Why your church needs planned giving

August 6th, 2015

Why does your church need a planned giving ministry? Simply put—for two reasons. First, to sustain your future ministry and mission; and second, to help a growing number of members who feel called by God to leave a legacy gift. Church of the Resurrection now has over five hundred members who plan on leaving a legacy gift. The wealth transfer from the boomer generation will be the greatest in human history! Some estimate that for the church the wealth transfer could be over $6 trillion by 2052. To grow in the future, planned giving ministry is essential now.

What is planned giving?

Planned giving in the church can be as simple as asking people to leave a bequest in their will to your church. Planned giving has become so popular today that nonprofit organizations, universities, hospitals, foundations, and charities receive an estimated $17 billion each year. Most annual conferences in The United Methodist Church have foundations to serve the local churches in their area with planned giving help. These area foundations have excellent staff ready to help every local church. Planned giving should become part of every local church’s stewardship ministry, regardless of the church size, age, budget, expertise, or giving history. Your area UMC Foundation can provide information and planning to help you establish an endowment committee.

Members can offer planned gifts in several ways:

  1. Deferred gifts (at the time of death)
  2. Current outright gifts
  3. Expectant gifts that are pledged
  4. A combination of gifts

Planned gifts can provide immediate benefit, deferred benefits, or a combination of both. Members who plan on giving a bequest normally will be strong givers to your annual budget needs. They are loyal donors!

Planned gifts can be outright gifts of stock, real estate, personal property, or cash. Appreciated stock represents the most common type of non-cash gift. IRA distribution gifts are becoming more popular and also represent a considerable tax savings to those over the age of seventy and a half. These are typical planned gifts for the church. The donor’s attorney or financial advisor offers the necessary legal advice.

Churches also benefit greatly from bequest giving. Bequests are the most poplar of all planned gifts because they are easy to understand and do not require donors to part with their assets during their lifetime. This offers donors a sense of financial security and peace of mind knowing that their assets are available to meet some unforeseen expense.

At the church I serve, we encourage bequest giving because it’s easy to explain, requires less cost to promote, and once established, is rarely changed. We also recommend percentage giving rather than a specific dollar amount. This way, donors do not have to worry about using up the estate if they live a longer-than-expected life. Whether the estate is a small or large amount, the church receives a percentage. Most members consider leaving at least a tithe (10 percent) gift, and the remainder goes to family and other charities. If there is no family or other significant charity, many donors will give the church a much higher percentage.

A bequest is simply a written statement in a donor’s will or trust directing that specific assets or a percentage of the estate is to be given. The church should encourage members of all economic levels to consider bequest giving.

When deciding on which type of assets to give, donors usually choose the most highly appreciated assets in order to save on capital gains taxes. In this way donors can give more because they have less tax liability. The donor can give the appreciated assets directly to the church. The church then sells these assets and the capital gains tax isavoided thanks to the church’s tax-exempt status.

Some donors prefer to give through a charitable lead trust. It’s one of the most sophisticated of all planned giving instruments. An experienced charitable estate planner should assist the donor and the church. This charitable lead trust pays an annual income to the church for a certain number of years. The remaining principal goes to the donor or the donor’s family when the trust ends.

A charitable gift annuity is a simple contract between the donor and the church. The donor makes an irrevocable transfer of cash or property. The church endowment committee or foundation agrees to pay a fixed amount of money each year for the lifetime of one or two individuals. This type of gift is easy to explain and requires minimal administrative time and expense. The guaranteed stream of income provides financial security for the donor. The church receives the balance at the time of the donor’s death. The church and donors can request that local bank trust officers or financial investment advisors manage this process.

A charitable remainder trust is a trust in which the donor transfers cash or property to a church and in return the donor or others named by the donor receive income from the trust for life or no more than twenty years. When the trust terminates, the balance goes to the church or nonprofit.

There are two types of charitable remainder trusts: the charitable remainder annuity trust and the unitrust. These trusts are similar, yet they do have a few differences. The main difference is based on how the annual income is paid. Another difference is that the annuity trusts do not allow for additional contributions, while the unitrust does. Most charities and churches prefer not to serve as trustee because of the legal fiduciary requirements and reporting. Churches can use area UMC Foundations or bank or trust companies to manage their investments.

The donor advised fund is a new tool for planned giving that many find useful. Rather than setting up a family foundation, the donor can place funds with the existing church foundation or endowment and offer advice on how these funds can benefit the future ministry and mission of the church.

The local church should have a way to respond to the growing opportunity of planned giving. Even with budget limitations, churches can promote the basic planned giving options to receive bequests. Faithful members who have been donors all their life want to give. Their loyalty makes it likely that they will remember the church in their will, if asked.

This article is an excerpt from Clayton Smith's book Propel: Good Stewardship, Greater Generosity (Abingdon Press, 2015).

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