(Formerly Standard 13)
PGTS Standard
13. No loans of trust/estate assets are made to any denominational entity or fund other than the Union Revolving Fund. (NADWP S 40 55) [PGTS]
NAD WP S 40 55
- Specifically Invested— All church entities acting as trustee of revocable trusts shall serve as such only in those cases where trust funds are invested based on specific written direction by the trustor or as provided in the trust instrument All income shall accrue to the benefit of the trustor who shall assume the benefits and risks of variations in principal and rates of return.
- Union Revolving Fund—No cash transferred to or held in revocable trusts shall be loaned to any church organizations, except to a Union Revolving Fund.
Avoiding Conflicts of Interest
Standard #13 and NAD WP S 40 55 exists because loans from individuals create an obligation that creates a conflict of loyalty, which relates to Standard #2 that deals with Conflict of Interest and is based upon NAD WP, E 85-15.6 (see appendix B). This concept is discussed in the Bible’s book of wisdom. “Poor people are slaves of the rich. Borrow money and you are the lender’s slave.” Proverbs 22:7 GNB. When you are a slave, your loyalty is to your master or, in this case, the lender. If church organizations, or their leaders, borrow funds from church members through their trust, they may become beholden to the lender. This obligation could create a dynamic in which a church member could have undue influence over a church organization or its leadership. To avoid all conflicts of interest, a church leader must have loyalty only to God and the Seventh-day Adventist Church who employs them. The organization should also be seeking God’s will alone for the Church and not feel restricted to the will of any individuals.
The Revolving Fund
The “Revolving Fund” is the only Seventh-day Adventist Church organization/entity that may accept loans from individual members or non-members. The Union revolving funds accept funds from many individuals and church organizations, and they must keep reserves in place so they can payout any funds that are requested. Church entities benefit from the revolving fund loans, which enable the funding of church projects, but no one church member is completely funding a loan for any single church project. Thus, the possibility of undue influence being exerted by any one individual is mitigated.
There are three ways that Revocable trusts may become irrevocable. First, the trustor(s) die(s), second, the trustor(s) become(s) incompetent, and third the trustor(s) make the trust irrevocable via a written statement. Suppose you happen to have any legacy revocable trusts that are still active and have not been amended to comply with the first two paragraphs (S 40 16, paragraphs 1 & 2 see above). In that case, you have the option of amending the trust to comply with the policy (S 40 16, paragraphs 1 & 2), or if your trustor does not agree to an amendment, contact our office at 301-680-5002 or [email protected].