Helping People Think “Outside Their Checkbook”
Question – what percentage of your constituent’s total assets are cash, savings or checking accounts? Answer – about 10%. Next question – what percentage of your annual church giving comes from cash, savings or checking accounts? Answer – possibly 95% (or more!). Final question – what’s wrong with this picture? Answer – read on to find out.
“What’s wrong” is that most church leaders do not actively or intentionally seek non-cash gifts. This is unfortunate for several reasons. First, compared to cash, non-cash gifts can provide significant tax advantages to the donor. Second, non-cash gifts may represent a new “income stream” to the church. Finally, educating your people about creative, tax-wise giving techniques empowers them to be better stewards in how they give, not just how much they give. It is a classic win/win!
So, is pursuing non-cash gifts worth the effort? Look no further than to our friends in para-church ministries. Not for profit 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. These organizations have known that one of the best power giving secrets of stewardship development is this: often, the largest gift a donor makes is not from 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 broad spectrum ranging from collectibles to precious metals to vehicles. In this and future articles we will explore each of these categories in detail, sharing strategies to promote them as well as pitfalls to avoid.
According to the Investment Company Institute, American households own approximately $20 trillion in stocks and mutual fund shares. With financial markets recently near all-time highs, many of these financial assets have appreciated beyond their original cost. Appreciated financial assets such as these represent a “golden giving opportunity” for donors and churches alike.
What is so “golden” about gifting appreciated financial assets like stock? For starters, assuming the donor has held the asset for over one year, they are normally 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 stock upon receipt, the church will realize the full value. Had the donor sold the stock, paid the capital gains tax and then gifted the remaining cash to the church; the church would have received less due to the capital gains tax. Bottom line – donating the financial asset to the church equals more dollars to the church and greater tax benefits for the donor– another win/win!
To learn more about increasing non-cash gifts to your church, read our related article “Promoting Non-Cash Gifts.”