You may desire to provide a perpetual stream of contributions for the benefit of your church, a favorite Baptist cause and/or other Christian ministries, but you are unable at this time to fund fully the perpetual endowment fund to make that happen.
A flexible endowment fund, administered by the Kentucky Baptist Foundation, is an option worthy of your consideration. It allows you to have a plan that establishes a permanent endowment fund over a defined, but flexible time period. During this flexible funding period, you also make on-going contributions directly to the cause(s) you intend to benefit.
A simple example would be to establish a flexible endowment to provide scholarship assistance for students to attend one of our Kentucky Baptist Christian education institutions. To provide $1,000 of annual assistance the endowment fund would need to be $25,000 assuming a 4% annual distribution rate. The distribution rate is not the same as the investment earnings rate. The distribution rate takes into consideration the rate of inflation and the investment costs so the fund will have an inflation-adjusted growth to the principal over time.
Let’s assume you could establish the flexible endowment fund with a $10,000 gift, and you would agree to contribute the remaining $15,000 over the next five years. Alongside your $15,000 pledge to fund fully the endowment, you also pledge to contribute directly to the institution during the funding period the difference in the $1,000 scholarship assistance and the distributable earnings from the invested principal in the endowment fund. As you fund the principal of the endowment, the principal should grow in value to produce an increasing amount of distributable earnings, and therefore, your direct annual contribution to the institution should decrease. Once the endowment has been funded fully with the $25,000, you would have no more responsibility to make contributions related to this flexible endowment.
Scholarship assistance is just one of many ideas that lend themselves to this hybrid giving idea. Call Laurie Valentine or me toll-free for more information about how you can make a lasting difference with a flexible endowment fund.
The information in this article is provided as general information and is not intended as legal or tax advice. For advice and assistance in specific cases, you should seek the advice of an attorney or other professional adviser.