earlier. For both restricted and unrestricted funds, any purposes or limitations should be concretely spelled out. 

This means very clearly outlining the restricted purposes (and potentially defining the full process for adding a new purpose to this list if a highly relevant one arises down the line). For unrestricted endowments, listing a set of purposes would be counter-productive. However, you may still want to define what the fund cannot be used for if creating those limitations is appropriate in your circumstances—for example, paying the executive director’s salary.

Investment policies

Endowment investment policies lay out specific targets and boundaries for the fund’s investment practices. These might include:

• Types of investments allowed
• Target asset allocation mixes
• Approximate risk levels allowed
• Minimum time to hold assets
• Long-term goals, like a target rate of return, for the fund as a whole or various asset classes within it

These policies should be developed to help safeguard a fund’s performance and the sustainability of its long-term growth. Your investment advisor’s services should ideally include working with you to create these policies.

Withdrawal policies

An endowment’s withdrawal policies define how, when, and how much money can be withdrawn from the fund through liquidated assets. They’re also referred to as spending policies.

Most organizations implement annual withdrawal limits based on a set percentage of the fund’s total market value, but there are other common options. Manning & Napier outlines these common approaches to setting endowment withdrawal policies:

• Simple Market Value. The annual spend withdrawn from the endowment is determined by a preset spending rate (often around 5%) multiplied by the fund’s total market value. This no-frills approach results in variable withdrawals year-to-year but helps to leave more of the fund untouched and able to recover during years of underperformance.
• Average Market Value. The annual spend withdrawn from the endowment is determined by a preset spending rate multiplied by the average total market value of the fund across several years. This approach creates more even annual payouts, including during years of underperformance.
• Inflation-Adjusted. The annual spend withdrawn from the endowment is determined by multiplying a predetermined spend amount in Year One (for example, 4% of the fund’s total assets) by one plus the inflation rate. This creates a dynamic amount that varies each year based on inflation, meaning higher payouts during inflationary periods. However, this approach detaches the spend from the fund’s real-time value.
• Hybrid Rule. The annual spend withdrawn from the endowment is determined by adding a preset proportion of the payout determined via the average market value rule to a preset proportion of the payout determined via the inflation-adjusted rule. In essence, this allows you to weigh two factors with different levels of importance. For example, you may calculate total payout as 40% of the average market value rule plus 60% of the inflation-adjusted rule. This allows you to tap into the benefits and reduce the risks of two separate withdrawal approaches.

Confusing? A bit. This is another area where working with your investment counsel might be the right choice. 

Gift acceptance policy

In addition to usage, investment, and withdrawal policies, you should revisit your organization’s gift acceptance policy. Make updates as needed to account for your new endowment. Define what types of gifts it can receive, whether other unrestricted gifts to your organization can be added to the endowment, and conditions for turning down gifts if needed.

No two nonprofits’ endowment policies will look alike—your endowment should be fully customized to your unique needs and reasons for creating it in the first place.

Don’t forget to think through additional logistical policies as needed, for example:

• How your endowment committee will work, who will serve on it, and when it will meet
• How and when your board will be briefed on endowment performance and developments
• How often your organization will revisit the endowment’s investment policies to make updates in line with market conditions and fiduciary duties
• How your organization will report on endowment performance to the public in your annual report

Clearly, there’s a lot to think through. Take your time with this step and work with legal and investment professionals as needed. Some of the endowment regulations discussed below will likely impact how you shape your own investment and withdrawal policies, so review them and consult with experts before formally adopting brand new policies for your endowment.

11. Establish the account and follow your management plans.

Finally, put your endowment plan into action!

Establish the financial account for the endowment and follow all your policies. Work with your investment advisor to get intimately familiar with reading the endowment’s allocation and performance data. 

Now you can start to think about how to present your endowment to donors—see below to learn a few endowment fundraising best practices.

Endowment fund rules to understand

Several key rules and best practices regulate how endowments can be used and managed. 

The first key concepts to understand, while not concrete regulations per se, include:

• Invasion. When an organization withdraws from an endowment to the extent that it encroaches and diminishes the fund’s initial principal investment or “corpus,” that’s referred to as “invasion.” In some cases, depending on your applicable regulations and the policies that you create for the management of your endowment, invading the corpus for necessary purposes can require court approval.

• Cy-pres doctrine. This legal concept empowers courts to interpret the terms of some gifting agreements like wills, estate disbursements, donations, and charitable trusts. A court can issue a cy-pres doctrine if an organization in bankruptcy needs to draw from assets in an endowment to pay debts. The court’s goal in these cases is to allow the organization to address its financial health concerns while honoring donor wishes to the degree it is able.

Build your endowment policies to prevent invasion. It should intentionally be quite difficult to reach that level of need.

