Estate and Planned Gifts
Glossary of Selected Planned Giving Terms
Adjusted Bases: The purchase price of an asset plus improvements less depreciation.
Administrator (Administratrix): An individual appointed by a court to distribute the property of a person who dies without a Will. (See "Will.")
Annuitant: The Beneficiary of the payments made under an Annuity agreement. (See "Beneficiary" and "Annuity.")
Annuity: An agreement to pay an agreed-upon sum of money at agreed-upon intervals at least annually and generally for life.
Annuity Trust: A Trust that pays an agreed- upon of money at agreed-upon intervals, drawing from the Trust's Principal when income from the Trust is insufficient to make the agreed-upon payments. (See "Charitable Remainder Annuity Trust," "Principal," and "Trust.")
Appreciated Property: An asset the value of which is worth more than its adjusted basis.
Appreciation: The difference between the adjusted basis of an asset and its Fair Market Value (assuming it has increased in value). (See "Fair Market Value.")
Bargain Sale: An arrangement in which a Donor sells appreciated property (stocks, bonds, real estate) to a charity at a price that is significantly lower than its fair market value, in effect making a partial Gift of the asset to charity. This arrangement enables the Donor to recover part, all, or more of his/her initial investment in the property and to deduct the difference between the sale price and the value as a charitable Gift. Note, however, that the Donor must pay income tax on part of the gain, using a formula provided in tax regulations. (See "Gift" and "Donor.")
Beneficiary: One who benefits; usually, an individual or charity who receives Gifts or charity who receives Gifts or income from an estate, Trust, Insurance policy, etc. (See "Estate," "Gift, "Life Insurance," and "Trust.")
Bequest: A Gift made by Will (technically, of personal property). (See "Gift" and “Will")
Bequeath: To make a Gift by Will (technically, of personal property). (See "Gift" and "Will.")
Capital Gain: (See "Appreciation.")
Capital Gains Tax: A tax payable on the appreciation of property when the owner sells the property. Before 1987 this tax was generally assessed at a lower rate than taxes on other kinds of income (assuming long- term Capital Gain). (See "Capital Gain.")
Charitable Deduction: An amount that may be subtracted from income, Gift, or estate taxes as a result of a Gift to a qualified charity. (See "Gift.")
Charitable Gift Annuity: An Annuity agreement between the Donor and a charity in which the Donor transfers assets to the charity. The charity agrees to pay a specified sum of money each year to the Donor, for a fixed price (usually life). The assets exceed the Present Value of the expected payments to the Donor, and the charity receives the surplus (mortality tables are used to make this calculation). The Donor can claim as a charitable tax deduction the difference between the Present Value of the expected payments and the value of the assets. (See "Annuity," "Donor," and "Present Value.")
Charitable Lead Trust (also called Charitable Income Trust): A Trust in which the Donor transfers income producing assets to a Trustee and instructs the Trustee to pay a fixed amount or annual percentage to charity for the term of the Trust. At the end of the Trust term, assets remaining in the Trust are conveyed to the Donor of her/his Beneficiary or Beneficiaries. The Donor can claim as a charitable tax deduction the Present Value of the expected payments to charity. (See "Beneficiary," "Donor," "Present Value," "Trust," and "Trustee.")
Charitable Remainder: The assets left in a Charitable Remainder Trust, Gift Annuity, or Pooled Income Fund that eventually pass to a qualified charity. The Present Value of the Charitable Remainder is equal to the charitable tax deduction. (See "Charitable Gift Annuity," "Pooled Income Fund," "Present Value," and "Trust.")
Charitable Remainder Annuity Trust: A Trust that pays the Donor or the Donor's Beneficiary an agreed-upon annual income for life or for a specific term. The Principal remaining from this type of Trust eventually passes to a qualified charity. (See "Beneficiary," "Donor," "Principal," and "Trust.")
Closely Held Corporation: A corporation owned by a specific group of individuals, usually family members or business partners. Sock in a Closely Held Corporation is not available for sale to the general public.
Closely Held Stock: Stock of a Closely Held Corporation, the sale of which may be subject to the approval of the corporation.
Codicil: A modification of an existing Will. (See "Will.")
Communitv Property: Property owned equally by husband and wife as a result of compensation earned by either of them while married and living in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, or Washington, or as a result of income from other community property.
Corpus: The income-producing Principal of a fund, estate, or Trust. (See "Principal" and "Trust.")
Deferred Pavment Gift Annuity: A Charitable Gift Annuity in which payments to the Donor are deferred until such time that they can be made at a higher rate (shorter life expectancy) and may be taxable at a lower rate. (See "Donor" and "Charitable Gift Annuity.")
Devise: A Gift of real property by means of a Will. (See "Gift" and "Will.")
Donor: One who makes a Gift. (See "Gift" and "Grantor.")
Executor (Executrix): An individual named in a Will who is charged with distributing the property of the person who leaves the Will. (See "Will.")
Fair Market Value: The price at which property will change hands between a willing buyer and a willing seller, neither being under compulsion to buy or sell and both having a reasonable knowledge of relevant facts.
Fiduciary: A person or organization who manages the assets of a Trust or fund for the benefit of others. (See "Trust.")
Gift: Something of value that is voluntarily transferred by one person to another out of affection, generosity, charity, or like impulses, and which is cost-free to the recipient.
Gift Annuity: (See "Charitable Gift Annuity.”)
Gift Tax: A tax assessed on a Donor who gives an individual a Gift of over $10,000 in a single year. This tax does not apply to qualified Gifts to charities or to Gifts between spouses. (See "Donor" and "Gift.")
