It seems that churches and other charities are always concerned about where they will find the next substantial charitable gift.
Asking a different question could be of greater benefit. They should ask "How can we help senior citizens recognize a financial benefit from a charitable gift to our organization?"
If this approach was applied more often, fundraising could be changed from prying the last nickel from donors' clutched fists into a flood of charitable gifts.
This may sound a little self-serving, but we're all human. From a practical point of view, why wouldn't someone be interested in making a charitable gift if a pressing problem was simultaneously solved?
From the perspective of a fundraiser for a church or charity, why wouldn't you employ a strategy to secure a charitable gift while also solving a financial problem for the giver?
This approach involves three steps. First, fundraisers need to know the kinds of problems people can resolve with a charitable gift. Second, they must be able to decide which problem(s) can be solved for the specific donor. This requires asking insightful questions and listening carefully for the answers.Third, they need to be able to explain, in a way the donor will understand, how making a charitable gift will benefit them.
The key to utilizing this approach is educating yourself and educating your donor base.
Here is a brief example of how a charitable gift to ones church can also solve a financial problem.
Libby is over age 70. She lives on a fixed income. Part of her retirement income is interest earned on a $50,000 CD account at the bank. The recent economic woes have resulted in the bank paying less interest.
Libby would like to solve three problems:
1. The CD is only paying 4.5%. This spins off $2,250 interest per year.
2. All of the CD's interest is taxable. In Libby's tax bracket, the net interest only translates into $1,900 a year of spendable income.
3. Libby's bank, Washington Mutual, went bankrupt recently. JP Morgan Chase now holds her CD account. Chase is another big bank. Libby is terrified that Chase will also go under and she will lose her money. She is not sleeping well.
Libby's problems could all be solved with a charitable gift if a good fundraiser offered this simple solution.
1. Transfer Libby's $50,000 from the bank by making a charitable gift of that amount to her church or other charity through a vehicle known as a gift annuity. This protects her money and her income from another bank failure.
2. Increase the interest she is receiving to 7.1%.
3. Increase her interest income from $2,250 to $3,500 a year.
4. Protect $2,460 of that income from taxation.
5. Increase her effective annual yield from 4.5% to 8.49%.
6. Create an income tax deduction of $20,047. In Libby's tax bracket and financial situation, she will be overjoyed to learn that this tax deduction is large enough so she likely will not owe any federal taxes for the next six years.
I am inclined to think Libby would be more than happy to enjoy all of these benefits of her charitable gift. I think the church or other charitable organization would also be thrilled to know they will have a large charitable gift when Libby dies.
More Information:
Robert D. Cavanaugh, CLU is a 39-year veteran of the financial and estate planning industry. He is the publisher of The Smart Giver, a
charitable gift educational program which advances strategies to increase income, reduce taxes while simultaneously helping churches and other non-profits. Additional information about
charitable giving can be found at his blog.
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