James Duncan has a provocative article over at First Things entitled, Celebrity Pastors' Walter White Problem: on megachurch megabucks. Duncan writes,
In the final season of Breaking Bad, Walter White, the chemistry teacher turned drug kingpin, has made more money than he can spend without breaking his cover as a mild-mannered cancer survivor. In one scene, he and his wife stare disconsolately at a ton of hundred dollar bills stacked two feet high, realizing it was all but useless to them.
Recently we’ve been discovering that celebrity pastors understand that they have a similar conundrum. Having built megachurches with budgets in the tens of millions and generous salaries to match, they can’t really spend all the money they’re earning. Unless they’re fully certified prosperity preachers, there’s a certain decorum that pastors must follow when spending their congregation’s money. When you live off money given to God, your public lifestyle ought to be just slightly constrained.
It’s the Walter White Problem. White couldn’t spend his fortune because it was dirty. Pastors can’t spend theirs because it’s holy.
In recent months more than a few intrepid journalists and internet bloggers have begun to illuminate the interestingly intricate ways in which some megachurch pastors shield their true income from the view of their church members and the public at-large. Strange and complex book deals and publishing arrangements and not disclosing income to church members (a contentious and debatable topic for most churches) are but two ways in which church and parachurch leaders shield income from disclosure. Some, if they have sophisticated tax lawyers and accountants, may use things such as Charitable Remainder Unitrusts (CRUTs). At least one famous megachurch pastor has done so, according to public records.
As I understand it, the way a Charitable Remainder Unitrust works is that a donor creates a legal trust, and chooses a non-profit organization (sometimes a church) as the beneficiary of the trust's funds. The donor then funds the trust with money. When the trustee of the trust (usually also the donor) dies, the beneficiary organization gets the "remainder" (all the money remaining) in the trust. That explains the "Charitable" and "Remainder" aspects of the trust. What about the "Unitrust"?
When the trust is formed, a non-charitable beneficiary must be selected and a set percentage of the trust's assets (5-50%) is to be distributed each year to that beneficiary. This is the "unitrust" part of the arrangement. The distribution continues for a set time or until the death of the "settlor," usually the non-charitable beneficiary. The IRS requires that 10% of the trust's assets at creation must pass to the charitable beneficiary.
Why would especially high-earning pastors use CRUTs? From a tax planning perspective, these kinds of trusts may provide a number of tax-favored benefits that increase the amount of earnings the high-earning pastor retains. They also provide a side-benefit that some pastors might find appealing.
Say a pastor writes books, and receives a major advance from the publishing company or the book sells so well the pastor receives $1 million in compensation. The pastor can donate all the money to his CRUT of which the pastor is the non-charitable beneficiary with an annual payout rate of 50% of the trust assets. His church is the charitable beneficiary. In such an arrangement, the pastor might technically and legally claim he gave the entire $1 million of his book profits to the church. But, in actuality, the pastor will be drawing, in this arrangement, from the proceeds for the rest of his life. By the time the church actually receives the funds there may only be 10% left. So the pastor "gave" $1 million to his church, but in the end tally the church received $100,000 and the pastor $900,000.
What I find particularly interesting in all this is the underlying question of "why?" If pastors and their boards want to set a pastor's salary in excess of $1 million a year, as some are purported to be earning, that's really their and their churches' business. As long as they are doing nothing illegal, then what they are paid is an equation of business, ethical, moral, and theological factors to be worked out by the individual church or ministry. So why do so many megachurch pastors go to such great lengths to make opaque what should be transparent, if in fact there is nothing to hide?
It seems to me, and perhaps I being woefully naive here, megachurch pastors and church boards should operate with the utmost transparency in how they designate, assign, and use "God's" money. After all, these are not businessmen who have amassed great fortunes by virtue of selling goods or services that multitudes wish to purchase. Instead, their salaries are directly underwritten by the parishioners who believe they are giving back to God and his work. If these pastors and their church boards think they are righteous in paying extraordinarily high salaries, they should be more transparent about what they are doing with what they claim i "God's money."
Covering up the inner workings of a church or ministry's financial apparatus with a legal accounting smoke-screen rarely works out for ministries. Inevitably the truth comes out. People are savvy enough these days to know that when it comes to financial scandals, wherever you see smoke, there's probably fire.