The Endowment Is the Right Answer to a Narrower Question

On September 28, Benefactor Group published a white paper with figures development directors should watch.[1] Cerulli projects that roughly $124 trillion in U.S. wealth will change hands by 2048, with about $18 trillion going to charity.[2] Only about one in nine nonprofits that file a Form 990 reports an endowment.[3]

The paper introduces the Endowment Building Institute, a six-session cohort built around Laura MacDonald’s The Endowment Handbook.[4] The program deserves serious scrutiny. I read it through the same lens I use for every financing idea in this sector: does it diversify the mechanism, or refine the instrument we already have?

What the paper gets right

The paper focuses on demand. That is a useful shift. Much of the discussion about the wealth transfer centers on supply: how much money is moving, who holds it, and which generation will receive it. Benefactor Group starts with what organizations need to do to receive and steward those gifts. As the paper puts it, “For many nonprofits, the opportunity is not simply attracting these gifts, but becoming fully prepared to receive and steward them well.”[5]

That is the Beyond Grants thesis applied to endowments. Capital can exist and still fail to reach nonprofits when organizations lack the policies, governance, reporting, staff capacity, and board fluency to manage it. The paper’s five barriers could also apply to earned revenue or corporate partnerships: limited capacity, board misconceptions, competing priorities, knowledge without structure, and no peer learning community.[6]

The Ohio Valley example illustrates the model in action. The Community Foundation for the Ohio Valley brought together 15 local nonprofit organizations. Thirteen established new agency funds, and the foundation provided matching funds.[7] The funder invested in the organizations' capacity rather than their programs. Although a single case does not show that the approach will work in all situations, it provides a design other funders can examine.

The paper also addresses the concentration of giving. In 2024, major and supersize donors made up about 3 percent of donors and contributed nearly 78 percent of the dollars in the Fundraising Effectiveness Project’s panel.[8] That panel has recorded annual declines in donor counts since 2021.[9] Benefactor Group calls this concentration a risk.[10] I agree. Then I ask what comes next.

Better plumbing, same water

An endowment is not a means of making gifts but an invested fund; it is subject to a spending policy and may be governed by donor-imposed restrictions. The issue, therefore, is what contributes to it. The paper lists bequests, beneficiary designations, donor-advised fund successor clauses, charitable gift annuities, and charitable remainder trusts.[11] In each case, a person directs assets to a charity, even though in some instances income is first given to the donor or a family member, and in others the transfer of assets does not take place until years later. The paper classifies these gifts as current, deferred, or split-interest; these categories refer to the timing and structure of the gifts and do not create a new source of value.

This is the distinction between source and mechanism. An endowment creates a new pool of assets, but it may not bring in a new group of donors. Many bequest donors have also given to the organization for years. The paper presents that overlap as useful cultivation insight: bequest donors “are far more likely than others to have been giving consistently for years before their death.”[12] It is useful for planned-giving work, and it also points to donor overlap.

The market can affect both endowment assets and individual giving. Giving USA’s 2026 report says a strong stock market helped lift individual giving, which rose 4.1 percent in 2025.[13] A 2025 National Bureau of Economic Research study of nonprofit endowments found that “charitable giving is procyclical.”[14] That is a sector-level finding, not a forecast for any one organization. Spending policies can smooth distributions, while investment mix and donor base shape an organization’s exposure. A downturn can still affect both an endowment's value and donors’ capacity to give. That shared exposure limits how much an endowment can diversify market risk. The annual fund and the endowment do not necessarily move in lockstep, but both can respond to the same market conditions.

The paper's own table makes the case

Figure 2 is the paper’s most useful exhibit. Adapted from The Endowment Handbook, it explains what an endowment is and what it is not. One line deserves attention: endowments are “long-term assets that ensure future financial resilience,” not “short-term solutions to fix today’s structural deficit.”[15]

The exhibit clarifies what an endowment is meant to do: to provide long-term support, not to close a structural deficit quickly. An endowment will not resolve grant dependence on its own. The payout math helps explain why. U.S. colleges and universities reported an average endowment spending rate of 4.9 percent in fiscal 2025.[16] At a 4- to 5-percent annual draw, each dollar of support requires $20 to $25 in principal. A nonprofit with a $2 million endowment would draw roughly $80,000 to $100,000 a year at that rate. That could fund a staff position; it does not replace a broader revenue model.

