By Bill Walter
It’s wise to encourage gifts of financial assets, real estate and tangible personal property.
Quick question: What percentage of your constituent’s total assets are found in cash or checking accounts? Answer: About 10 percent.
Another quick question: What percentage of your annual church giving comes from cash or checking accounts? Answer: Likely 95 percent — or more!
What’s wrong with this picture?
Clearly, most church leaders don’t actively or intentionally seek non-cash gifts. This is unfortunate for many reasons.
First, non-cash gifts can provide major tax advantages to the donor when compared to giving cash. Second, non-cash gifts might represent a new “income stream” to the church. Third, educating your people about creative, tax-wise giving techniques empowers them to be better stewards of how they give — not just how much they give. It’s a classic win / win!
A worthwhile endeavor
If you’re wondering if pursuing non-cash gifts is worth the effort, look no further than to our friends in parachurch ministries. Their donor communications regularly tout the ease and benefits of making non-cash gifts. Many of these organizations have part-time or even full-time staff tasked solely with developing such gifts. They discovered long ago one of the best secrets of stewardship development: Often, the largest gift a Christian makes isn’t in the form of cash.
Non-cash assets fall into one of three broad categories: financial assets, real estate and tangible personal property.
Financial assets include stocks, bonds and mutual funds.
Real estate can be residential, commercial or vacant land.
Tangible personal property encompasses a very broad spectrum ranging from collectibles, to precious metals to vehicles.
American households own about $20 trillion in stocks and mutual fund shares. With financial markets recently near all-time highs, many of these assets have appreciated beyond their original cost. Appreciated financial assets such as these represent one of the “golden giving opportunities” for donors and churches alike.
What’s so “golden” about gifting appreciated financial assets, such as stock? For starters, assuming the donor has held the asset for more than one year, they’re usually entitled to deduct the full fair market value on the date of the gift. Any appreciation that would have been subject to capital gains tax (had they sold the stock) is avoided. Assuming the church immediately sells the security upon receipt, it realizes full value. Had the donor sold the stock, paid the capital gains tax and then gifted the remaining cash, the church would have received less. So, the bottom line is this: more dollars to the church, a larger charitable deduction to the donor, and no capital gains tax to the IRS. What’s not to like?
How to accommodate non-cash gifts
First, let your people know you’re “in the game” and actively seeking such gifts. This can be accomplished simply by publishing a quarterly announcement: “If you’re interested in making a non-cash gift to our ministry — stock, mutual funds or real estate — please contact John Doe, our Creative Gifts team leader, to discuss the procedures and benefits.”
Beyond this simple announcement, you must create visibility and promote such gifts.
- Distribute fliers / brochures explaining the benefits by using case studies. (Commercial literature such as this is readily available and can be branded to include the church name and logo.)
- Host a “creative giving seminar” taught by a financial professional, such as a CPA, CFP or CFRE — someone highly skilled and knowledgeable in tax-wise charitable gifting techniques.
- Feature a testimonial (written or verbal) of a recent non-cash gift made by another church member.
A few planning pointers
As your church prepares to receive gifts of securities:
Open a brokerage account in the name of the church. These days, most transfers of shares are done electronically. You’ll need to provide the donor (or their broker) with the church’s brokerage account number for them to make the transfer.
Brush up on proper IRS procedures for receipting non-cash gifts (see IRS publications #526 and #561). For all non-cash gifts, it’s always the donor’s responsibility to value their gift, not the church. Following IRS guidelines, your gift receipt should clearly describe the asset but not show any dollar value.
Handle all non-cash gifts (and especially first-time ones) with great care. By showing your donors that you have the systems and knowledge to competently handle their gift, you enhance their confidence for future, and perhaps larger, gifts. Who knows — today’s $5,000 gift of a few mutual fund shares could become tomorrow’s $500,000 gift of company stock!
Clearly communicate the advantages of non-cash gifts to your congregation. Provide the vehicles for people to respond. Your ministry — and your members — will benefit.
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.