What about other, more consistently enforced requirements? There are a few key regulations to understand. Their applications can vary widely from organization to organization, though, so it’s important to look carefully at your unique circumstances and jurisdiction before concretely reflecting them in your endowment policies and practices. 

Let’s take a look at the most prevalent endowment rules so that you can effectively orient your nonprofit to the landscape:

Foundation payout requirements

If your organization is classified as a private non-operating foundation (the most common type), the IRS requires you to meet a Minimum Distribution Requirement (MDR). This generally means paying out roughly 5% of the average market value of your investment assets annually. This payout includes both grants to other nonprofits and reasonable administrative expenses related to your mission.

‍Private operating foundations (as opposed to other, “non-operating” foundations) must pay out much more of their investment income—at least 85% annually. These organizations exist to pay out the vast majority of their income to charitable causes but have the benefit of allowing their donors much higher maximum tax deductions from qualified gifts.

Uniform Prudent Management of Institutional Funds Act (UPMIFA)

UPMIFA, some form of which has been enacted in most US jurisdictions, regulates the management of investment funds in tax-exempt organizations. Its core purpose is to protect nonprofit assets from misuse and loss by laying out clear rules for endowment spending, investment practices, and gift restrictions.

This wide-reaching set of rules covers many topics, including prudent investment management (and everything that entails), investment and spending policies that should be reflected in your endowment’s own policies, reporting and audit requirements, and guidance for prudent asset diversification.

Note that UPMIFA is not federally enforced. Rather, individual states have developed and enacted their own versions of it. State agencies enforce UPMIFA rules, so they should be your first stop for questions. 

For a more detailed explanation of UPMIFA, we recommend Carnegie Investment Counsel’s complete guide.

Taxes on large university endowments

When the 2017 federal Tax Cuts and Jobs Act came into effect, some private nonprofit higher education institutions were required to pay a new tax on endowment investment income. 

Specifically, this rule applies to institutions that enroll at least 500 students and hold endowment assets greater than $500,000 per enrolled student. These institutions are required to pay 1.4% of their net investment income as an annual federal tax.

This rule applies to a very small group of organizations, but if yours happens to belong to it, you should consult with your investment manager to determine appropriate spending policies that will maintain your endowment’s performance while also accounting for the annual tax.

Key takeaway: Working with legal, tax, and financial advisors will be the single best way to gain a clear understanding of your compliance needs as you finalize your endowment policies and practices.

Nonprofit endowment fundraising best practices to master

After receiving or allocating the principal gift, you and your donors can then add to the endowment over time, growing its principal and increasing the investment income that it generates for payouts. 

To grow your nonprofit endowment over time and make endowment fundraising an ongoing background activity, try these strategies:

1. Launch your endowment with a quick campaign.

An inaugural endowment campaign can be effective for garnering support for a new fund, particularly if your endowment is restricted and serves a specific, direct purpose. For example, a scholarship endowment could be a specific, motivating reason to donate to an endowment fund. 

Specificity is important because the funds in an endowment are meant to go largely untouched—they won’t have an immediate, direct impact the same way a traditional fundraising campaign does. Similar to annual fundraising, donors are often most easily compelled to give when they know that their gifts will have a tangible impact. Even with this, soliciting gifts for an unrestricted endowment fund is possible if you have a robust case for support (more on this later).

For an endowment campaign, focus on personally reaching out to your major and mid-level donors like you would in the quiet phase of a capital campaign. Take the opportunity to use the endowment to showcase your organization’s increasing financial sophistication and responsibility. If your endowment was started by an initial gift from a donor, ask them to lend a hand in promoting the endowment and connecting you to other prospects who may be interested in the endowment’s purpose.

Note that once an endowment is established, it’s not often recommended to host standalone endowment fundraising campaigns. 

Since they’re such long-term investments, you won’t see an ROI on your campaign efforts for a long time. Instead, look for ways to fold endowment fundraising into activities you’ll already be doing like personalizing major and planned gift solicitations to include the endowment.

2. Remember your nonprofit’s overarching capital structure.

As you grow and promote your endowment, don’t lose sight of the bigger picture. Your primary financial priority is your nonprofit’s immediate health. High-performing organizations avoid “endowment tunnel vision” by ensuring that long-term growth never compromises current operational stability.

For example, if you’ve been talking to a major donor about a capital campaign, you might be able to present options for structuring their gift. A portion of a large campaign gift could go to your endowment, especially if endowment growth is built into the campaign’s goals. Typically, the overarching purpose of a campaign is to raise liquid capital for tangible purposes, so unless endowment growth is an express priority, don’t become too fixated on boosting your endowment fund.

