Endowments

An endowment is a type of fund that is invested to provide annual support while maintaining long-term value. The university withdraws a set percentage of the fund each year, typically around 5%, that allows the funds to grow in the market. A university’s endowment consists of both unrestricted funds for general purposes and restricted funds for areas outlined in gift agreements.

Common types of endowments include:

Endowments allow your gift to make an impact every year in perpetuity, or for as long as the terms of the gift dictate. Institutions value the stability of an endowment gift, but its longevity poses risks for donor intent.

The Risk of Endowment Gifts

Because endowments are designed to last for generations, funds are vulnerable to shifting university priorities. Donors and their descendants are sometimes able to push back against the redirection of funds, as in the highly publicized case Robertson v. Princeton. The Robertsons’ gift was intended to support graduate education in Princeton’s Woodrow Wilson School, now known as the Princeton School of Public and International Affairs. However, the donors’ heirs discovered that Princeton had been using the funds for capital projects on campus, general operating expenses, and to pay professors outside of the program. The family sued Princeton, and after six years and millions in legal fees, the Robertson family reclaimed $100 million of the gift. Similar disputes have arisen at other institutions, where endowment funds were used in ways that left donors and their families feeling that their legacies were compromised. Their trust in the university is often irrevocably harmed. Few, however, are able to make their case in court, and even fewer have had their funds returned. Special care must be taken when making the gift to ensure that donor intent is clear and enforceable before any funds reach the university.