In 387 B.C., in an olive grove just outside the gates of Athens, the philosopher Plato established the Academy, the world’s first institution of higher learning. Plato then bequeathed his farmlands to the Academy, to ensure it would continue after his death. His gift is regarded as history’s first endowment. It was certainly one of the most enduring: The endowment lasted nine centuries, until Emperor Justinian closed the school in 529 A.D. and seized its assets.

For clients who look to you for advice about the disposition of their wealth, and their legacy, following Plato’s example of establishing an endowment may be a fulfilling—and tax-advantaged—solution.

Although the word “endowment” is often associated with the billion-dollar portfolios of Ivy League colleges and other major institutions, an endowment can be an advantageous option for a donor with $100,000 or more. It can be funded immediately, or years after it is established (for example, in connection with the sale of a business or real estate), or through a bequest.

At its core, an endowment is a charitable fund set up to provide support for one or several of the donor’s chosen charities or causes after death or during the donor’s lifetime and beyond. The assets are managed prudently and professionally, enabling a certain percentage to be distributed each year to those charities or causes while preserving the principal. The donor can direct that the proceeds go to a specific organization, such as a hospital, school or other nonprofit organization, or to a field of interest, such as medical research or support for the arts.

Endowments can of course be funded with cash, bonds and shares of public companies, but many other types of assets can be used as well. These include real estate, life insurance policies, private securities, charitable gift annuities, artwork, jewelry and intellectual property. Even IRAs and other retirement assets can be used, if transferred as a bequest or IRA charitable rollover for those 70 and a half years or older. Charitable trusts can provide such benefits as lifetime income to the donor or preservation of family wealth, with the charitable interest funding an endowment.

The types of donors for whom an endowment may be appropriate include those whose heirs are financially secure, or who are without heirs; those whose heirs are mentally unstable or worse; donors who plan to leave some of their wealth to their heirs, but also want to provide lasting support for their favorite charities; those who want to start an endowment for a charity and see the immediate impact of their philanthropy; donors who have had, or are anticipating, a liquidity event such as the sale of a business or an inheritance; and many more.

Donors may plan on making ongoing gifts to build up their endowment, including a bequest from their estate. They may establish multiple endowments in the names of their children or other family members, to transmit their philanthropic values and celebrate life cycle events. A memorial endowment may honor a friend or loved one via a scholarship or medical research in an area important to that individual. Groups of donors, such as members of a board, may set up a fund to honor a leader.

The estate-planning advantages and tax benefits of an endowment fund can be significant. A tax deduction of up to 50 percent of the donor’s adjusted gross income (AGI) can be taken for cash contributions to the fund, and up to 30 percent of AGI for donations of stock and other appreciated assets.

Establishing an endowment, particularly via a community foundation, is an easy and straightforward four-step process. The donor signs a simple agreement creating and naming the endowment. He or she then selects one or more causes to support, such as an eligible nonprofit organization or a field of interest. The next step is to decide whether the endowment will be funded immediately, over time or via a bequest. Finally, the donor specifies what will be donated: cash, securities or other assets.

Various federal and state laws govern the management, investment and spending decisions for endowment funds. In California, these include the Uniform Prudent Management of Institutional Funds Act (UPMIFA) and the Uniform Prudent Investor Act (UPIA).

Notably, the Commonfund Institute’s 2013 Community Foundation Benchmark Study reported an average annual effective spending rate of 5 percent of endowment assets for grants and expenses.

An endowment fund requires an understanding of complex federal and state statutes and reporting requirements, as well as managing a portfolio of assets that is intended to last for decades or in perpetuity. For these and other reasons, establishing the endowment fund via a community foundation, which has the necessary experience, legal and investment expertise, is often the easiest, most practical and lowest-cost path.

Community foundations can accept a wide variety of endowment fund donations, including illiquid assets and bequests, and can serve donors who wish to establish their endowment fund well in advance of donating assets. Economies of scale typically allow community foundations to charge administrative fees of typically only 1 percent of assets for managing investments and grantmaking. Endowments offer an effective option for donors of varying levels of wealth.

Elliot Kristal, Esq., is vice president of charitable gift planning at the Jewish Community Foundation of Los Angeles. Susan Mattisinko, Esq,. is the foundation’s general counsel.