Or, say your nonprofit’s cash reserves are running low. A loyal annual donor has expressed interest in giving to the endowment. While very appealing, consider what would be more impactful for your organization: an unrestricted cash gift to bolster your flagging operating funds or a mid-size donation to a restricted endowment?

‍The bottom line: As your endowment becomes more ingrained in your normal development work, make sure your entire team is aligned on big-picture and current financial priorities to support the organization’s health.

3. Keep the endowment’s express purpose front of mind.

Building on the previous tip, you should also avoid allowing the excitement of potential endowment gifts to result in strategic drift—a slow expansion or shift in the ways that you discuss the endowment, its purpose, and its impact with donors.

Donors should clearly understand a restricted endowment’s specific purposes. For unrestricted endowments, explain in your case for support exactly how endowment funds free up the capacity for growth. Do not imply that unrestricted endowment gifts will vaguely go towards a donor’s favorite program or area of concern. 

‍Again, team alignment is key for ensuring consistent messaging.

‍On the investment side, you should also keep an eye out for style drift—slow changes in the investment approach and asset allocation of a fund away from the original vision/policies, typically in pursuit of faster performance. The disjointedness of a drifting strategy can quickly become counterproductive. Ensure that your investment manager knows your endowment’s policies and target allocations and adheres to them as closely as possible.

4. Establish a quasi-endowment if you want to start small.

A quasi-endowment established directly by your board might be the better strategic choice for your nonprofit in a few cases. Consider this route if:

• You see the need for an endowment but don’t already have a donor interested in seeding it for you.
• You have other pressing cash or capital priorities but don’t want to lose momentum on your push for an endowment.
• You’ve received a large unrestricted gift (perhaps a bequest), want to use it responsibly over the long run, and don’t already have an endowment.

Quasi-endowments are highly flexible financial tools for nonprofits. They allow you to start an endowment yourself with any amount of money and for any purpose. They also allow you to draw down the principal over time if the intention isn’t to create a permanent investment fund. Or, quasi-endowments can be grown over time or lumped into traditional permanent endowments later as needed.

‍If you’re a smaller nonprofit or are facing any of the situations listed above, take the time to consider the ins and outs of quasi-endowments—they may be the perfect way to get started and give your organization a more flexible route to growth.

5. Fold endowment fundraising into your next capital campaign.

As mentioned above, many nonprofits choose to add endowment components to their major fundraising campaigns. After all, capital campaigns are intended to build an organization’s capacity for expansion and sustainable growth, which a healthy endowment can support.

‍This can be a smart way to grow your endowment and offer your donors options without fully shifting attention away from more immediate capital priorities. 

‍But what’s the best way to ask for endowment gifts during a capital campaign? Ideally, a prospect will commit both a campaign gift and an endowment contribution as a result of your solicitation. Easier said than done, you’re probably thinking.

‍Look to planned giving to help you grow your endowment during a campaign.‍

‍According to Capital Campaign Pro,

‍Endowments are best raised through planned giving… Consider including an endowment fund as one of the objectives of your capital campaign so you can use the campaign as an opportunity to encourage your donors to include your organization in their will.

‍By framing the gifts in different ways—the campaign gift as immediately impactful and the deferred endowment bequest as an investment in your organization’s future—you tap into a fuller range of giving motivations. You also circumvent a common concern that wealthy donors express about donating to endowments, namely that they don’t trust nonprofits to be savvy investors and that they’re better off keeping and growing their assets themselves.

‍Whenever you plan a major fundraising campaign, take the time to consider how planned giving might be incorporated into solicitations. This is by far the easiest way to make endowment growth a sustained priority without heavily distracting from your strategic priorities and capital needs. 

6. Have a case for support for your endowment.

Equip your fundraising team to talk about your nonprofit’s endowment by providing a roadmap to compelling conversations.

You’ll need a compelling case for support. By laying out the reason behind your priority and outlining key talking points, you can create more coherent, persuasive marketing messaging for everything from your website to one-on-one development conversations.

Your endowment case for support should cover these key details:

• Fund specifics: Define exactly what your endowment funds support—whether it’s a specific program, a scholarship, or general mission longevity.
• The benefit of the gift: Explain the impact of both restricted and unrestricted options.
  
  • Restricted: Directly funds a stated purpose in perpetuity.
  • Unrestricted: Expands your capacity and ensures long-term operational sustainability.
• Gift acceptance options: Clearly list the types of assets you can accept for starting an endowment, such as cash, stock, or planned gifts.
• Impact talking points: Provide concrete examples to enliven donor discussions.
  
  • Example: “This restricted fund has provided 50 scholarships to date.”
  • Example: “Unrestricted payouts gave us the 'breathing room' to launch our new community program last year.”

