I recently spoke in Chicago on building endowments for Islamic Schools. Its not an easy subject and in fact, many schools would not be able to set up an endowment as they are too new or too small or do not have enough of a donor base. Before delving into the issue, you want to have the consulting and legal expertise available. Trusts and Estates Magazine has a brief primer on building a better endowment. You can access it here.
A few highlights:
- Endowments are not especially common among US charities. While everyone has heard of the giant Harvard and Yale endowments, they are more the exception then the rule. Furthermore, and this is obvious to many, Endowments have taken massive hits recently.
- Endowments may have many, sometimes thousands of seperate special use funds associated with them. The purposes of donors in such accounts are governed by state law. Most states have adopted the Uniform Prudent Management of Institutional Funds Act (UPMIFA). Here is a link to a PDF of the act.
- The Act uses a "total return" approach to investing, rather then the traditional way, which was looking at income alone. In developing a trust based Waqf, I have looked at removing some of the "default" UPMIFA rules, particularly on investment returns so as to make them more conservative. However the Uniform Act has a good approach and does much to protect endowments. Of particular interest for many in the Muslim community is the difference between they way Trusts and Corporations are treated. For historic reasons, as well as the continued inclination to to develop Islamic Rules of Awqaf by contract, I continue to favor the use of Trusts when developing endowments.
