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Church money
Churchgoers' offering accumulates to support the work of bishops and general agencies, among other global church efforts.
As explained last week, ownership of UMC assets is determined by the concept of legal personhood and the trust clause.
Having looked at ownership, it’s worth looking more specifically at what exactly is meant by assets or property. The trust clause covers “all real and personal, tangible and intangible property,” which essentially means all assets. But what is real, personal, tangible, and intangible property?
First, “property” is defined as something that can be owned. Technical definitions of “asset” vary, but within accounting, an “asset” is something of positive value owned by a legal entity. For the sake of this blog series, I will use the terms property and asset interchangeably.
Real vs. personal property and tangible vs. intangible property are two separate ways of breaking down the categories of property. The inclusion of both in the trust clause implies that the trust clause applies to all property, regardless of type.
Real property is property that cannot be moved, like land and buildings. When most people think about the trust clause, this is what they think of – church buildings. It is worth noting, however, that the trust clause applies to all land and buildings owned not just by local congregations but by any United Methodist legal entity: parsonages, annual conference and agency headquarter buildings, church camps, land purchased for possible future use, and the property of church-owned social service or outreach ministries. Real property goes far beyond just the category of church buildings used by congregations, even while church buildings make up the largest share of real property.
Personal property, by contrast, is all property that can be moved, including financial assets, i.e., money, and intellectual property. The term “personal” here refers to legal personhood, not human personhood; thus personal property is a much larger category than the things you might think of yourself as owning. Few United Methodists own an ocean freighter or the rights to the use of a cartoon character, but these are also forms of personal property.
The breadth of the category of personal property makes the second distinction – between tangible and intangible property – useful.
Tangible property is any physical property that can be touched. It includes real property (you can touch land or a building), and a lot of personal property as well. Furniture, equipment, supplies, vehicles, books, clothing, jewelry, etc. – all of these are forms of tangible personal property. Thus, everything from a communion chalice owned by a local congregation to the books owned by GCAH to a van owned by an annual conference-run summer camp would count as tangible personal property and be subject to the trust clause.
Intangible property, then, is anything with value or potential value to a legal person that cannot be touched. This category of property can include patents, other intellectual property, brand reputation, and, perhaps most importantly, financial assets such as bank accounts and investments. Again, everything from the copyright of agency-penned books to a local church checking account to an annual conference trust fund to support new church starts is subject to the trust clause.
Within the world of financial assets, there is also a difference between cash on hand – money that is kept in bank accounts, cash, or other forms that can be spent immediately – and long(er)-term investments of one sort or another – stocks, bonds, mutual funds, managed funds, options, etc.
Among financial assets, there is a further distinction between designated and undesignated assets. Designated assets are those that can only be used for a particular purpose. Undesignated assets can be used for any purpose that the church, annual conference, agency, or another owner would like.
Usually, the purpose of a designated asset is determined by those who originally gave it. That designation is legally binding, especially when gifts are given as part of a will. Thus, were the church to use a designated asset for a purpose other than that originally intended by the donor, it might be sued for doing so, especially by relatives of the person who gave them money. The strength of such designations can persist even when the church no longer does whatever the money is designated for. Hence, if there is a local church fund that was donor-designated for choir robes, that money probably cannot be used for other purposes, even if the church choir hasn’t worn robes since 1984.
By now, it should be clear that when there’s a discussion of dividing up church assets, that potentially applies to much more than each of the agencies writing a check for a fraction of whatever’s in their bank accounts.
Where there is talk of dividing assets, it is critical to determine what type(s) of assets people are talking about: Does this division apply just to financial assets, or are all assets being taken into account? Within financial assets, are just undesignated assets considered, or are designated assets included in the calculation? Within non-financial assets, how will the value of the asset be determined? Who gets to say what a building, tract of land, van, copyright, vestment, or historical artifact is worth? Finally, when there’s a discussion of division of assets, what level of the church is being discussed: local congregation, annual conference, or general church?
As these questions show, the simpler the division of assets is, the less room there is for conflict. A specified lump sum from clearly designated sources is much simpler and therefore less open to litigation than a percentage of total assets or another more complicated formula.
UM & Global blogmaster Dr. David W. Scott, a United Methodist layman, serves as Director of Mission Theology at the General Board of Global Ministries. The opinions and analysis expressed here are Dr. Scott's own and do not reflect in any way the official position of Global Ministries. Dr. Scott is neither a lawyer nor an accountant, and thus the following should not be interpreted as legal advice. This post is republished with permission from UM & Global, the collaborative blog of United Methodist Professors of Mission.