From here, you’ll be able to distill the core case for support into different versions as needed. Use it to craft customized donor discussion guides heading into a solicitation meeting or draft a series of introductory emails announcing the creation of the endowment.

7. Invest in your planned giving program.

Planned giving is one of the most effective ways to fuel long-term endowment growth. In fact, total bequest dollars rose 13% to over $2 billion in 2025, driven by a 15% increase in the average gift size.

By prioritizing these gifts, you can transform your organization's future in two primary ways:

1. Financial flexibility: Many bequests (the most popular type of planned gift) are unrestricted, allowing your organization to treat them as strategic windfalls. Instead of using these funds for short-term expenses, you can allocate them directly to your endowment to generate permanent income.
2. Natural mission alignment: Planned gifts and endowments both focus on building a lasting legacy. Donors who are already thinking decades ahead are often highly receptive to supporting an endowment that ensures the mission they love continues forever.

If planned giving hasn't been a priority, now is the time to start. Start by downloading our free educational guide to launching your program.

To ensure your program runs smoothly and gathers the information you need, you’ll also need the right tools. FreeWill offers a range of innovative tools for nonprofits to facilitate planned and other non-cash gifts—learn more about our planned giving tools here. It’s the easiest way to kickstart your planned giving program and improve the donor experience.

8. Prioritize other non-cash gifts for your endowment

In addition to planned gifts, incorporating other non-cash gifts into your endowment efforts will be beneficial. Non-cash giving is on the rise as more donors look for ways to maximize their tax benefits, fine-tune their portfolios, and support missions they care about.

In fact, a study of 1 million nonprofit tax returns found that nonprofits that only accepted cash grew by 11%, those that accepted any type of non-cash gift grew by 50%, and those that accepted securities (like stock) grew by 66% over 5 years.

Common non-cash gifts accepted by nonprofits include:

• Stock, both public and private
• Cryptocurrency
• Qualified Charitable Distributions (QCDs) from IRAs
• Grants from Donor-Advised Funds (DAFs)

‍Offering flexibility gives you another tool in your solicitation toolkit when discussing any type of gift. Since non-cash giving most often comes up in the context of major gifts and planned gifts, having the ability to accept these kinds of assets makes it easy to meet donors exactly where they are. 

Plus, it’s a great look that shows donors your nonprofit is financially savvy! Combine this with the responsibility and longevity conveyed by your endowment, and you’ll make a fantastic impression.

The FreeWill Smart Giving Suite can handle all of these types of gifts and makes the perfect complement to your endowment. It facilitates giving, improves the donor experience, and minimizes your transaction fees—0% for crypto and 1% for stock, capped at $1,000. Our tools also help you collect all the important transaction data you need to manage your finances and steward relationships with key supporters.

Don’t take out word for it though. See how FreeWill’s Smart Giving Suite helps NOCO Humane secure non-cash gifts from its donors:

Discover how our tools can help you strengthen your financial foundation before creating an endowment.

Final thoughts: Using your nonprofit’s endowment to power growth

You’ve successfully established an endowment and begun growing it—congratulations! This is a powerful investment in your nonprofit’s future, and you’ve likely found all kinds of new ways to up your fundraising game along the way.

What next? How do nonprofits actively leverage their endowments for further benefits?

• Showcase your endowment to prospective donors. Endowments demonstrate responsibility and long-term thinking. Impress potential donors to attract larger, more complex gifts (including non-cash and planned gifts) over time.

• Highlight your endowment to funders. When seeking grant funding, you often encounter funders who want to know how you’ll sustain funded programs once a grant ends. An endowment, either one that generally shows your commitment to capacity growth or one set up specifically to support the program, is the perfect answer to these sustainability questions. Meet funders as equal partners driving change to inspire more confidence in your organization’s abilities.

• Take the opportunity to launch or revamp new giving options. As discussed above, planned and non-cash gifts complement endowments quite well. Diversifying your fundraising programs is easy today with tools that help to minimize the upfront investment needed. Check out our full range of modern giving tools for an idea of the features to look for.

Key takeaway: Your organization’s endowment holds valuable assets but is also an incredible asset for growth in and of itself! 

The process of starting an endowment and getting it off the ground teaches nonprofits many lessons—carry them all forward to keep your organization thriving for years. Actively manage and maintain your endowment to ensure it’s serving its purposes well. Enjoy the growth and impact that you’ve worked so hard to create!

To learn more about nonprofit development and diversified giving programs, we recommend these additional resources:

• Planned giving: A nonprofit's guide to growing legacy gifts ‍
• DAFs 101: Introduction and how-to guide for nonprofits‍
• How to accept crypto donations: What nonprofits should know‍
• How to accept stock donations: Easy steps for nonprofits‍
• FreeWill Tax Season Smart Giving Campaign Toolkit