Receiving Gifts of Stocks and Other Securities for the Local Church

	Steps for Receiving Gifts of Stock and Other Securities in the Local Church The UM Foundation and the Detroit Annual Conference heartily encourage our local congregations to promote the giving of appreciated securities among their members. First, because a gift of appreciated securities often means substantial tax advantages for the donor and often a reduced cost of giving. Second, for the local church, this represents yet another way to encourage stewardship of financial resources by offering an attractive, simple way to give.
NOTE: We say “appreciated” securities because a gift to charity of securities that have gained in value relieves the donor of having to pay capital gains tax on the appreciation. “Appreciation” is the increase in value over the time the donor has owned the securities. If a donor has depreciated securities, where the value now is less than the value at purchase, it is better for the donor to sell the securities and report the loss on the current year IRS Form 1040. Then, if the donor desires, the proceeds may be donated to the church in the form of cash. Before proceeding with gifts of securities, there are a few “rules of the road” and some specific steps that local churches will want to learn about and observe. A firm knowledge of these procedures will help the pastor and church financial leaders make the process of giving gifts of securities easy and pleasant for their donors. Lack of this knowledge can lead to an unpleasant experience for all concerned. Following are the procedures for securities transfers to charities. I. Status of Assets at the Time of the Gift There are, essentially, two forms in which a donor may own securities: certificate form, and what is called “street name.” A. A donor may have a stock certificate in hand, for example, for 100 shares of XYZ Corporation stock. This stock certificate may be given to the local United Methodist Church, but this certificate of ownership will need to be transferred through the process of having the issuing bank (or its successor) re-issue the stock certificate in the name of the local church. This process can take from four to eight weeks, sometimes longer. Thus, for donors holding stock certificates, advance planning is critical. B. A donor may also own stock in “street name.” This means that the donor’s ownership is registered electronically at a brokerage, mutual fund or other securities dealer and the funds may be transferred electronically. This may be done by a simple phone call from the donor to his or her brokerage with instructions to transfer a specified number of shares of a certain security to the local United Methodist Church. Often the brokerage will request the donor to follow up this verbal order with a written one for safety purposes. Transfer of the Assets A. For donors who have stock certificates in hand, there are two ways this stock may be transferred to the local United Methodist Church. On the one hand, the pastor or other church official may receive the signed stock certificate directly from the donor, in person. In this case it is helpful to note that the issuing bank will require that the donor’s signature be guaranteed by an officer of a local bank. On the other hand, the donor may prefer to use what is called a “stock power” to transfer the stock to the local church. In this case, the donor would go to a local brokerage or bank and obtain a stock power form. Having filled out the form and having had the bank or brokerage guarantee the donor’s signature, the donor would then send the stock power to the church in one envelope and the stock certificate to the church in another, separate envelope. The donor would NOT send the stock power with the stock certificate in the same envelope, because the two documents together would constitute a negotiable security and thus open the donor to potential theft of the securities. B. For donors who have stock in “street name” the stock transfer is much simpler. The donor simply asks the broker, bank, mutual fund or other securities dealer to electronically transfer the securities to the local church. This may be done by phone call, or by written letter. Often, both are required by the securities dealer, as explained above. This transfer can be done almost immediately, and often takes no more than a day or two. What the Local Church Needs to Do A. If the stock being transferred is in certificate form the pastor or another church financial leader may go the donor’s home or office to receive the signed certificate in person, or the certificate with the stock power, if the donor so chooses. Alternatively, the church will receive the stock certificate through the mail and will receive the stock power also through the mail in a separate envelope. At this point, when the church has the certificate and stock power in hand, the gift is complete. In either case, the church financial leaders will then take the signed stock certificate, or the stock certificate with stock power, to any bank or brokerage firm and request that the transfer be completed according to the wishes of the donor. What will happen now is that the certificate, or certificate and stock power, will be sent to the issuing bank (or its successor) and a new stock certificate will be issued in the name of the local United Methodist Church. This process will take from four to eight weeks to be completed. When the local church receives the newly issued stock certificate, it will then need to take this certificate back to the local bank or brokerage firm and have them liquidate (sell) the stock and give the church a check for the proceeds of the sale. NOTE: It is both customary and prudent for a charitable donee (the local church) to sell all gifts of securities immediately upon receipt of ownership. B. If the stock being transferred is in “street name,” the process is a good deal simpler. Normally, the local church would simply call the donor’s brokerage firm, mutual fund or bank (the one that holds the securities for the donor) and request that an account be set up with that institution for the local United Methodist Church. There will be a Trustee authorization form that the church will need to fill out and the chairperson of the Board of Trustees will need to sign. Often this paperwork comes along considerably after the transaction is completed – but it is done for the sake of the security and safety of the brokerage firm. If a local church receives a good number of gifts