Glossary
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Actuarial - In planned giving it refers to the factors used based on mortality tables to calculate the value of lifetime payments based on the life expectancies of income beneficiaries or the term of years for a trust.
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Administrative Expenses - Expenses incurred in the administration of the estate—the collection of assets, the payment of debts, and the distribution of property. Examples might include attorney fees and miscellaneous expenses.
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Administrator - The person or entity (often a bank) appointed by the court to settle the affairs of a decedent who dies without a will, or whose named executor cannot or will not serve.
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Adjusted Gross Income ("AGI") - AGI is an individual's total gross income minus specific deductions. Taxable income is adjusted gross income minus allowances for personal exemptions and itemized deductions. For most individual tax purposes, AGI is more relevant than gross income. Individuals may deduct charitable cash contributions up to 60% of AGI in any given tax year. For gifts of appreciated property the deductible limit is 30% of AGI in any given tax year.
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AFR (Applicable Federal Rate) - Also known as the Discount Rate, is the interest rate used to value the charitable deduction for different types of planned gifts, such as charitable remainder trusts and gift annuities. The rate is equal to 120% of the applicable federal midterm rate rounded to the nearest two-tenths of 1% (e.g., 2.61% would be rounded to 2.7%). The rate changes monthly.
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Alternate Valuation Date - Is the date six months following the date of death of a decedent that an executor may elect to use to value property included in the decedent’s gross estate.
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Annual Exclusion - The continuing right of a donor to make a tax-free gift of up to the allowed limit for the year in which that gift is made to each of any number of donees in any year; applies only to gifts of present interest; exclusion may be doubled if gift-splitting with a spouse.
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Annuity - A contractual arrangement to pay a fixed sum of money to an individual at regular intervals. The charitable gift annuity is a gift that secures fixed lifetime payments to the benefactor and/or other named beneficiaries.
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Appraisal - A professional assessment of the value of a piece of property. Generally, benefactors contributing real or tangible personal property (art, books, collectibles, etc.) worth $5,000 or more must secure an independent qualified appraisal of the property to substantiate the value they claim as a charitable deduction.
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Appreciated Property - Securities, real estate, or any other property that has risen in value since it was acquired. Typically, appreciated property held by the donor for a year or more may be donated at full fair market value with no capital gains cost.
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Bargain Sale - The sale of property to a charity for less than its fair-market value. A charitable deduction is taken by the donor for the difference between the sale price and the fair-market value. However, because the adjusted cost basis must be allocated between the "sale" and "gift" portions of the transaction, some taxable gain may be realized.
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Basis - The original purchase price for an asset is cost basis, possibly adjusted to reflect subsequent costs or depreciation. Adjusted basis normally is the value used for tax purposes to determine gain or loss.
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Beneficiary - The recipient of a bequest from a will or a distribution from a trust, retirement plan, or life insurance policy.
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Bequest - A transfer of property or cash to an individual or organization under a will or trust. A bequest may be general and unconditional, residuary, or contingent.
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Capital Gain or Loss - The profit or loss resulting from the sale or other disposition of a capital asset. If the property was held for more than twelve months, the gain or loss is long-term. If the property was held for twelve months or less, the gain or loss is short-term.
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Capital Gains Tax - A federal tax on the appreciation in an asset between its purchase and sale prices.
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Cash Value- The loan value or surrender value of certain types of life-insurance policies.
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Charitable Deduction - The deduction allowable for gifts made to qualified charitable organizations. If a gift is made during the lifetime of the donor, it qualifies for income-tax and gift-tax charitable deductions. If it is made at the end of the donor’s life, it qualifies for an estate-tax charitable deduction.
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Codicil - A codicil is a document that amends, rather than replaces, a previously executed will. Amendments made by a codicil may add or revoke a few small provisions or may completely change the majority or all of the gifts under the will. Each codicil must conform to the same legal requirements as the original will, such as the signatures of the testator, witnesses, (depending on jurisdiction) and notary.
