One of the important roles that Truman Heartland Community Foundation serves is honoring and preserving the legacy of people who wish to make a positive impact in their community through their charitable giving. This is often done through an endowment, so I want to share a few thoughts about the power of an endowment.

The concept of an endowed fund is that it will provide perpetual support for charitable programs that are important to the donor. And yes I do mean forever, which is certainly a long time. And the goal is for the fund to be making grants in future years that have the same buying power as grants today. So the funds must be strategically invested and managed so they will grow over time to enable larger grants in the future to keep pace with inflation. It’s a responsibility that your community foundation has the expertise to accomplish and is honored to serve charitable members of our community and strategically manage their endowment.

One question about endowments that is often asked is why would anyone want to tie up money and only spend the income from the fund? Wouldn’t there be a greater impact if it was all spent now to meet current needs? While the spend-it-all-now approach would address more needs of today, an endowment fund will have a much greater overall impact and will usually be more strategically utilized.

Let’s use as a simple example a couple who creates an endowment fund of $100,000 through a bequest at their death to benefit their church. So instead of giving the entire amount to their church to use for its current needs and wants, they have arranged to have their church continue to receive their annual support forever. The current spending policy of our board of directors is a 5 percent annual payout based on a three-year average of the balance of the fund. This endowed fund with investment earnings of 8 percent and paying out 5 percent will, over 25 years, have made gifts to the church of $186,000, nearly twice the initial amount, and will still have a balance of $190,000. Over 50 years cumulative gifts will be $541,000, with a balance of $360,000 still in the fund. That’s the power of an endowment.

Endowments are used for many purposes, and one popular purpose is scholarship funds. We have more than 90 scholarship funds at the foundation, and one of those is the Forest and Marjorie Martin Scholarship. The Martins had no children but greatly valued education and entrusted your community foundation with a bequest of $1.1 million in 2006 to be used for scholarships for students graduating from any high school in our Eastern Jackson County region.

Entrusted with this important responsibility, our board of directors identified an unmet need for scholarships. The challenge for many college students is that it’s much easier to get scholarships for your freshman year in college, but many of those scholarships go away after the first year. One of the scholarships created from this generous gift is for students who have achieved 36 hours of college credit, so it’s focused on those entering their junior year in college who are challenged to stay in school when those initial scholarship funds have dried up. There is also a graduate school scholarship and one for technical school studies. Scholarships range from $2,000 to $4,000 per year.

Anyone who has investments and is thinking about the timing of the Martin’s bequest clearly realizes that shortly after their gift was made we had an historic downturn in the economy and stock market and may wonder how well this scholarship fund did weathering this storm. The Forest and Marjorie Martin Scholarship Fund continued to make scholarships grants even during the economic and market downturn, with scholarships totaling $390,000 to date. And the balance of the fund today is still around $1 million and growing. It’s another great example of the power of an endowment providing support during even the most challenging of times.

Endowment funds are a powerful tool, particularly when they are paired with a strong community foundation like ours with expertise in strategically managing endowed funds.

Phil Hanson is president and CEO of the Truman Heartland Community Foundation, based in Independence.