How To Build An Endowed Church Fund

Most churches rely upon tithes and contributions from their members to pay for their ministries. Most churches also pay for capital improvements and new building in the same way. Churches that rely only on contributions to build their church fund are missing out on a major opportunity. Most of these churches do not understand that they only need to know three tips that will help them build a church 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.

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.

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

1. Focus on the big givers.

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. Solve a 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.

I’m very clear that tax breaks are not the primary reasons people give money to a church fund. In most cases, the tax issues never enter the mind of the giver. But if you can show someone who is interested in your ministry how to make a gift that satisfies the original goal and helps them solve a financial issue or tax problem at the same time, you dramatically increase both your chances of getting the gift and your chances of getting a larger gift for the church fund.

3. Provide case study information.

I am convinced that many people who could be major donors to church funds simply don’t know about the planning approaches allowed by law that can encourage a major gift to the church fund.

I have spoken with a surprising number of business owners over my 39 years in financial and estate planning who did not even know they had a problem. They had no idea how much of the business or of their wealth could be lost to taxes. Fundraisers also seem to have missed out on similar information.

If you will provide explanations of the laws and examples of how others have solved specific problems through church fund endowments, I am convinced that people will easily see how their financial and tax situation could also be improved. This is the first step in starting a conversation about the possibility of making a major contribution to a church fund that will pay for the churchs ministries with the interest on the investments.

About the author: Robert D. Cavanaugh, CLU is a 39-year veteran of the life insurance, financial and estate planning industry. He publishes The Smart Giver, a planned giving educational program which advances techniques to increase income and reduce taxes while simultaneously helping churches and non-profits. More information about how to build a church fund can be found on his blog.