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Corpus - Also called Principal is the fund or capital upon which income is earned.
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Deferred Gift - Any arrangement whereby money or property is set aside for future use of a charity.
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Discount Rate See AFR.
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Endowment Fund - An invested fund owned by a charity from which the capital appreciation and/or income is used to support the general or specific objectives of that charity's mission.
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Estate Tax - The tax imposed by the federal government and some states on the transfer of property at death.
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Estate Tax Deduction- A deduction from the gross estate of the decedent for property passing to the surviving spouse. The deduction is unlimited.
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Executor - The person named in a will to administer the estate (known in some states as the "personal representative").
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Fair-Market Value - The price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.
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Generation-Skipping Transfer Tax - A federal tax that applies to transfers in generation-skipping trusts and to direct gifts between the transferor and a person in a generation at least two below the transferor.
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Generation-Skipping Trust - A federal tax that applies to transfers in generation-skipping trusts and to direct gifts between the transferor and a person in a generation at least two below the transferor.
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Gift-in-Kind - A gift of property other than cash or marketable securities (e.g., an automobile, livestock, or a painting).
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Gift-Splitting - The annual exclusion may be doubled when a spouse joins in the gift and file a statement with the IRS accordingly. There is no tax liability.
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Gift Tax - A tax on the transfer (during the donor’s lifetime) of property worth more than the allowable exclusion amount per year to another person; payable primarily by the donor.
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Gift Tax Deduction - Allowed for lifetime gifts to a spouse. Deduction is for full value of such gifts. No gift tax has to be paid until your lifetime total taxable gifts exceed the applicable exemption amount.
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Grantee - The person to whom property is transferred.
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Grantor - The individual transferring property – also the individual transferring property into a trust.
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Income Interest- In a trust, the right to receive payments from the trust for lifetime or a term of years.
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Installment Sale - Sale of property over more than one tax year. The purpose of an installment sale is to spread the impact of any capital gain.
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Intestate - Dying without a legal current will or living trust.
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Intervivos - A trust that is created by an individual for their benefit while they are still living as opposed to a testamentary trust which is created by a will after someone's passing. Also called a living trust.
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Irrevocable Trust - A trust that cannot be ended by the person who created it.
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Jointly Owned Property - Property owned by two or more persons with the right of ownership passing to the person or persons who survive; normally unaffected by a will.
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K-1 (also 1099-R) - The IRS forms that we send our life income gift participants detailing how payments they received from their gifts during the year will be taxed.
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Life Estate - An interest in property for life. For example, a person who has the right to occupy a residence for the duration of his or her life has a life estate in the property.
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Life Expectancy - A statistical measure of the average length of an individual's life.
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Life-Income Gift - A planned gift that makes payments to the benefactor and/or other beneficiaries for life or a term of years, then distributes the remainder to charity.
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Living Trust - See Intervivos.
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Long-Term Appreciated Property - Property that has increased in value, and has been held for more than the required holding period, currently 12 months.
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Marital Deduction - A deduction allowed for property passing from one spouse to another, either by gift during life or transfer following death.
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Marital Trust (Trust A)- (Also called Trust A). A trust in which the property transferred to it qualifies for the marital deduction
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Non-Marital Trust (Trust B) - This trust receives property of the decedent over the amount designated for the marital trust. The surviving spouse typically receives the income from the trust, has a right to limited distributions of the principal at the discretion of the trustee, but has no general power of appointment over the trust. Because the trust corpus is not included in the surviving spouse's gross estate at death, federal estate-tax savings may result.
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Ordinary-Income Property - Property which, if sold at a profit, gives rise to ordinary income as distinguished from long-term capital gain. A gift of ordinary-income property to charity is deductible only to the extent of the donor's adjusted basis in the property.
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Outright Gift - Cash, securities, or other property for the immediate use of the charitable organization.
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Pourover Will - A will directing that part or all of the testator's assets be transferred or poured over after his or her death into a trust that has its own provisions for distribution of assets.
