Managing an Endowment - Kids or Management Company

Now that you've set up the endowment fund to ensure the future of the summer home you've bought for your offspring (or yourself, for that matter), other somewhat uncomfortable questions remain. Among them: Are your kids responsible enough to make sure everything stays in order? Are they much too busy with the rigors of their own lives and families to be burdened by this additional responsibility?

One of the better material ways to leave a mark for one's offspring is to establish an endowment policy, usually for a vacation retreat of some sort (log cabin, summer home, winter lodge, etc). Gathering enough for the principle, such that most or all of the future expenses of such a gift will be taken care of, is often a lasting source of appreciation between parent and kid(s), as well as their grandkids, and so on. Once the money is secured, however, there is often one crucial consideration that a parent must make upon establishing a fund, and it is second only to the amount of money intended to be left behind: who will manage the endowment plan? Unless responsibility is to be given to a child or children, there are really only two options - either the insurance company from which you obtained the endowment policy, or an external manager (as in a trust company) independent of the endowment-assigning-company altogether. Whichever one the buyer chooses is of course dependent on the parent's confidence about the eventual fate of the endowment.

In this scenario of endowment policy management, the policy is put into the hands of a professional investment manager, specializing in trust funds. Performance is secured by the fact that the "leasing" company (the company that originally drafted the endowment policy) doesn't just give the policy away; the trust company is merely hired, and can be fired for poor performance. This choice is sometimes a good one for endowment plan-establishers who have reservations regarding the responsibility of their heirs, or even of the original company, if they don't actually specialize in managing endowments, just in selling them. This whole arrangement doesn't indicate that one doesn't trust those inheriting their endowment; it may be done simply to take a load off their busy shoulders, and all of the related investment information (stocks rising and falling, etc). In the scenario of trust-company-management, they will even take care of the associated taxes, reporting them back to the original company, which may or may not (depending on the terms of the original agreement) then forward the necessary tax-forms to the endowment policy-holder.

Another option is to simply keep the endowment policy with the original company from which it was bought. Usually in this case, however, a lot more time investment is required from the beneficiaries, who can choose amongst themselves managers for the endowment fund.