Trust/Fiduciary Funds     0051-02        ZZall

                                                                       - - - Rejoice in the Lord always ... again I say Rejoice !!! - - -

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                            TO:  Interested Ministries                                                            FROM: Jim Bramer, Retired CPA-Auditor
                                                                                                     Matt.   11:28            FILE:  0051-02/all

                             RE:  Trust/Fiduciary Funds                                                        Originated:  August 1998                                 


        Below is a transcript of another hypothetical Online conversation, or THRD WRITING, between   Jim@bcidot.org  and members of a M)inistry F)inance Team - MFTeam: the MFTeam members are PAT .. the Ministry Executive, LEE .. the Volunteer Board Treasurer, and FRAN .. the Ministry Computer Bookkeeper.   Click here and go to List of threads (THRDs) at www.bcidot.org


FR: PAT

        As a Ministry we are FINALLY able to provide our Donors/Constituents (hereafter referenced as Donors) with some "Deferred Giving" (sometimes called "Planned Giving") services via a reputable outsource.
        As you know, our Ministry has been around for over 35 years and many of our Donors have reached the age where they need credible help in doing financial estate planning. Of course, we expect them to remember us.
        Thank you, Jim, for 'pushing' us in the past along these lines.

             FR: JIM

            Tremendous, Pat, but first, please note the list of Web Publications at the bottom that are relevant to this topic.
         
  Thank you for bringing me current on this topic, Pat, at your Ministry. Outlined below are some "Deferred Giving" ministry issues for all of you to consider. Please note the Current column plus the Later columns below. I have made a separation between (1)Current and (2) Later to generally show you when the Ministry will have some "Ministry Financial Benefits."   
           
Also note below that some types will require some Ministry Administration now (see the "YES" group below) and some won't (See the "NO" group below). My comments will be made within this context.

   MINISTRY   FINANCIAL   BENEFITS

(1)Current

(2)Later

The "YES" Group

"YES" - the Ministry does have ongoing Admin responsibilities - See (1) below

    A>

Gift Annuities

Yes

No

    B>

Agreements- See (2) below

See (3)

See (3)

Revocable Trusts

Irrevocable Trusts

Charitable Remainder Trusts

    C>

Endowments

See (4)

No

Donor evoked

Ministry evoked (Quasi)

The "NO" Group

"NO" - the Ministry does NOT have ongoing   Admin responsibilities

    D>

Agreements

No

Yes

Revocable Savings Trusts

    E>

Wills - Estate Income-net

of Probate Costs

No

Yes

      (1) Via a "Trust/Fiduciary Fund" (TFFund) Accounting entity (Often via a Ministry's Foundation).
      (2) Such instruments go by a variety of names to declare their status and type.
      (3) Sometimes the corpus of such agreements/trusts can be invested in Ministry Capital assets, etc. --- please discuss mortgage-like funding.
      (4) The corpus usually is invested in non Ministry Assets, as subject to your "Ministry Investment Policy." Such a policy might provide mortgage-like funding for certain of your facilities. The Ministry benefits currently from the applicable distributed earnings, or yield, from investments.
      (5)  Please Go Here  for some ideas about using QuickBooks for these matters.

FR: PAT

        As you know, Jim, we have a segment of our Operational accounting structure that we call SPECIAL PURPOSE FUNDS (SPFunds) .... this includes sums of money that are SetASide by the Board for a special purpose but, more pronouncedly, the SPFunds  come from donors who give for a specified Ministry operating purposes. An example is Memorial Funds for special event (Camp, etc.) scholarships, etc.
        Can these TFFunds - 4 - (Trust/Fiduciary Funds) monies be included within our SPFunds? And if not, why not .... as you know we do not want any more 'red tape' that absolutely necessary.

           FR: JIM

    I strongly advise against it, Pat, for at least the following reasons:

  •     Some of these TFFunds (Trust/Fiduciary Funds) do NOT pertain to your Ministry ... you are functioning as a trustee until a specific time/event and you must follow the specific mandates of the instruments.

  •   Sometimes SPFunds, like yours, are legitimately borrowed temporarily for other Ministry purposes; these TFFunds are not "borrowable."

  •      Your fiscal accountability for TFFunds is more stringent, even to the extent of NOT using your common corporate Bank Account for such transactions.

  •     If I understand your comment in an earlier Email, you hoped to NOT form a separate Foundation corporation for such purposes. But you prefer to operate the Foundation via a 'Foundation' "D)oing B)usiness A)s (DBA)" department of your Ministry. If so, any co-mingling of such DBA Foundation (or TFFunds) monies could be misunderstood.

  •     The management and administration of these unique Funds are often outsourced; again, to provide a credibility 'veil'.

FR: PAT

    I have to admit, Jim ..... I don't understand all of the Fund types that are mentioned above. For example, please explain the above A> "Gift Annuity" and D> "Revocable Agreement via a Savings Account".

