A Primer on UMC Assets: Trust vs. Ownership

Today's post is by UM & Global blogmaster Dr. David W. Scott, 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.

As recounted in my previous two posts, the assets of The United Methodist Church are governed by the two principles of ownership by legal entities (usually non-profit corporations) and trust for the denomination. These two principles apply to all forms of property owned by any official entity within The United Methodist Church – including annual conferences, jurisdictions, boards and agencies, and others – not just to buildings owned by local churches.

Having laid out this basic framework, it is worth exploring in some greater detail the relationship between trust and ownership. Both give certain parties rights relative to property, but the nature of those rights and who holds them differs in the two scenarios.

Before I go further, however, it is important to note a couple of very important caveats. First, as indicated above, I am a theologian, not a lawyer. The following is an attempt to give a general explanation for laypeople of broad principles that structure the polity of the church. It is not specific legal advice that will be accurate in all cases.

Second, the specifics of property law vary from place to place. There are differences in property law between the different countries in which The United Methodist Church exists. But there are also differences across state property laws in different states in the United States. Since a lot of property law exists at the state rather than the federal level, that means there can be significant variation across annual conferences or other bodies of the church. Very little can be said with any specificity that will apply to all United Methodist bodies in all places.

Those caveats out of the way, here’s some of what can be said generally about ownership and trust.

Both ownership and trust come out of a Western legal tradition of understanding property wherein ownership is largely construed in terms of the rights to use that property and control over the use of that property. Put simply, an owner is a legal entity that has the ultimate right to control how and by whom a piece of property is used. The owner can use it themselves, or they can allow others to use it, but the decisions regarding that use lie with the owner. In general, an owner can do whatever they want with their property, within the limitations of the law.

Trust is an arrangement between three parties that puts some restrictions on the rights and use of property not found under the most basic form of ownership. In a trust, one party (technically, the grantor, trustor, or settlor) conveys ownership of a property to a second party (the trustee) with the stipulation that the property must be used for the benefit of a third party (the beneficiary).

Prior to setting up a trust, the trustor owns the property outright. But they give up that ownership in transferring that property to the trustee. There are certain cases in which a grantor might be able to receive that property back (“revocable trusts”), but in general, they relinquish all claims of ownership to the property (“irrevocable trusts”).

The trustee assumes ownership of the property, but they are not free to do anything they way with it, as under basic ownership. Their rights to the property are limited by the stipulation that they use that property for the good of the beneficiary. They are legally prohibited from doing anything with the property that would harm the interests of the beneficiary. Yet as owner of the property, the trustee does get to make decisions about how to use that property for the good of the beneficiary.

The beneficiary does not own the property – the trustee does, but the beneficiary does receive the benefits of the use of that property. The beneficiary cannot make any and all decisions about the use of the property – again, that power is reserved for the trustee, but those decisions are supposed to be in the beneficiary’s best interest. The beneficiary may have some power to assert what they see as in their best interest, but that power is limited. They don’t own the property, so there are things they can’t legally force the trustee to do with the property.

To give an example from family property, let’s assume there is a wealthy parent with a chunk of money. As owner of that money, they can use it any way they want – spend it, invest it, give it away, even gamble with it. As long as they’re not doing anything illegal with it (buying drugs, offering bribes, etc.), it’s theirs to use.

Now assume that parent acts as a trustor to put this money in a trust administered by their lawyers, who would serve as the trustees, for the sake of their children’s education, the children thus being beneficiaries.

The parent relinquishes ownership of the money put into this trust, but they establish some rules for how that money should be used when they transfer it to the trust. Doing this with the money might bring a tax benefit to them, but they can no longer spend or use that money for themselves.

The lawyers, as trustees of the money, are responsible for making sure the money is being well-stewarded and used for the purposes set up. They cannot spend that money however they want, even though they are the executors of the trust, which legally owns the money.

The children benefit from that money, but they don’t own the money. They benefit from the money is thus limited by the rules set up by the parent. They cannot use the money to buy a car, for instance, since the parent stipulated that the money be used for their education.

How does this basic framework apply to the UMC? In this instance, individual donors are the trustors, giving over money to various UMC legal persons, who function as the trustees, for the benefit of the denomination as a whole, the beneficiary.

Not all donors may realize that’s what they’re doing when they give to the offering plate, but that’s essentially what’s going on. Except in rare circumstances, upon giving property to a church entity, the donor loses ownership of and rights over that property. Just as you can’t get your money back after a donation to the Red Cross, you generally can’t get back the money you give to the church.

The UMC legal entity (local church, annual conference, board or agency, etc.) as the trustee is the legal owner of the property. But they are required to use that property for the benefit of the whole of the United Methodist connection, within the restrictions and stipulations set up by donors for particular pieces of property. They cannot simply use their property in any way that they want. This is why, for instance, there are rules and restrictions regarding selling, mortgaging, or renovating local church buildings – those buildings must contribute to the good of the connection as a whole.

The UMC as a whole is the beneficiary of the trust, which means that all property owned by UMC entities is supposed to benefit the connection as a whole. But since the UMC is the beneficiary and not the owner, that means that there are things that General Conference (as decision-making body for the whole connection) might not be able to ask or require that various church entities do with their property, since the UMC as a whole does not own it and thus does not have full rights to decision how to use that property.

Again, there are many very complicated and technical issues at stake here, and it is impossible to comment on the application of these basic principles to all of them. Future posts will try to look at how these general issues play out in more specific cases and especially how this system can break down.