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Simple English definitions for legal terms
endowment
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A quick definition of endowment:
Endowment: Money or property given to an organization for a specific purpose. It's like a big piggy bank that grows over time because the organization invests it. The organization can use some of the money it earns from the piggy bank, but it can't spend all of it. Endowments are often used by big organizations like universities and hospitals, but any charity can use them to help manage their money.
A more thorough explanation:
Endowment refers to money or property that is given to an organization for a specific purpose. It is usually invested in stocks, bonds, or other investment vehicles to grow over time. The invested amount is called the principal or corpus, and the income earned from it is used for the benefit of the organization.
- A university receives an endowment of $10 million from a donor to fund scholarships for students from low-income families. The university invests the money in stocks and bonds, and the income earned from it is used to provide scholarships to eligible students.
- A hospital receives an endowment of $5 million from a philanthropist to fund research on a particular disease. The hospital invests the money in mutual funds, and the income earned from it is used to support the research.
These examples illustrate how endowments work. The donated money is invested to generate income, which is then used for the intended purpose. The principal amount is not spent, but is instead preserved and grown over time to ensure the long-term sustainability of the organization's mission.