The $105 trillion the endowment cannot reach

Cerulli projects that about $18 trillion of the $124 trillion transfer will go to charity and roughly $105 trillion will go to heirs.[17] The paper focuses on the charitable share, as it should. Beyond Grants looks at the larger share passing to heirs.

Heirs will inherit a large portion of that wealth, which they can invest, spend, or use to start businesses. Nonprofits can offer heirs more than a gift; some generate income, establish paid partnerships with companies, or obtain funds through blended financing schemes that include repayment arrangements. However, such options remain rare across much of the sector. For many nonprofits, few realistic ways exist to raise capital that expects a return. This situation reflects mechanism scarcity, not capital scarcity.

In August, I wrote that the pond is shrinking and nobody has noticed the lake.[18] This paper describes the pond carefully and shows nonprofits how to fish it better. It does not ask why the sector built only one kind of net.

Where the endowment fits in a Resilience Portfolio

I'm okay with grants. I'm not okay with grant dependency. The same applies to endowments. I support endowments, but they can't replace a more comprehensive resilience strategy if an organization keeps relying on a single instrument.

In a Resilience Portfolio, an endowment has a clear function: it acts as a long-term reserve, funded by gifts and investment returns. Its payouts can reduce volatility in philanthropy and show donors the commitment is permanent. It should be included with earned revenue, money from corporate partnerships, blended finance, and grants. It does not replace any of these.

Endowments give nonprofits a place to practice investment discipline. Boards responsible for them approve investment policies, set spending rules, track performance against benchmarks, and plan over decades. Those habits can help organizations assess earned revenue and investment capital. In many nonprofits, the investment committee is one of the few places where people already discuss returns. That conversation can inform decisions elsewhere in the organization.

A question for conveners

The Endowment Building Institute's value lies in how it delivers its services. Community foundations, United Ways, federations, and associations gather groups of 8 to 15 organizations. Teams of three to five people, including both staff and board members, develop working policies over six months.[19] Assignments keep the work moving, and participants hold each other accountable.

Could conveners use the same six-session format to help nonprofits generate a surplus, price a service, or structure a paid corporate partnership? The barriers and board concerns may sound familiar, but each question needs its own evidence. Russell James found no evidence that planned giving reduces current giving. In the data he examined, donors who added a charity to their estate plans gave about 77 percent more afterward, adjusted for inflation.[20] James cautions that this sequence does not establish causation and that the measure includes giving to all charities. Planned-giving evidence cannot answer whether earned revenue affects donations. A convener could begin to answer that question by tracking donations as participating organizations develop earned revenue.

Benefactor Group closes with a line I agree with: “The wealth now moving between generations will not wait for organizations to get ready.”[21] Nonprofits will need to prepare to receive gifts and to work with other forms of capital.

Notes

[1] Paul Yeghiayan, "How Nonprofits and Their Funders Are Preparing for the Largest Wealth Transfer in United States History: An Introduction to the Endowment Building Institute" (Benefactor Group, September 28, 2026), https://benefactorgroup.com/intro-to-ebi/.

[2] Cerulli Associates, "Cerulli Anticipates $124 Trillion in Wealth Will Transfer Through 2048," press release, December 5, 2024, https://www.cerulli.com/press-releases/cerulli-anticipates-124-trillion-in-wealth-will-transfer-through-2048. Cerulli's total includes $54 trillion in transfers between spouses.

[3] Andrew W. Lo, Egor V. Matveyev, and Stefan Zeume, "The Risk, Reward, and Asset Allocation of Nonprofit Endowment Funds," NBER Working Paper 34078, July 2025, https://www.nber.org/papers/w34078. The authors find that 10.6 percent of 374,351 Form 990 filers (2008–2020) report an endowment fund. Yeghiayan attributes the figure to Laura J. MacDonald, The Endowment Handbook (Wiley, 2024).