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Power of Appointment - The right to direct the disposition of property one does not own, such as the right of a trust-income beneficiary to designate the person to receive the trust principal upon the beneficiary's death.
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Payable-on-Death (POD) - See Totten Trust.
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Personal Property - Securities, artwork, business interests and items of tangible property as opposed to "real property," used in planned giving to refer to land and the structures built on it.
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Personal Representative - See Executor.
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Planned Giving - A method of supporting charities that enables individuals to make larger gifts than they could make from their income. While some planned gifts provide a life-long income to the donor, others use estate and tax planning techniques to provide for charity and other heirs in ways that maximize the gift and/or minimize its impact on the donor's estate.
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Present Value - The value on a given date of a future payment or a series of future payments, discounted to reflect the time value of money based on various factors such as investment risk and inflation.
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Probate - The review or testing of a will before a court (the Probate Court) to ensure that the will is authentic and the estate is distributed properly.
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QCD – Qualified Charitable Distribution - A direct transfer of funds from your IRA custodian, payable to a qualified charity. QCDs can be counted toward satisfying your required minimum distributions (RMDs) for the year, as long as certain rules are met. In addition, a QCD excludes the amount donated from taxable income. This is also referred to as a Charitable IRA Rollover.
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Quasi Endowment (sometimes called “board designated”) - A fund that functions like an endowment, but without any legal restriction to hold the fund permanently. The difference between a true endowment and a quasi endowment is that the principal of a quasi endowment may be spent at some point.
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Related-Use Rule - If the use of a donated item of tangible personal property is related to the exempt purposes of the charity, the donor is entitled to an income-tax charitable deduction for the full fair market value of the property, provided its sale would result in long-term capital gain. If the use is unrelated to the charity’s exempt purpose, the deduction is limited to the donor’s basis in the property.
Note: If an item of tangible personal property is left to charity by bequest, the standard of related-use does not apply.
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Remainder Interest - In a trust, the portion of the principal left after the income interest has been paid to the beneficiary(ies). A charitable remainder trust pays income to the benefactor or other individuals and then passes its remainder to charity.
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Residual Estate - That portion of the estate that remains after all administrative expenses, taxes, and specific bequests have been paid. The person or entity named to receive all or a portion of the residual estate is said to have a residual interest.
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Remainderman (remainder beneficiary) - The term for the individual or organization who receives the trust principal after the income interest has been satisfied.
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Revocable Living Trust - A revocable document (that becomes irrevocable at death) by which many people arrange for management and distribution of their assets. The person who creates a revocable living trust is entitled to all trust income, can withdraw capital, and can amend or terminate the trust. Assets transferred to the trust must be titled in its name.
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Residual Estate- The portion of the estate that remains after all administrative expenses, taxes, and specific bequests have been paid. The person or entity named to receive all or a portion of the residual estate is said to have a residual interest.
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Revocable Trust - A trust that may be ended by the person who created it.
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Tangible Personal Property - Property other than cash, securities, or real estate that can be touched and is movable (e.g., a painting, coin collection, or rare books).
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Totten Trust - A type of revocable trust, also known as a payable-on-death (POD) account, whereby assets in a bank or brokerage account can be paid directly to a named beneficiary without being subject to probate. If the beneficiary withdraws money while the depositor is living, a taxable event occurs subject to the annual exclusion. Any amount paid to the beneficiary at death is included in the depositor’s taxable estate.
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Trust - The arrangement whereby property is held by a trustee (an individual or entity) for the benefit of another. The trustee holds legal title to the property. The beneficiary is the person or organization benefited. The person establishing the trust is called the grantor, creator, donor, or settlor.
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Testamentary Trust - A trust created by will.
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Testator - The individual making the will.
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Trustee- An individual or organization carrying out the wishes of the person who established the trust (the "grantor"), paying income to the beneficiaries and preserving the principal for ultimate distribution.
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Will - The legal declaration of a person's intentions as to the disposition of his or her property upon death.
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