Housing Equity Plan
As an ordained or commissioned minister of religion, you may face a dilemma with regard to housing. A minister who has housing provided by his or her congregation is free from home ownership concerns and ties that may inhibit their accepting a call or appointed to another location. On the other hand, the minister may eventually need to provide housing for himself and his survivors. For instance, a minister may receive a call from another congregation that neither has housing nor chooses to provide it. If a minister becomes disabled or retires, the minister and family will not be able to continue in the home provided by the congregation. Furthermore, if the minister dies, he or she will want his survivors assured of housing.
To assist a minister facing this dilemma, a housing equity plan was developed by Clergy Financial Management, whereby congregations can defer, tax free, a portion of the minister's compensation that can be used later to provide housing. For instance, a minister who retires or becomes disabled could use these accumulated funds to make the down payment on a home that he/she might otherwise be unable to purchase. A significant benefit to the minister is that these funds are not taxable until they are actually paid to him/her. Further, if the amounts are designated as housing allowance prior to payment; most, or all of the payments eventually made may be tax-free to the extent used by the minister to provide housing.
A housing equity plan is an irrevocable trust used to fund deferred compensation benefits. A non-qualified housing equity plan avoids many of the complex and administratively burdensome requirements that govern qualified plans under ERISA and the Internal Revenue Code. In addition, they can be tailored with great flexibility to fit precise objectives and be targeted for specific church employees.Housing equity arrangements fundamentally consist of an agreement between the church and an employee that payments due for current services will be made at a future date. The employee's tax objective is to ensure that taxation does not occur until payments are actually received. The built-up value of investment income is also generally tax-deferred to the individual.
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