Final answer:
An endowment is nonexpendable, meaning that the principal donated to a private-purpose trust cannot be spent, but the income from it can be utilized as per the trust's terms.
Step-by-step explanation:
An endowment is created when the principal donated to a private-purpose trust is nonexpendable. This means that the original amount of money given, or the principal, cannot be spent, but the income generated from investing that principal can be used according to the terms of the trust. A private-purpose trust is a type of trust established to benefit a specific individual or organization rather than the public at large. The nonexpendable nature of an endowment ensures that the fund can theoretically last indefinitely, providing a perpetual benefit to the named beneficiaries.