Grantor: One who makes a Gift. (See "Donor" and "Gift.")
Gross Estate: Generally, everything owned by an individual at the time she/he dies; however, the precise definition depends on the context in which the term is used.
Guardian: An individual responsible for managing a minor child and/or the child's property.
Income Beneficiary: The designated recipient of income from a Trust. (See "Trust.")
Instrument of Trust (Trust Agreement): The legal document setting forth the provisions of a Trust. (See "Trust.")
Inter Vivos Trust: A Trust established during the life of its creator, unlike a Testamentary Trust. (See "Trust," and compare "Testamentary Trust.")
Intestate: To die without a Will. (See “Will”)
Irrevocable Gift: A charitable contribution that the Donor cannot take back, in return for which the Donor generally receives a tax deduction. (See "Donor.")
Issue: The descendants of a common ancestor, such as children or grandchildren.
Joint and Survivorship Gift Annuity: A Charitable Gift Annuity based and paid on the lives of two persons. After the death of one, the survivor continues to receive the Annuity for life. (See "Charitable Gift Annuity.")
Jointly Owned Property: Property owned by two or more individuals. When one dies, ownership automatically transfers to the survivor(s).
Legacy: A Gift of personal property (technically, money) through a Will. (See "Gift" and "Will.")
Legal Remainder Gift (Remainder Deed): An arrangement in which a Donor irrevocably transfers to charity a remainder interest ownership of a personal residence or farm. In return, the Donor receives an immediate charitable income tax deduction based on the Present Value of the property at the time of the Gift. By retaining a life interest in the property, the Donor is free to use it and manage it almost as he/she wishes --- live in it, rent it, remodel it, etc. The Donor generally continues to pay property taxes, insurance premiums, and mortage payments (assuming that the property is not free and clear). Upon the Donor's death, the charity takes physical possession of the property, and -- in most cases -- liquidates it. (See "Donor" and "Present Value.")
Legatee: One who receives a legacy.
Life Income Fund: (See "Pooled Income Fund.")
Life Insurance: An agreement between an individual and a company to pay an agreed-upon sum of money to a Beneficiary upon the death of an insured individual in exchange for payments ("premiums") to the company usually during the life of the insured individual. In the case of a Gift of a Life Insurance policy to charity, the Donor receives a charitable contribution deduction that approximates the policy's cash surrender value when he/she transfers it irrevocably. (See "Donor," "Gift," and "Beneficiary.")
Living Trust (Inter Vivos Trust): A Trust created during the life of the Settlor. (May be Revocable or Irrevocable.) (See "Revocable Trust" and Settlor.")
Pooled Income Fund: An arrangement in which a Donor irrevocably transfers assets (usually cash) to a Trustee. The assets are commingled and invested in a "pooled" fund with other Donors' Gifts (not unlike a mutual fund). The Donor receives a portion of the total income from the fund annually. When the Donor dies, her/his remainder interest in the fund is conveyed to the charity. The Donor's annual income from the fund is based on the proportion of fund assets attributable to his/her contribution, as well as on the fund's total income. (See "Donor," "Gift," and "Trustee.")
Present Value: The value, today, of the right to receive an asset in the future. To calculate the Present Value, the full value of the asset is discounted because of the period of time that must pass before the asset will be received.
Principal: The income-producing portion of a fund, estate, or Trust. (See "Trust.")
Probate: To establish the validity of a Will and to carry out its provisions as directed by the court. (See "Will.")
Remainder: The rights that a person or organization has to receive what remains in a Trust when it terminates. (See "Trust.")
Revocable Gift: A charitable Gift that the Donor can take back during the Donor's life (as with a Gift provided in a Will or Revocable Trust). Such Gifts do not result in income tax advantages for their Donors. (See "Donor," "Gift," "Revocable Trust," and ,,Will.")
Revocable Trust: An Inter Vivos Trust, which the Settlor may revoke during life. (See "Inter Vivos Trust," "Settlor," and "Trust.")
Securities: Stocks and bonds.
Settlor: One who creates a Trust (also called "Trustor" or sometimes "Donor" or "Grantor.") (See "Donor," "Grantor," "Trust," and "Trustor.")
Single Life Gift Annuity: A Charitable Gift Annuity based and paid on the life of one person. (See "Charitable Gift Annuity.")
Survivorship Gift Annuity: A Charitable Gift Annuity where payment is made to one Annuitant for life then to the designated survivor Annuitant for the rest of his/her life. (See "Annuitant" and "Charitable Gift Annuity" and "Survivorship Gift Annuity.")
Tenancy: Some ownership of real property, commonly for a lease period or life.
Testament: An act by which one orders the disposition of his/her property after death.
Testamentary Trust: A Trust established by the Will of its creator for the benefit of survivors. (Compare "Inter Vivos Trust, and see "Trust" and "Will.")
Testate: To leave a Will at death. (See “Will”)
Testator (Testatrix): One with a Will in force at death. (See "Will.")
Transfer Agreement: The legal document changing ownership of property from one individual to another individual or to a charity.
Trust: A legal agreement by which something of value is owned by a Trustee or Trustees for the benefit of another or others. In practice, this means that a person transfers assets to a Trust, which, analogous to a corporation, is a separate legal entity. (See "Trustee.")
Trustee: The individual, bank, or trust company who owns and manages the assets of a Trust. The specific responsibilities of the Trustee are delineated in the Trust Agreement. (See "Trust” and
“Trust Agreement”)
Trusto: (See "Settlor.")
Unitrust: (See "Charitable Remainder Unitrust.")
Will: A legal document that distributes an individual's assets upon his/her death.
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