Planned Giving: Glossary

Actuarial
As used in planned giving, refers to the factors used to calculate the value of lifetime payments to individuals or organizations.

Adjusted Gross Income ("AGI")
A person's entire income reduced by adjustments including a deduction for payments to an IRA (Individual Retirement Account), medical savings accounts, and alimony. The AGI can be found at the bottom of the first page of your federal tax return.

Administrator
The court appointed person who handles the business of one's estate when he/she dies without leaving a will, the will did not name an executor, or the executors are unwilling or unable to act.

Annuity
A contractual arrangement to pay a fixed sum of money to an individual at regular intervals. The charitable gift annuity is a gift to a charitable organization in exchange for a current income tax deduction, and secures fixed lifetime payments to the benefactor and/or another individual.

Appraisal
An estimate of the quality or value of real or personal property. The term also refers to the process by which this estimate is obtained.

Appreciated Property
Securities, real estate, or any other property that has risen in value since the benefactor acquired it. Generally, appreciated property held by the donor for a year or more may be donated at full fair market value with no capital gains cost.

Basis
The original value attributed to an asset, and is used to determine the appreciation or depreciation of that asset.

Beneficiary
An individual designated to receive benefits or funds under a will or other contract, such as an insurance policy, trust or retirement plan.

Bequest
Personal property and other assets given to an individual or legal entity through a will.

Capital Gains Tax
A tax due on profits you realize on the sale of a capital asset, such as stock, bonds, or real estate. The capital gain is the difference of the sale price and the original purchase price of the asset after making appropriate adjustments for closing costs, improvements, allowable depreciation, etc.

Charitable Gift Annuity
A combination of a gift to charity and an annuity. A donor transfers cash or other assets to a charity with a contractual agreement to receive fixed and guaranteed annual payments for life. Upon the death of the donor the remaining assets remain with the charity to be used as indicated in the agreement.

Charitable Trust
A trust having a charitable organization as a beneficiary.

Codicil
A legal instrument used to explain, add to, subtract from, modify, or revoke provisions of an already existing will.

Corporate Fiduciary
An institution that acts for the benefit of another. One example is a bank acting as a trustee.

Cost Basis
See Basis, above.

Durable Power of Attorney
A legal document giving power to a person named in the document to act on behalf of the person granting the power. It continues in effect or sometimes takes effect if the person granting the power is incapacitated or disabled.

Endowment Fund
The permanently held capital of a non-profit, income and/or principal from which is used to support ongoing projects and meet institutional opportunities.

Estate Tax
A federal tax on the value of the property held by an individual at his or her death (paid by individual's estate, not the heirs or recipients of bequests).

Executor
A person named in a will who administers the estate of a deceased person. Activities may include gathering the assets, paying the taxes and distributing the estate in accordance with the will. An executor must “qualify” before the circuit court where the will is filed.

Fair Market Value
The hypothetical price that a willing buyer and seller, neither being under compulsion to buy or sell, will agree upon when they are acting freely, carefully, and with complete knowledge of the situation.

Fiduciary
A relationship which implies a position of trust or confidence wherein one is usually entrusted to hold or manage property or money for another. Among the obligations a fiduciary owes to the principal are duties of loyalty; obedience; full disclosure; the duty to use skill, care and diligence; and the duty to account for all monies.

Gift Tax
Federal tax placed on a gift, monetary or property. The tax is based on the appraised value (if other than monetary) at the time of transfer. Under the law, each person may gift up to $10,000 tax free to another person.

Gift-Tax Annual Exclusion
The provision in the tax law that exempts from federal gift taxes the first $10,000 in present-interest gifts a person gives to each recipient during a year.

Grantor
A person who transfers property by deed or grants property rights through a trust instrument or other document.

Gross Estate
The total value of all property in an estate before liabilities (ie, debts and taxes) are deducted.

Guardian
A person appointed by a court to manage the person and/or property of one who is legally incapable of handling his/her own affairs.

Inter vivos Trust
A type of trust created during one's lifetime to hold property for the benefit of him/herself or another person. Also known as a living trust.

Interest
A share or right in some property. Also, money charged for the use of money (principal).

Intestate
A person who dies without a will, or leaves one which is defective in form, in which case his estate descends by operation of law to his heirs or next of kin.

Joint Ownership
The equal ownership of property by two or more people, usually with the right of survivorship.

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.

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.

Life Insurance Trust
A type of life insurance policy where a trust company is named as the beneficiary and distributes the proceeds of the policy under the terms of the trust agreement.

Living Trust (Revocable)
A trust that is created and operative during the lifetime of the one who creates the trust. More recently, a living trust has become an estate planning instrument in addition to or in place of a will.

Living Will
A document which specifies the life-prolonging measures an individual wants and does not want taken on his/her behalf in the event of a terminal illness. Living wills are often used in conjunction with a healthcare power of attorney, which appoints someone to make healthcare decisions on your behalf.

Marital Deduction
A deduction allowing for the unlimited transfer of any or all property from one spouse to the other generally free of estate and gift tax.

Personal Property
Tangible physical property (such as cars, clothing, furniture, and jewelry) and intangible personal property (such as stocks, bonds, and bank accounts). This does not include real property such as land or rights in land.

Personal Representative
See Executor, above.

Power of Attorney
A power of attorney is a written instrument which authorizes one person to act as another's agent or attorney. The power of attorney may be for a definite, specific act, or it may be general in nature. The terms of the written power of attorney may specify when it will expire. If not, the power of attorney usually expires when the person granting it dies.

Powers of Appointment
A right given to another in a written instrument, such as a will or trust that allows the other to decide how to distribute property. The power of appointment is "general" if it places no restrictions on whom the distributees may be. A power is "limited" or "special" if it limits who the eventual distributees can be.

Probate
A court procedure for settling the personal and business affairs of a decedent by formally proving the validity of a will and establishing the legal transfer of property to beneficiaries, or appointing an administrator and supervising the legal transfer of property to heirs if there is no valid will.

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.

Remainderman
The persons or institutions who will receive the remainder (what is left over) of the trust after the income beneficiary has died and the trust ends.

Testamentary Trust
A trust created within a will that does not take effect until the death of the grantor.

Testator
A person who has made a legally valid will before death.

Trust
A legal device used to manage real or personal property, established by one person (the grantor or settlor) for the benefit of another (the beneficiary). A third person (the trustee) manages the trust.

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.

Unified Credit
A credit is an amount that eliminates or reduces tax. A unified credit applies to both the gift tax and the estate tax. You must subtract the unified credit from any gift tax that you owe. Any unified credit you use against your gift tax in one year reduces the amount of credit that you can use against your gift tax in a later year. The total amount used during life against your gift tax reduces the credit available to use against your estate tax.

Will
A legal instrument directing the distribution of a person's estate, the handling of a person's affairs, and the appointment of an executor for the estate and/or a guardian for dependents after a person's death.