What is an Endowment like BeaconProject.Charity Education Endowment Fund II?
What is an Endowment?
An endowment like BeaconProject.Charity Education Endowment Fund II is a donation to a nonprofit organization, meant for investment. The earnings support specific purposes, while the main amount, or "principal", remains mostly untouched.
Quick Facts:
Endowments prioritize keeping the principal intact largely and use earnings for charity mostly.
They can be set up as trusts, foundations, or public charities.
Commonly found in educational, cultural, religious, and service organizations.
Policies of Endowment?
Investment Strategy:
Larger universities may divide their endowment into many smaller funds.
These funds invest in various assets aiming for mostly long-term returns.
The mix of assets is chosen to achieve the fund's return goals.
Withdrawal Policy:
This sets how much can be taken out and when.
Typically, there's an annual limit, like 5% of the total fund each year as grants required by IRS for public charities like BeaconProject.Charity to hold its 501(c)(3) tax exemption status.
Such limits ensure the endowment lasts indefinitely over the long haul.
Usage Policy:
This describes what the fund's money can be used for. For instance, Scholarship.Fund, overseen by BeaconProject.Charity among its 18 funds, aims to increase U.S. elite school education from 1% to 6%.
Examples include supporting departments and/or elite learning programs, granting scholarships, or aiding financially challenged students.
Revenue can fund prestigious roles, such as endowed professorships, enabling institutions to expand select elite programs sixfold.
Endowments can be for specific purposes, like Smith College's botanical garden fund or Harvard's 14,000+ individual endowment funds.
Endowment Types:
There are four main types of endowments:
Unrestricted Endowment: Assets with no spending restrictions set by the donor.
Term Endowment: Funds can be used after a set time or event.
Quasi Endowment: Donations for specific purposes. Earnings are spent as directed by the donor, while the principal remains intact.
Restricted Endowment: Earnings are spent based on donor's wishes, but the main amount is untouched forever.
Generally, endowment terms must be respected. However, in financial crises, courts might allow slight adjustments to uphold a donor's intent while aiding an institution's stability.
BeaconProject.Charity's Endowment Fund II Overview:
The fund encompasses all four endowment types:
Unrestricted: BeaconProject.Charity decides how to spend or invest.
Term: Funds used based on specific donor-set timelines or events.
Quasi: Uses investment earnings for set purposes, keeping the principal safe.
Restricted: Uses only the earnings, preserving the donor-advised principal indefinitely.
Requirements for Endowment Management
Roles of Endowment Managers:
They balance growing funds and supporting their institution's objectives.
They handle tasks like setting goals, choosing assets, picking managers, and risk management.
Legal Requirements:
Most grant-making foundations must spend 5% of endowment assets yearly for charity to maintain tax exemption.
Private operating foundations must spend 85% or more of their investment income.
Community foundations have no specific payout requirement.
Taxes:
Since the 2017 Tax Cuts and Jobs Act, large university endowments pay a 1.4% tax on net investment earnings if they have assets of $500,000 per student at private institutions with 500+ students.
Harvard University Endowment: A Brief Example Overview
2020 & 2021 Performance:
Harvard anticipated a decrease in its endowment in 2020 due to the pandemic. However, it grew by 7.3%.
2021 was even better with a 33.6% return, increasing the fund by $11.3 billion to $53.2 billion - its highest ever.
The New York Times labeled Harvard as the world's wealthiest university in 2020.
Fund Allocation:
Equities: 14%
Hedge funds: 33%
Private equity: 34%
Real estate: 5%
Bonds: 4%
Financial Details:
The 2021 payout rate was 5.2%, amounting to $2.0 billion.
Distributions covered 35% of 2021's total revenue, while another 10% came from philanthropic gifts. Endowment cash gifts were $541 million.
70% of the annual distribution is donor-specified, leaving 30% for flexible Harvard use.
Student Support:
In 2021, $161 million was allocated for undergraduate scholarships.
55% of students received need-based scholarships, paying an average of $12,700 yearly. Among these, 20% attend Harvard College for free.
General Insight:
Harvard's endowment consistently yields robust long-term returns, augmented by new contributions.
A donor-advised fund (DAF) is a philanthropic giving vehicle administered by a public charity, such as BeaconProject.Charity Education Endowment Fund II, Inc., created to manage charitable donations on behalf of organizations, families, or individuals. A DAF allows donors to make a charitable contribution, receive an immediate tax deduction, and then recommend grants from the fund over time.
Here's how it generally works:
Contribute to the Fund, such as Scholarship.Fund: A donor contributes to the fund and is generally eligible for an immediate tax deduction.
Investment Growth: The funds can be invested and accumulated over time for tax-free growth after deducting reasonable marketing and management costs.
Grant Recommendations: The donor can then recommend grants to qualified charitable organizations of their choice, including BeaconProject.Charity Education Endowment Fund II itself. They advise the fund, such as Scholarship.Fund, on how to distribute the money, hence the name "donor-advised."
Administration: The public charity like BeaconProject.Charity that administers the DAF handles all the record-keeping, due diligence, and disbursements to other charities as directed by the donor.
Ongoing Contributions and Advisement: Donors can continue to contribute to the fund like Scholarship.Fund, advise on its investment based on the total amount the very donor has contributed, and direct its charitable disbursements for the long term.
DAFs are popular because they allow donors to take a tax deduction in the year of the donation, even if the funds are distributed to charities in future years. They also offer donors a streamlined way to give to multiple nonprofits without managing separate records and transactions. It provides a flexible and simplified means of giving, with various potential benefits depending on the specific rules and policies of the administering charity.
US Gift Tax IRS Form 709 P1
Anyone can give anyone else a gift under a certain amount without paying U.S. gift tax. Please listen to the video for details.
US Gift Tax IRS Form 709 P2
Currently a couple can give a child $34,000 in 2023 without paying gift tax, and in life time $12.92 million USD now in total.
BeaconProject.Charity Endowment Fund II
An IRS 501(c)(3) Public Charity Fundraising Channel for 18 such Funds as Scholarship.Fund:
BeaconProject.Charity is committed to supporting millions of promising students from all backgrounds. Our mission is to nurture the next generation of elite talents, helping to keep America a "City Upon A Hill," shining as a Beacon Of Hope for the world.
Whether you're from a middle, upper, or low-income family, if you strive for excellence in learning, we are here to help you reach that grand goal. Middle and upper-class families can utilize donor-advised funds like Scholarship.Fund to set up scholarships of up to $34,000 for one child as the beneficiary. Since we are an IRS 501(c)(3) public endowment fund across schools, your contributions would be tax-deductible if funds were to be used for the elite education. However, there might be a cap for your tax-deductible amount in total scholarships, please consult with a U.S. tax expert for details.
Low-income families aren't left behind. Launch a GoFundMe campaign for training-related scholarships or reach out to your community's affluent individuals or businesses to support your cause under our public endowment fundraising channel. Search for "Beacon Project Dot Charity" on GoFundMe to start.
Join us in this vital effort to redefine excellence in education across America. Your support, whether as a donor or aspiring student, ignites the path towards a brighter future for all. Donate to BeaconProject.Charity today, and let's light the way together.