What you need to know about accepting gifts of tangible personal property and life insurance
By Bill Walter
When it comes to creative stewardship, people are often encouraged to think “outside the box.” Sometimes, however, it pays to think inside the box” — inside the (boxed) confines of one’s own home, that is.
Many folks own valuable physical assets that can be creatively gifted to your ministry to enhance your mission. These physical assets are referred to by the IRS as tangible personal property, or TPPs. Examples include collectibles (rare books, coins, stamps, baseball cards), antiques, precious metals, jewelry and art objects. The opportunities for creative gift giving are endless.
Gifts of TPP create some terrific opportunities for your people and your ministry. Members are encouraged to uncover their “hidden assets.” By gifting such assets, they are acknowledging a key principle of Christian stewardship — God owns it all; I’m just a manager (steward).
From the standpoint of your church, you’re sending an important message as well: “We want to help you be creative in your giving, beyond just writing checks or electronic fund transfers.”
Avoid potential pitfalls
Your church must carefully present the opportunity so people understand this is about giving their treasure, not their junk. This can be easily accomplished by providing examples of desirable assets.
In most cases, there are no taxes advantages to the donor in making a contribution of TPP versus selling the asset and giving the cash. So, donors should be encouraged to sell the property themselves. However, the church might want to accept the actual property and then sell it to facilitate making the gift by the donor. Additionally, some churches have found it helpful to recruit an “eBay coach” — an individual highly skilled in online auction selling.
The eBay coach is then made available to congregants who want to give / sell a valuable asset, but don’t know the ropes of eBay auctions.
Life insurance: an overlooked gift
Although it’s not considered tangible personal property, life insurance is another overlooked gift option. Many people don’t recognize that a life insurance policy is a giftable asset; they perceive it only has value as a death benefit. While this is generally true for term insurance policies, permanent (or whole-life) policies typically do have a current value.
When considering gifts of life insurance, donors should only consider contributing policies that no longer have a valid role in their personal financial plan. However, it is not unusual for some folks to have an old whole-life policy sitting in a dresser drawer whose primary financial planning purpose has long since passed.
Although life insurance can sometimes be a complex subject to discuss, transferring ownership from an individual to the church is relatively easy. The policy owner simply completes a change of ownership form provided by the agent or insurance company. Once policy ownership is changed to the church, leaders have the option to maintain the policy in force or surrender it for cash value. In most cases, you will want to obtain the cash value to employ in current ministry.
Although transferring a life insurance policy can be relatively easy, valuing the asset for charitable deduction purposes can be more complex. The insurance company can provide a form 712 which values the policy. However, as with all non-cash charitable gifts, donors need expert tax advice when claiming their charitable deductions. And, as a general reminder, the donor is solely responsible for valuing all non-cash gifts for charitable deduction purposes.
For many people in your church, God might already have provided them with a substantial gift to your ministry — but it might not be sitting in their checkbook. Instead, it might be sitting in their living room!
Help them discover it. They will thank you, and your ministry will be more fully resourced.
Bill Walter is a Certified Financial Planner (CFP) and president of Church Growth Services, a capital campaign consultancy located in South Bend, IN.
The information contained in this article is not intended to be legal or accounting advice; it is for educational purposes only. Individuals are encouraged to contact their own tax and legal professionals regarding the subjects presented.