By David Thoroughman
One of the challenges churches face is how to accelerate their vision through project-based funding initiatives. It requires a church to craft a clear vision and purpose and articulate it through a case for support.
Additionally, a church will need to outline how the goal can be achieved and invite its people to become part of the solution. Usually, these initiatives focus on givers who have made annual gifts in excess of $10,000 per year for several years.
Unfortunately, this traditional approach might overlook people who possess significant resources who are not readily visible through data analytics.
Consider the profile of one couple with whom we recently worked. The couple was relatively new to the church, having attended for less than two years. They are in their mid-50s with multiple children, the youngest of whom will begin college in the fall. By all accounts, they are invisible to church leadership. According to MortarStone, they are a Band 1 household, meaning they give less than $200 per year. They volunteer in a limited capacity. Spiritually they are early in the process of becoming fully formed followers of Jesus, which includes their journey toward generosity.
The church developed a giving pyramid to demonstrate how it can reach its project goal and have invited its people to invest in it as part of the solution. This emerging giver made a significant commitment of $250,000 toward the giving goal. Given the low level of historical giving and affinity, the church wanted to secure the gift and establish a relationship with the couple. In addition, they desired to offer philanthropic counsel to ensure the couple was aware of charitable giving tools and tax-advantaged strategies.
The church’s stewardship and generosity pastor invited the couple to coffee. Over the course of the next hour, he came away with a greater understanding of who they were, how the church could help them take next steps on their spiritual formation journey, and how they could grow in their generosity. With the couple’s blessing, the pastor made a simple email introduction to a MortarStone generosity advisor who would help them take the next steps toward developing a Kingdom mindset versus a secular mindset. The email reads as follows:
“It was a pleasure having lunch with you and hearing how Christ has moved in your lives and especially in the life of your daughter. Thank you for your generosity and support for our campaign.
“I have copied David from MortarStone in this email for the introduction. David, (the couple) are attending our church and have a unique opportunity for giving through stocks and options for a company that (he) works for that is going public. It would be fruitful for them to talk to you about the resources and strategies that you and MortarStone can provide.
I’ll let you all take it from here. Let me know if you have any questions for me and the church.”
The introductory email precipitated a discovery conversation between the couple and a MortarStone advisor, as represented below:
“There is a quote that I like that I’ve slightly revised. ‘Wealth is not new, and neither is charity. But the idea of using private wealth imaginatively, constructively, and systematically to advance causes that break your heart, things that you are grateful for, things that you want to protect and guard against, well, that is new and very rewarding!’
“In full disclosure, I am not licensed to give tax or financial advice. We have team members who can help with that, but that isn’t my specific role. There is a good chance that we land on some ideas that you like that would require us to work with your team of professionals, including your attorneys and financial planners, in order to implement your wishes. I’m going to put down some ideas for you to consider that we can discuss later.
Do you plan to fulfill your current pledge of $250,000 in one year or over the campaign period, and why? What I’d like you to consider is your charitable tax deduction. If I may be direct, how did you arrive at this dollar amount? Is it a percentage of income? Or did your accountant help you identify the amount for a deduction? Obviously, there is no right or wrong answer, but I’d like to fully understand your thought process.
Do you support other charitable organizations? Or is the majority of your giving through the church?
If you don’t have a Donor Advised Fund, I would encourage you to explore that. I can help make recommendations if you would like.
Have you considered a life income gift? For example, you could make a gift to a Pooled Income Fund, receive a tax deduction, and receive life income as you think about retirement.
Do you have a charitable component as part of your estate planning documents? Most estate planning is done through a secular lens rather than a Kingdom lens. I’d like to unpack that in detail when we meet.
Certain retirement assets, such as IRAs and 401Ks, can present challenges because they are double-taxed. How are you planning to transfer those assets, and to whom will the balance be transferred? Are you aware of the tax implications if you make your children the beneficiary of these plans?
Thank you for sharing your passion for underserved children and adoption. Have you thought about creating an endowment for a ministry in these areas that could provide long-term financial support? For example, you could create a scholarship fund for children who have been adversely affected. It is important to discover your passions and lean into them as much as possible.
We have a fantastic tax attorney who is competent to deal with more technical concerns. If you would like to discuss ongoing tax strategies, we would need a schedule of stocks and stock options, whether they are vested, the date of grant or acquisition, date of exercise of any options, option price upon exercise, etc. You can put that in an Excel spreadsheet.
Finally, if you are willing, it would be helpful if you could share a balance sheet that lists all of the assets you hold both individually and jointly. We do not wish to supplant your existing team of advisors. We want to complement their work as a part of your overall planning process.
The couple reflected on these questions and responded in part below.
“These questions are worth discussing, but I will throw out a few thoughts here. First, we have always given to various charities, but I would be pressed to suggest that the total amount has ever exceeded more than 2%-3% of our total annual income. So as you might imagine, pledging $250,000 is a big step for us, but one that we feel really good about given the goals of the campaign. To be candid, we arrived at the number because of the collateral piece provided by the church that broke down how it was going to get to its goal. We liked the idea of being in the top giving bracket, and considering our annual compensation, it was the number that felt ‘right.’
“We decided to spread the donation out for a couple of reasons. First, because it was such a significant gift for us we wanted to ‘settle into it.’ Second, we have to exercise the options in order to donate them, which means we have to have the cash available to fulfill the pledge. Other financial obligations — not the least of which is our daughter beginning college this fall — means we have to manage our cash flow. We are learning that the interesting thing about wealth that is created by a company going public is that liquidity isn’t a part of the equation, especially when you are an officer.
“Having said that, we will make an evaluation closer to the end of the year as to the actual amount we will give toward the pledge based on advice from our CPA.”
Her response highlights several important concepts.
First, notice that the significance of the gift would stretch their understanding of what it means to be charitably generous. It is also worth noting that they felt compelled by the idea of being a financial leader toward the campaign goal. They were motivated by the church’s diligence in explaining the goal and how it could be attained. And, perhaps most importantly, they made the gift irrespective of any conversation about tax benefits. In other words, something greater than tax savings ultimately moved them to make this commitment.
You might be interested to know that the couple shared all of their financial information without hesitation. As our advisors work with givers like this, we have discovered several things that you need to be aware of. According to a recent study, 58% of evangelical givers support more than one charity, but one charity will constitute 65% or more of their contributions. We need to understand our givers and work toward developing relationships with them in order to remain top of mind in an overcrowded, competitive philanthropic environment. Givers who are charitably inclined often have to learn about asset-based giving from secular advisors, if they seek the information at all. Is your church positioned to help its givers learn how to be generous from all of their assets and not just cash?
People who give from assets need assistance in planning for one or more tax challenges. Ordinary income tax, capital gains tax, estate tax, or a charitable component within their estate planning documents are all ways that churches can be giver-centric in their generosity ministries and serve them as they steward their blessings from God.
For givers who like to support multiple charities, a Donor Advised Fund can be a way to help provide an immediate tax deduction while supporting several organizations, including the Church. Those who have assets but need additional income can use any number of tools, such as a Charitable Gift Annuity or a Pooled Income Fund, to trade an asset for a lifetime flow of income. Givers also need to be educated about testamentary gifts, which perhaps will enable them to make the greatest impact overall. Only 35% of Americans have a will or trust; and of those who do, only 10% have a charitable component.
Our calling is to help givers align their values and their valuables for Kingdom purposes. We only accomplish this when we understand the passions of our givers and what breaks their hearts. As we build trust with our givers, we can truly become faith raisers and not fund raisers.
David Thoroughman is CEO & co-founder of MortarStone.