Why does Planned Giving Make Sense? Providing Further Value to Our Donors.

Written by Brandon Allen
Executive Director / Fortify Foundation

One of the things that I love about my job is having the opportunity meet with school leaders and hear about the rich heritage that a lot of the Christian schools throughout our country have. Whether it was independently established or through a local church, it is amazing to hear about all that God has done to get those ministries to where they are today. In almost every situation, it has taken a strong donor base to get those schools opened and operating. Those donors are often individuals who are passionate about the need to impact the next generation through teaching a Biblical worldview in Christian education. It’s those donors behind the scenes that have made generous contributions, often sacrificially, that has helped to bring that vision of Christian education to fruition. 

We all know the value that a generous donor brings. Hopefully, as a school leader, you have been more than generous in return when it comes to expressing your appreciation for those gifts along the way! We most certainly would not be where we are today and most certainly could not accomplish what we hope to in the future without them! Even if it is a loyal donor of many years, we should never take them for granted. 

Beyond the expression of our appreciation and furthering the mission we have at hand, I want us to explore a couple of questions and then follow up by helping to provide perspective in answering these questions. 

What value do we bring to our donors? Is there anything else we can do to further increase that value to help them? 

The main reason why the foundations exists is to help Christian schools like you build a stronger and more stable future financial path. Fortify Foundation is a strategic ministry partner formed exclusively to benefit Christian schools. We’re ready to come alongside you, your donors, and stakeholders with expert major gift and planned gift support. This benefits both your long-term and short-term financial goals. We do everything we can to help our partnered schools develop a long term strategy and build a more flexible budget that ultimately creates a greater viable future. 

I imagine the donors we have been blessed with through the years would agree that this is something that they would desire for us as well. As a matter of fact, many donors might be willing to give even more if they knew we had a strong plan that ensured our school’s indefinite existence. 

What a blessing it would be to capitalize on that opportunity and all the while provide a stronger relationship by creating greater value to our donors. How does this happen?

It’s utilizing tax laws to either save or create even more money on our donors’ behalf. This is where planned giving is such a crucial piece that will help increase our value back to our donors.

In the hundreds of conversations I’ve had with schools, there are very few that have taken advantage of the planned gift options that are out there. We all would agree that it’s a blessing when a planned gift is received but it seldom happens in our ministries. I know that most of this is due to a lack of knowledge and experience in this area. Even the few schools that have received planned gifts, have often received them because of the donor’s initiation. You can most likely thank the tax accountants out there for that! Even if we don’t like talking about taxes and people surrounding them, sometimes they do provide a benefit (or even thinking about them for that matter)! Imagine if we helped through our own marketing efforts and provided an avenue to help further make those gifts happen.

So, why Planned Gifts?

Have you ever ran a fundraiser where you encountered people who honestly wanted to give to the project at hand but just weren’t able to in the moment? There are always extraordinary circumstances that God allows in our lives that interferes with our immediate goals and sometimes evenin the area of giving.

My family is blessed to live on a shared pond with a number of other neighbors. Well, it was recently discovered that a dam inspector happened to pay the neighborhood a visit due to a revealed leak. What was the end result? A project that is estimated to cost between $150,000-$200,000. Not a small pill to swallow by anyones standards. It’s amazing that the timing of that project came right in line with some other things that our family was looking to accomplish and the thought of giving to maintain our pond was not one of them. 

Perhaps your donors are going through the same thing. Cash is tight but it still hasn’t changed their heart for giving. Planned giving may help to provide the solution for both of you. It may be that your donor can barely give $100 to your current need but they are sitting on a multi-million dollar asset in which they’d be happy to give a portion of if they just had a means to do so. This is the alternate option that planned gifts affords.

For those that are a little wiser in the area of wealth, the bulk of their assets aren’t sitting in a bank account anyways. It’s tied up in various investments that help those assets grow in conjunction with their needs. This helps them to, in essence, double their revenue stream (regardless of what the current return percentages may be). 