[4] Yeghiayan, "How Nonprofits," 4, 10–11.

[5] Yeghiayan, 4.

[6] Yeghiayan, 8–9.

[7] Yeghiayan, 20–21; Benefactor Group, "Helping Nonprofits Think Beyond the Next Gift," client profile, https://benefactorgroup.com/helping-nonprofits-think-beyond-the-next-gift/.

[8] AFP Foundation for Philanthropy and GivingTuesday, Fundraising Effectiveness Project Quarterly Fundraising Report, Q4 2024 (2025), 7–8, https://afpglobal.org/sites/default/files/attachments/resource/FEP_Report_Q4_2024_Final.pdf. Major and supersize donors made up 3.1 percent of donors and gave 77.7 percent of dollars. FEP data cover its panel of participating nonprofits.

[9] FEP, Q4 2024, 3; Fundraising Effectiveness Project, Q4 2025 Report, https://publications.fepreports.org/archive/2025-q4/. Yeghiayan dates the decline to 2019. FEP's data place its start in 2021.

[10] Yeghiayan, 6.

[11] Yeghiayan, 5, 13.

[12] Yeghiayan, 5. Yeghiayan cites Russell N. James III, "American Charitable Bequest Transfers Across the Centuries," Estate Planning & Community Property Law Journal 12 (2020): 235–285. The closest supporting data appear in Russell N. James III, "The Emerging Potential of Longitudinal Empirical Research in Estate Planning: Examples from Charitable Bequests," UC Davis Law Review 53 (2020): 2397–2431, Table 3, https://lawreview.law.ucdavis.edu/sites/g/files/dgvnsk15026/files/media/documents/53-5_James.pdf. Charitable bequest decedents were roughly twice as likely as others to give $1,000 or more a year at every interval in the two decades before death.

[13] Lilly Family School of Philanthropy, "Giving USA 2021: In a Year of Unprecedented Events and Challenges, Charitable Giving Reached a Record $471.44 Billion in 2020," June 15, 2021, https://news.iu.edu/philanthropy/live/news/51641-giving-usa-2021-in-a-year-of-unprecedented-events; Lilly Family School of Philanthropy, "Giving USA: U.S. Charitable Giving Rose to $617.20 Billion in 2025," June 23, 2026, https://philanthropy.indianapolis.iu.edu/news-events/news/_news/2026/giving-usa-report-2026.html.

[14] NBER Digest, November 1, 2025, https://www.nber.org/digest/202511/investment-returns-nonprofit-endowments, summarizing Lo, Matveyev, and Zeume (note 3). The study finds that a 1 percent market return is associated with a 3 percent increase in donation growth.

[15] Yeghiayan, 12, Figure 2, adapted from MacDonald, The Endowment Handbook.

[16] National Association of College and University Business Officers, "U.S. Higher Education Endowments Report Stable Returns, Increase Spending to $33.4 Billion in FY25," press release, February 12, 2026, https://www.nacubo.org/Press-Releases/2026/US-Higher-Education-Endowments-Report-Stable-Returns-Increase-Spending-to-33-4-Billion-in-FY25. The figure covers 657 U.S. colleges and universities. The $2 million example is the author's illustration.

[17] Cerulli Associates (note 2). Cerulli projects that $105 trillion "is expected to flow to heirs," or 84.7 percent of the $124 trillion total.

[18] Claudio Tanca, "The Pond Is Shrinking. Nobody Has Noticed the Lake," Beyond Grants, August 30, 2026, https://www.claudiotanca.info/post/the-pond-is-shrinking-nobody-has-noticed-the-lake.

[19] Yeghiayan, 17–19, 23.

[20] James, "Emerging Potential," 2421–2424. Inflation-adjusted giving averaged $7,699 after donors added a charitable estate plan, against $4,355 before. James notes that the data show sequence, not causation, and measure giving to all charities.

[21] Yeghiayan, 22.