How To Attract Major Gifts

An IRA is one of the worst assets to leave to your heirs. Here’s an alternative that can save tax on your IRA and benefit your church.

Meet Bill and Ann. Bill is retired and has an IRA worth $1,000,000–not unusual in today’s mega-IRA world. They both have other assets: Ann’s 401(k) from her career, their home, other investments and the proceeds from the sale of Bill’s business.

Bill has named Ann the beneficiary of his IRA. When he dies, Ann will re-name the IRA in her name, continue to draw income for the balance of her life and then leave it to their three children.

A “typical” plan. Exactly what most people do.

But it’s a tax disaster.

Take a look at the “before and after” results (just with respect to Bill’s $1,000,000 IRA) in the chart below. Plan A is Bill and Ann’s current plan. Plan B shows the results of a technique I teach in The Smart Giver.

Which looks like a better plan to you?

Most people are what I call “flying blind.” They don’t even know there is a Plan B.

Your church probably has a number of “Bill and Anns.” Knowing about Plan B can endow your church in just a couple of transactions.

The Treasury Department estimates there are currently 3 trillion dollars in IRAs. Right behind this are 60+ million Baby Boomers (the oldest turning 63 this year) who hold 12 trillion dollars in qualified plans such as 401(k) plans.

Will your church get its fair share? Could you help people within your congregation divert money that otherwise would go to the government to their heirs and your church?

For more information about this plan, see the video entitled, “How To Leave 100% Of Your Estate To Your Children Tax Free” on my video podcast site.

This concept is also the subject of one of the 16 lessons in The Smart Giver, an educational series designed to help people increase their income, reduce taxes and help their church all at the same time.

Three Steps Toward Building an Endowment Fund for Your Church

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 fund.

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.

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.

This is not unusual. Because of the current economic climate, many churches took a big hit the fourth quarter of 2008. In a December 1, 2008 article, The Barna Group predicted that churches would receive $3 billion to $5 billion less than expected the last quarter of 2008.

Financing ministries from the interest on endowment funds goes a long way toward shielding the good a church can do from economic downturns.

Some churches have done a good job building their endowment 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

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 an endowment 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. Solve a problem

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.

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) is enhanced.

3. Provide case study information

I believe that many potential major donors do not know about the planning techniques the law allows that lead to a major gift.

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 “what’s possible” that limits the receipt of major gifts by a church.

If you provide examples of what others have done to solve specific problems, people can easily see if the solution might work for them. This is the first step in opening up a dialogue about the possibility of a major gift.