of stock each year, it may be wise for the church to open up a single account with a local bank or brokerage of their choice. Then the church can give the donor’s brokerage or securities dealer the transfer instructions by which the shares are transferred from the donor’s account in the donor’s brokerage to the Church’s account in the Church’s brokerage. This works just as well and just a quickly in most circumstances. Once the local church has an account with the brokerage, bank, mutual fund or other securities dealer, the donor’s broker or securities dealer will transfer the securities from the donor’s account into the church’s account. This will be done upon the instruction of the donor. At that point, when the assets have been transferred from the donor’s account to the church’s account, the gift to the church has been completed. The local church financial leaders will then instruct the broker/dealer to liquidate the assets in the church’s account and give the church a check for the proceeds of sale. Then the church may do whatever it needs to do with the cash received from the sale of the securities. NOTE: In the case of the transfer of mutual fund shares, the process may well take from three to six weeks to be completed. A gift of 100 shares of XYZ stock is fairly simple. Other types of securities will frequently take a good deal longer to be completed. Note also, again, that liquidation of the assets by the donee charity is both customary and prudent. When the gift is complete, the pastor and local church financial leaders should send a warm, sincere letter of thanks to the donors, thanking them for their gift and stating that no goods or services were received by the donor in exchange for this gift. There is no need for the church to tell the donor the value of the gift. It is the donor’s responsibility, if claiming the gift on their IRS Form1040, to use a Form 8283 and provide a date of gift and a valuation themselves, using IRS approved methods. Valuation of the Assets The value of the securities given to the local United Methodist Church can be determined as follows. The value of a gift of publicly traded securities is the mean between the high and the low price of the stock as traded on the day the gift is completed. For example, Mr. and Mrs. Smith instruct their broker to transfer 100 shares of XYZ Corporation stock to First UMC by electronic transfer. This happens on December 8th. The day those shares are entered into First UMC’s account is December 10th and is, most often, considered by the IRS to be the date of the gift. On that date, December 10th, XYZ Corporation stock, in public trading, reached a high of $35.00 and a dipped to a low of $33.50 per share. This can be found in the Wall Street Journal; or the business section of most public libraries. To find the mean, we would add $35.00 (the high) to $33.50 (the low) with a result of $68.50 and then divide by 2 to get the mean price of $34.25 per share. This result, then, multiplied by the number of shares transferred (100 shares), would bring the value of the gift to $3,425. Alternatively, Mr. and Mrs. Smith sent the stock certificate to the church in one envelope and the stock power in another envelope. The date of the gift is the date of the postmark on the envelope carrying the stock power. If the pastor of First UMC went to the Smith’s home to pick up a signed certificate, and took them to the bank to have their signatures guaranteed on the certificate, the date of the gift would be the date the certificate was presented by the Smiths to the pastor. That date, then, is used, as above, to calculate the mean price of the securities and determine the value of the gift. How the Detroit Annual Conference can Help The Annual Conference Treasurer’s office can be a source of assistance to local churches who find themselves unable to handle securities transfers. Working in conjunction with the UM Foundation, the Conference can be a surrogate for the local church and receive the securities donation on the church’s behalf, giving the church a check for the proceeds of the sale of the securities after the transaction takes place. How the UM Foundation can Help The UM Foundation can be used as a resource for information and technical assistance any time a local church finds themselves in the process of receiving a gift of securities. The Foundation can also be used in instances where local church leaders do not know what to do, and have no alternatives for handling this type of gift. The Foundation is able to act as the donor’s surrogate for transferring assets, and receive the securities donation on the church’s behalf. The UM Foundation will then will give the church a check for the proceeds of the sale of assets following the donor’s gift. Summary of Steps: Status of Assets A. Stock in Certificate Form Pastor or other leader picks up signed certificate – signature must be guaranteed. Or...Donor may elect to send certificate and a stock power to the church – use separate envelopes. B. Securities in “Street Name” with securities dealer or mutual fund company Donor issues an order to dealer to transfer X number of shares to UM Church. II. What Church Needs to Do A. Stock in Certificate Form Take certificate (and stock power if there is one) to brokerage or bank. Have brokerage or bank turn in the stock for re-issuing in the name of the church. Church will receive newly issued stock certificate. Church goes to bank or brokerage and requests liquidation of the securities. Church receives a check for the proceeds of securities’ sale. B. Securities in “Street Name” Open an account at donor’s brokerage so assets can be received into that account Or... Church may have its own account elsewhere and instruct donor’s broker with appropriate numbers and information to effect the transfer into that account. Church instructs bank or brokerage to sell the securities immediately and issue a check for the proceeds of the sale. Church receives the check for the proceeds of securities’ sale. C. In all cases: Thank-You letter(s) should be issued to the donor thanking them for their gift. If you need technical assistance or have any questions, help is readily available. You can call John Fike, UM Foundation Executive Director at 734-484-2166. You can FAX a question to 734-484-2177. You can email John at johnfike@msn.com. Or you can contact Annual Conference Treasurer Anna Morford at 1-800-334-0544 Ext. 350.

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This Website updated on 12/28/01