Also, knowing that the bulk of our donor’s assets aren’t held in cash, this also opens the door for potentially larger gifts depending on how they are established. Getting back to tax season… What happens when individuals get to the end of the year and start to assess their annual income versus their giving? Knowing that Uncle Sam wants to maximize “his” portion, the average individual looks for ways to defer that soon up and coming bill. Here’s the real kicker that giving from an asset can provide over a cash gift. 

Sure, we can quickly increase our donations by the end of the year to help offset some of those tax expenditures but herein lies the problem… All we’ve in essence done is rob Peter to pay Paul so to speak. But what is it about planned giving that makes it different? 

Consider this scenario:

For simplicity, let’s use stock as an example. If a potential donor owns some stock that has greatly increased in value and they want to take advantage of those investment returns, what is the initial consideration? Sell them off at the higher stock price, right? If that is the path taken, guess who will come knocking on their door shortly after? Good ol’ Uncle Sam would be happy to make another visit collecting on the increase in that stock value. After all, nothing is free, right? Depending on the situation, the tax could be as high as 37% on those capital gains! Boy does that change the expected return rather drastically. Kind of like hearing about those lottery winners that won “a million” dollars only to find out it’s but a small portion of that total after tax. Sure, something is better than nothing, but, if we had the ability to take advantage of more of it, why wouldn’t we? 

A donor has the ability to avoid those taxes by donating it to your nonprofit thereby both benefiting your organization and helping them with their upcoming tax bill. How does it work? I’m glad you asked! I know the immediate thought is they are having to give up their money either way which is partially true but both situations have completely different outcomes 

Let’s use a nice round number as an example. Let’s say your donor had invested $10,000 into the stock market. After a short while, they realized they hit the jackpot in the company they chose to invest in and now their stock has doubled to a whopping $20,000! They’ve concluded based on current market conditions, and the anticipation of some things coming down the company pipeline internally, that it would be best to go ahead and sell off that stock. Again, remember that if they sell that stock today that the donor will be taxed on $10,000 of that total amount. That would be a cut into the profit of anywhere from $1,500 to $3,700 netting them a total of $16,300-$18,500 from the sale.

Now what if a donor was already considering giving $20,000 to your school. They could most certainly write a check (if they are able) and take advantage of the tax deduction going into the next year. This is ok, but what if they chose to give that $20,000 worth of stock to your school? Because it’s worth $20,000 they still are able to take advantage of the same tax deduction as if they were giving cash BUT now they no longer have to deal with the capital gains tax and their deduction is maximized!

What is the end result? 1. This is our way of avoiding the tax in an upright and legal manner (this is the part where I put the disclaimer that all tax advice should personally be consulted with your personal tax accountant / attorney or whoever else you work with;) ) 2. They are able to take the cash from the same donation that they were planning to give to your school and reinvest it elsewhere as they choose. A pretty sweet deal all the way around!

This is what planned giving does to help increase value back to our donors. And guess what? At the end of the day, we both can walk away thankful for what we’ve been able to create for one another! Especially for the individual that may not have the cash in the immediate to help benefit your current fundraiser. It may not provide the cash to reinvest but it still gives them a platform that provides a dual benefit to them in the long-run. 

This is what Fortify Foundation can help your school with as the opportunity arises. Depending on the heritage of your school, it may provide some good potential options in the immediate. If you are a relatively new school or have a fairly small donor base, it may be such that these types of gifts are a few years down the road. If you are just starting to market for this, it typically takes 5-6 years before these kinds of gifts can come to fruition. But the beauty of starting now is that we are creating another path for a stronger financial future. If you haven’t yet setup a time to discuss what Fortify can do for your school, I’d encourage you to visit the link connected to the QR code below and setup a meeting at your convenience. We’d love to help come alongside your school and create a more viable future for Christian education abroad!

Get in touch with us!

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