Three Steps Toward Building an Endowment Church Fund
Churches do a tremendous amount of good for their members and for others. But most of the funding for their ministries comes from contributions and pledges. Wouldn’t it be wonderful if every church was building an endowed church fund for each of their major expenditures? You can actually build an endowed church fund in just three easy steps.
All 88 keys of the Phoenix Symphony’s Steinway piano are endowed. They went for $5,000 a key. Penn State has every position on its football team endowed.
If your church is not creating an endowed church fund for major goals, maybe they should be.
I’ve been attending a different church for the past few months. The church recently marked its 50th anniversary. It is a small church that ended 2008 with a $33,000 deficit. I was surprised to learn that after fifty years this church has nothing in earmarked or other church funds. There is no endowed church fund.
Because of the recent and current economic climate most churches saw reduced giving during the fourth quarter of 2008 and the first quarter of 2009. In an article released in December of 2008, the Barna Group predicted giving to churches to be about $3 billion to $5 billion lower than anticipated in the fourth quarter of 2008. For congregations that do have money in a church fund, the balance is likely to fall until the economy turns around.
Financing ministries from the interest on endowment funds goes a long way toward shielding the good a church can do from economic downturns.
Many churches have built substantial church funds through endowments. For other how-to information and examples, I would point to “Financing American Religion” by Mark Chaves and Sharon l. Miller. Because most churches could do a better job of creating church funds here are three tips for building an endowed church fund.
1. Fish where the big fish swim.
You probably have heard of the 80/20 rule, which holds that 80% of anything comes from 20% of the people involved in the activity. With respect to building a church fund, it’s more like 98/2. You need to concentrate on major gifts. 98% of the money will come from 2% of your congregation.
2. Show potential donors how their church fund gift could solve their own financial problem.
Most of the problems that can be solved with a large donation to a church fund are related to tax savings. One such typical example would be knowing how to sell a business without paying a capital gains tax or how to pass wealth to the next generation without first paying half of the estate to the government in inheritance tax.
Most of these problems involve tax savings. For example, how to sell a business without paying a capital gains tax and how to pass on wealth to the next generation without first giving half of the person’s estate to the government are typical examples. Yes, I know, the tax aspect of major gifts is not the primary reason gifts are made. Most of the time, it’s not even on a person’s list. Nevertheless, if you can show someone who is interested in your cause how to make a gift that satisfies his or her interest and support of your mission and help them solve a problem at the same time, your chances of getting the gift (maybe even a larger one) and adding to the balance of your church fund is enhanced.
3. Support your fundraising effort with case study information.
Many of the people who could be major donors to church funds don’t know how to plan approaches to giving that both are legal and provide incentives to make large gifts to the church fund.
In my financial and estate planning practice of 39 years, I called on numerous business owners who had no idea they had a problem. No one had ever pointed the problem out to them. My view is that it’s the same lack of communication of “whats possible” that limits the receipt of major gifts by a church.
By explaining the laws and offering case study examples of how other people have solved similar problems, I believe fundraisers can easily help people see how their tax problems can be eliminated by opening a conversation about making a sizeable contribution to a church fund that will pay interest and provide the principle of the gift to the church.
About the author: Robert D. Cavanaugh, CLU is a 39-year veteran of the life insurance, financial and estate planning industry. He is the publisher of The Smart Giver, a planned giving educational series which teaches strategies to increase income and reduce taxes while simultaneously helping churches and non-profits. Additional information about how to build a church fund can be found on his blog.
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