           FR: JIM

        A>  "Gift Annuity" comes about when a Donor wants to exchange their asset(s) (it could be a piece of appreciated property, like a personal residence) for both an Annuity (monthly income for life) and a donation to your Ministry. Let me know if you need to know more details about such related issues as: 1> The amount of charitable contribution;   2> Taxation of the monthly annuity.  Fund management of the Gift Annuity as it involves governmental actuarial issues, etc.
        B>    "Revocable Agreement via a Savings Account" agreement is done completely by the Donor when s/he opens a unique Savings Account at a Credit Union, or Financial Institution.   Most Financial Institutions provide a means for this type of Savings Account balance to go directly to a Ministry upon their death.

FR: PAT

    If I understand these types right, I would think a number of our donors could readily make arrangements for such deferred gifts, etc.
    I need some help also, Jim, about understanding Endowments; especially Quasi-Endowments. Please fill me in......

FR Jim:

                               - - - E N D O W M E N T S - - - (1)

        OK, basically an Endowment is initiated by some assets (usually called the Corpus) provided by a Donor which either remain invested in the same assets, or are converted and reinvested by the Ministry; usually the Corpus must always be invested and can NOT be spent. A Donor can establish/fund an Endowment while alive or it can take place via their Will/Estate. The investment earnings (often called the Endowment yield) is earmarked for some specific Ministry purpose.
         Endowments funded by Donors are usually very specific as to how the yield is to be used; and sometimes how the Corpus must be invested. When/if the Ministry decides on the Corpus asset investments, it generally has "Investment Policies" that it carefully follows. Some Endowments end at a specific point in time, which means that the Corpus assets are converted to cash and used for the specified Ministry purpose. Hopefully, the Endowment instrument clearly indicates it's requirements.

                                               - - - Q U A S I - E N D O W M E N T S - -  (2)

                Quasi-Endowments basically function like Endowments above, but are unique in the following ways:

1> Quasi-Endowments are Board, not Donor, driven and/or controlled and the yield tends to be used for a high profile operational segment of the Ministry.
2> The Corpus comes from:
              a> Board discretionary funds. 
              b> Donor contributions who wish to donate for a known Board Quasi-Endowment  yield purpose, or the high profile item above.

      Example .... there could be a Board policy that limits the size of an Donor Endowment ... (like $10,000 or less), due to its administration etc.  In a Memorial Gift environment, Donors are encouraged to contribute to an existing generic Quasi-Endowment fund that best fits their donative intent.
          
3> Of course, the Board decides Corpus Asset Investments and the Yield Ministry purpose.

FR: PAT

        I'll ask about the other type of Agreements downstream.  Do you have any comments about investments?

          FR: JIM (5)

    You will note that I have made some comments along these lines within the web Publications below.  Many of your mature Board members will have "SPINs" on Board Discretionary investments, and you can learn from them; below are some "Jim Bramer" SPINs:

        A> The Board MUST set forth its investment policy; and your Investment Counselor should comply .... your Counselor should NOT have complete say how your Board discretionary funds are to be invested.
        B> You need to evaluate your entire Board Discretionary Fund picture and set some Investment type percentages? Examples:

Per-cent

of Total

Insured Entities 

See Replicating - per below

   ____

Non Replicating

   ____

Uninsured - 

See Replicating - per below

   ____

Non Replicating

   ____

Government Bonds

   ____

Stock - Bond Market

   ____

More Speculative with

potential higher yield

   ____

Total to Invest

100.00

   I define a "replicating" investment as one in an entity (like certain denominational groups or foundations and the "Evangelical Christian Credit Union") where they turn around and invest in other Christian Ministries but still supply you with a good yield. See the Publication below for more information.

    C> Be careful about what I call the "R" and "R" investment issues. One "R" concerns the (R)isk aspects of an investment and the other "R" is direct, or indirect, stock investments in (R)ighteous products.   As I understand it, when you link to  www.timothyplan.com ,  they can help you in such endeavors.
    D> Historical stock market gains are NOT guaranteed; remember, you are investing now and during the future, and not the past.
    E> Carefully appreciate the advice of your Investment Counselor.
    F> Earn daily interest on every open Bank balance. See Writings below on this topic.

FR: PAT

    Wow, Jim...... most helpful. Anything else?

             FR: JIM

    Just to remind you that your Board of Leadership probably should have a Board Committee who is responsible for these "Trust/Fiduciary Fund" issues. Holler if you have comments or questions. Thanx.


SEE  THE  WEB   PUBLICATIONS  LIST  BELOW (6):


Board Members & Ministry Finance Info 0008-01 ZZall
Church Financial Policies Q & A 5005-01 ZZchu
Current-Dormant Sets of Books 0127-02 ZZall
Deferred Giving Trusts 0019-01 ZZall
Endowments at Ministries FWIW 0903 ZZfwi
Finance Committees-Perspective 0029-01 ZZall
Float Management System 0006-02 ZZall
Fund Accounting - Not Fun 0041-01 ZZall
Investments "Double Duty" 0044-01 ZZall
Investments and Cash Management 0043-01 ZZall
Ministry Finance Team Info 0000-99 ZZall
Policy and Administration Manual 0054-01 ZZall
Replicating Ministries 0083-01 ZZall
Special Purpose Funds Perspective 0070-77 ZZall
TRUISMS List 0069-01 ZZall


  The bulk of this Publication originated in August 1998 and was   .  UPTD: March 09, 2012  

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