When a generous gift arrives or a board member suggests starting an endowment, the real question to ask is whether an endowment would help your nonprofit right now. An endowment is one of the most consequential financial commitments an organization can make, and it is designed to be very hard to undo. That makes the timing as important as the decision itself.
Two Ways the Conversation Starts
Most endowment conversations begin in one of two ways.
The donor-initiated path. A supporter offers a significant gift and asks that it be invested for the long term, or a board member with wealth-management experience suggests the idea. Both signal confidence in your work. The risk is that a single offer can skip the strategic conversation entirely. A gift like this is an invitation to build a plan, not a plan in itself.
The strategic path. Leadership identifies a specific vulnerability: heavy reliance on a few major donors, volatile grant cycles, or a mission that will need funding for decades. This path tends to produce healthier endowments, because the organization knows why it wants one before it decides how to build it.
The Real Tradeoff: Stability vs. Flexibility
At its core, an endowment trades flexibility for durability.
A true endowment is generally created by a donor restriction that requires the fund to be maintained over the long term. Assets are invested with a long horizon and distributed under a disciplined spending policy, often around 4–5% of the fund’s average value each year. Restricted endowment dollars generally can’t be redirected to an urgent need, even a compelling one. Your organization must follow the donor’s restrictions, its own spending policy, and applicable law.
That permanence is the point. But if your organization is facing real instability, tying up capital for the long term can work against you.
Ready or Not Yet? A Quick Self-Check
No checklist settles the question, but the signals below show which way your organization leans.
Purpose
- Ready: You can say what the endowment will accomplish: sustaining a program, funding operations, or reducing reliance on annual fundraising.
- Wait: The idea started with a single gift offer, not a plan.
Finances
- Ready: Core costs are predictable year over year, and you track restricted and unrestricted funds carefully.
- Wait: You’re unsure you can make payroll six months from now. Build an operating reserve first.
Governance
- Ready: Your board will adopt a written spending policy and hold to it, and it understands its fiduciary role.
- Wait: No one owns investment oversight, and there’s no process for monitoring investments.
Size
- Ready: The starting amount is meaningful, with a realistic plan to grow it.
- Wait: The expected annual support wouldn’t justify the governance, investment, and fundraising effort.
Priorities
- Ready: Long-term resilience is the most pressing need.
- Wait: Urgent needs mean the most mission-aligned choice is to spend the money now.
Few organizations check every box cleanly. The goal is a candid conversation about where yours stands today.
The Middle Path: Alternatives to a True Endowment
If you’re not ready for a true endowment, you can still build long-term discipline without giving up flexibility.
Board-designated reserves set aside unrestricted funds for a long-term purpose, and the board can redirect them if circumstances change.
Quasi-endowments go a step further. Unrestricted funds are invested for the long term under endowment-style governance, including a disciplined spending rule. Unlike a donor-restricted endowment, the board can modify or remove the restriction it imposed.
For many organizations, a quasi-endowment is a practical stepping stone. It builds the investing and spending habits a true endowment requires and positions you to grow a donor-restricted fund over time.
Before Your Board Decides: Essential Resources
See how peer organizations hold their reserves and endowments, and run your own numbers.
- Look Up Any Nonprofit's Form 990: see how peers report endowment funds, net assets and reserves
- Financial Health Signals in a Form 990: what to check before locking up capital
- Nonprofit Endowments: A Practical Guide for Boards and Leadership
- Free Endowment Calculator: project what a fund could produce each year
- Donor-Advised Funds Resource Center: another source of endowment gifts
- Types of Planned Gifts: bequests and other gifts that build endowments over time
Where to Go From Here
If your organization looks ready, the next step is to answer five practical questions:
- What will the endowment be used for?
- Who will oversee it?
- What investment and spending policies need to be in place?
- How should the assets be invested?
- When should you bring in an investment advisor?
If you’re still not sure, start with eCIO’s free Endowment Readiness Scorecard. Work through it with your executive team, finance committee, and board to get a clear, board-ready read on whether now is the right time.
Adapted from Is an Endowment Right for Your Nonprofit Right Now? by eCIO.
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Courtney brings over 25 years of experience in the investment management industry to her role as a Nonprofit Investment Advisor, developing investment strategies, managing portfolios, and working closely with investment committees and boards. She is an active member of the eCIO Investment Committee and also serves as Chief Revenue Officer, leading client acquisition and retention efforts.
Throughout her career, Courtney has held leadership roles in client management and business development, with extensive experience delivering tailored investment solutions for high-net-worth individuals and institutional investors. She co-founded NorthRoad Capital Management, an international and global equity investment firm, which was later acquired by Madison Investment Advisors, where she continued in senior business development and client service roles. Earlier in her career, she served as an investment specialist and sales manager at Lazard Asset Management.
Beyond her professional work with institutional investors, Courtney is committed to volunteering in her community. She serves on the board of the St. Louis Arc and contributes her expertise as a member of the Investment Committee for Ranken Jordan Pediatric Bridge Hospital. She earned her BA from Colgate University and an MBA in Finance from NYU’s Stern School of Business.
