Last week in Growing Generosity (Part 1) Catherine Malotky introduced the concept “high net worth” donors using a measure that may have surprised you. This week in Part 2, Catherine describes three methods these households may employ to make charitable gifts. Is your congregation ready and able to put these gifts to work in your ministry? Cash in the offering plate is great, but there’s more than one way to give and receive.
Adam Copeland, Center for Stewardship Leaders
Growing Generosity (Part 2)
Rev. Catherine Malotky
For all of us in ministry, one of our tasks is to inspire generosity. Why? Because generosity is a hallmark of faith in a God who provides all that we need and who created us to live in community with other people and a creation for whom/which God is equally inclined to provide. As people of faith, we live in the lovely and complicated margin between God’s autonomous work and our own roles as co-creators of God’s vision of enough for all. We all share a responsibility then, as stewards, to do what we can to be sure everyone is housed, fed, clothed, and honored as sufficiently as we are (see Mt 25:31-40).
From this calling, and because of the economic realities impacting our giving environment, I think it behooves us as stewardship leaders to learn about a few of the tools our members are using to manage their own lives and, hopefully, their own instincts for generosity.
Last week, I discussed what may be the surprising fact that “high net worth” households/givers are defined as those with an annual income of $200,000 or more, or investments or other assets equaling $1 million or more. Below are three types of gifts that congregations and faith-related non-profits should be ready to receive.
Appreciated assets: gifts of stock
The first tool is pretty straight forward. For those with investments, giving appreciated assets is remarkably efficient and allows them to actually give more because capital gains taxes are removed from the equation.
You need to be ready to receive these kinds of gifts, however. You will need to have identified a broker who can receive these gifts, and set a policy about when they will be sold, which is when the dollar value of the gift is established. Most gift policies direct the receiving broker to sell the stocks upon receipt so there isn’t any temptation to try to time the market.
In your instructions, ask the donor to let you know the gift is coming, what stock and from what broker. Personal identification is often not included in the data sent from the donor’s broker, and you will want to follow up with a thank you note to the donor. This will also save you time trying to figure out who this gift is from.
The donor’s request to his/her broker can be copied to you to make this efficient. Be sure they include your DTC number (Depository Trust Company) and your congregation’s or organization’s custodian account number. Here is an example of these kinds of instructions from Luther Seminary’s web site.
IRA Qualified Charitable Distribution
For a donor with a traditional IRA, reaching age 70 ½ creates a streamlined charitable opportunity. At age 70 ½, the IRS requires a minimum required distribution from the IRA, a percentage of the value of the account based on mortality tables. The short-hand reason is that the IRS wants to be sure it gets some taxes out of this deal. Traditional IRAs are funded with pre-tax dollars, assuming taxes will be paid when money is withdrawn (also known as a distribution). If the first distribution in a year from the IRA belonging to someone who has hit this age threshold is distributed directly to a charity (your church!), it moves without tax consequence to either the giver or the receiver. There are some limitations; for example, no more than $100,000 can qualify as a qualified charitable distribution (QCD). The withdrawal/distribution does not count as income to the giver for tax purposes, so it streamlines tax preparation, since otherwise it would be counted as income and then deducted as a charitable contribution. Scroll down in this FAQ from the IRS to find the QCD information.
Luther Seminary annually sends instructions and a form to give to the donor’s IRA administrator. You can see it here.
Donor Advised Fund
Charitable gifts from donor advised funds have quadrupled in the last decade, so they are a growing choice being made by people to facilitate their giving. According to the National Philanthropic Trust, “a donor–advised fund, or DAF, is a philanthropic vehicle established at a public charity. It allows donors to make a charitable contribution, receive an immediate tax benefit and then recommend grants from the fund over time.”
There are plenty of places to start a donor-advised fund, including with community foundations and national church bodies. Somewhat new to the scene are individual donor contributions pooled into large, relatively low-cost charitable funds being sponsored by organizations like Vanguard, Fidelity, and Schwab.
Your congregation may receive a check from one of these sponsoring organizations (you would have been named a beneficiary of the DAF). There isn’t anything special you need to do to receive the check, but do note that this gift is not considered tax-deductible to the original donor because the tax benefit is taken at the time to fund was set up, not when a payout is made. You do not need to send a tax receipt for this kind of gift.
Payouts from donor-advised funds also cannot be “pledged” because technically gifts are coming from the sponsoring organizations, not from the donor. That’s why it’s called a donor-advised fund.
One of our foundational charges as leaders of Christian communities is to inspire generosity. Being able to receive the generosity of others is an administrative responsibility that will take some effort, but isn’t impossibly difficult. We all want to be able to welcome an act of generosity with a gracious “thank you” free from administrative hurdles!
For More Information
Rev. Catherine Malotky serves as Grant and Project Manager for the Center for Stewardship Leaders. Before retiring from full-time work, she was the Director of Development at Luther Seminary, and prior to that was called as the Retirement Planning Manager at Portico where she trained as a life coach and earned the CRC®.
Rethinking Stewardship: Join us on July 25-27 for three days of conversation and exploration at Luther Seminary’s Rethinking Stewardship: From Solemn Obligation to Inspired Choice. More information here.