Three Steps Toward Building an Endowment Church Fund

Finance

Written by RobertD.Cavanaugh,CLU

Sunday, 06 September 2009

by RobertD.Cavanaugh,CLU

For all the good churches do, most of the funding for their ministries come from pledges. What if every church was endowed? Here are some suggestions you can employ in your church to build a bigger endowment church fund.

All 88 keys of the Phoenix Symphonys Steinway piano, for example, were endowed. The endowment was sold for $5,000 per key. At Penn State, there is an endowment for every position on the football team.

Is your church endowed? If not, why not?

The church I just started to attend just celebrated its 50th anniversary. It's not a big church " about 350 members. It finished 2008 $33,000 in the red. In fifty years, they have a church fund balance of zero.

A financial shortfall is not surprising for any church during the last quarter of 2008 when the economy entered a recession. In December 2008, the Barna Group predicted that churches would experience giving that would be $3 billion to $5 billion less than anticipated for the last quarter of the year. They also predicted that churches that have church funds will likely see the balances fall until the recession ends.

Some churches, however, have a history of drawing on interest earned by a church fund to finance ministries during tough times.

Some churches have done a good job building their church fund. I would refer you to "Financing American Religion" by Mark Chaves and Sharon L. Miller. However, every church can do more. Here are several of my opinions about some of the steps needed to build a church's endowment fund.

1. Fish where the big fish swim.

2. Help donors solve a problem.

Although we want to believe that all giving to the church is entirely faith-based or altruistic, you should also consider that if you can show a donor how to solve a personal financial problem or need and endow a church fund you will be more successful.

While it is true that many donors are 100% altruistic, you stand a better chance of getting a major gift if you can show a major donor how to solve a problem that simultaneously results in a gift to your church.

A very large number of problems that can be solved with a sizeable donation to a church fund are related to issues of taxation. For example, a church member might need to know how to sell a business without paying a capital gains tax. Another member might want to know how to pass wealth to the next generation without paying an inheritance tax of up to 50% of the inheritance. I know most people don't make contributions to church funds for tax breaks. But consider that showing someone who is interested in the church's ministry how to make a significant gift to the church and solve a financial problem at the same time could increase your success in getting the gift. It might even mean the church will get a larger gift.

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.

During my 39 years in the financial and estate planning arena, I have spoken with numerous business owners who didn't even know they had a problem. No one had ever pointed out to them how much of the fruits of their labors could be lost in taxes. I think church fundraisers also suffer from the same lack of information, as do church members.

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:

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 program which advances techniques 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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