Permanent Charitable Endowments Face Evolving Community Needs
When Harold and Hilda McCurdy’s children established a permanent charitable fund in 1994, they designed it to last forever. Permanent endowments keep the principal invested while granting a prudent portion of annual earnings, operating decades beyond the lifetimes of the founding donors. However, when a benefitting organization changes significantly or closes its doors, a fund agreement requires specific provisions to manage the transition.
Until 2023, earnings from the McCurdy family fund directly benefitted the Pendleton Emergency Ambulance Service. That year marked the formation of the South Madison Fire Protection Territory, which replaced the volunteer organization with a professional service. Because the original 1994 fund agreement anticipated potential changes, the transition automatically triggered a pre-specified second phase for the account.
Bright Future Grants Activate Second Phase Provisions
Once the professional emergency service took over operations, the fund agreement dictated that earnings should be used at the discretion of the Foundation’s Board of Directors for the betterment of the community. According to the South Madison Foundation, the fund automatically entered its second phase to address modern community needs through Bright Future Grants. While some of these grants serendipitously continue to support local emergency services, the funding mechanism now possesses the legal flexibility to back a broad array of charitable causes as the region evolves.
Frequently Asked Questions
What happens to a charitable endowment if the original beneficiary closes?
A properly structured endowment includes a special provision in its fund agreement specifying a second phase for the assets. This allows the foundation’s board of directors to redirect earnings toward broader community needs, as occurred with the McCurdy family fund in 2023.
How are annual grant amounts determined for a permanent endowment?
The principal of the fund remains permanently invested while a prudent portion of the investment earnings is distributed as grants each year. This ensures the financial asset continues generating support indefinitely beyond the donors’ lifetimes.
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