Glossary
of Planned Giving Terminology
Actuarial:
In regard to planned gifts, refers to the
factors used to calculate the value of lifetime
payments to individuals or organizations.
Adjusted Gross
Income (AGI): The sum of an individual’s
taxable income for the year --the total
at the bottom of the first page of IRS Form
1040. Individuals may deduct charitable
cash contributions up to 50% of AGI; they
may deduct gifts of appreciated securities
and appreciated property up to 30% of AGI.
Annuity:
A contractual agreement to pay a fixed sum
of money to an individual on a regular basis
(annually, semi-annually, quarterly, monthly.)
A Hattie Larlham charitable gift annuity
provides fixed lifetime payments to the
benefactor and/or another individual, typically
a spouse.
Appraisal:
A valuation of a piece of property. Benefactors
giving real or tangible personal property
(collections of art, gems, books, etc.)
to Hattie Larlham must obtain an independent
appraisal of the property to justify the
value that they claim as a charitable deduction.
Appreciated Property:
Real estate, securities, artwork or other
property that has increased in value since
the benefactor acquired it. In general,
appreciated property held by the donor for
a year or more may be donated at its full
fair market value with no capital gains
cost.
Basis:
The benefactor’s purchase price for
an asset, possibly adjusted to reflect subsequent
costs or depreciation. If Mrs. Smith purchased
stock for $50 per share and sold it for
$90, her cost basis in the stock is $50
per share.
Beneficiary:
The recipient of a bequest from a will or
distribution from a trust.
Bequest:
A transfer of property to an individual
or organization through a will.
Capital Gains
Tax: A federal tax on the appreciation
in an asset between its purchase and sale
prices.
Codicil:
An amendment or addition to an existing
will which may explain, modify, add to,
subtract from, qualify, alter, restrain
or revoke provisions of an existing will.
It is not intended to revoke or change the
entire will. It requires all the formalities
of execution needed for the will, i.e.,
signed, dated, witnessed, etc. State law
governs the execution requirements.
Cost Basis:
See Basis, above.
Endowment:
The transfer of money or property, usually
as a gift, to an organization or institution
for a specific purpose, like medical research.
Estate Tax:
A federal tax on the value of the property
held by an individual at death, paid by
the estate of the deceased. In contrast,
in states with an inheritance tax, that
tax is applied to the value of bequests
passing to beneficiaries; the estate also
pays it before the distributions are made.
Executor/Executrix:
The man or woman named in a will to administer
the estate (some states refer to this individual
as the “personal representative”.)
Fair Market Value:
The price that an asset would bring on the
open market; the most probable price that
could be obtained by average, informed purchasers.
Fiduciary:
A person having a duty, created by his or
her own undertaking, to act for another’s
benefit, such as a trustee or executor.
Holographic Will:
A will written entirely in the testator’s
handwriting and not witnessed; validity
is determined by state law.
Income Interest:
In a trust, the right to receive payments
for lifetime or a term of years.
Intestate Succession:
The method by which property is distributed
when a person dies without a valid will.
Each state’s law provides that the
property be distributed to the closes surviving
relatives, but the order of inheritance
varies by jurisdiction.
Inventory:
A complete listing of all property owned
by a deceased person at time of death which
is filed with the court during probate.
The executor or administrator of the estate
is responsible for making and filing the
inventory.
K-1 (and 1099-R):
The IRS forms received by our life-income
participants (like those with charitable
gift annuities) 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
lifetime, then distributes the remainder
to Hattie Larlham.
Personal Property:
Securities, artwork, business interests
and items of tangible property--unlike real
property, i.e., land and the structures
built on it.
Personal Representative:
See Executor, above.
Probate:
A formal judicial certificate issued by
a probate court certifying the validity
of a will and giving the executor legal
authority to execute the will.
Remainder:
For trust purposes, the portion of the principal
left after the income interest has been
paid to the beneficiary (ies); for example,
a charitable remainder trust pays income
to the benefactor or others and then passes
its remainder to Hattie Larlham.
Remainderman:
A legal term for the individual or organization
that receives the trust principal after
the income interest has been satisfied.
Settlor:
The person who creates a trust by donating
property to be managed and administered
by a trustee with the profits going to a
beneficiary.
Testamentary Trust:
A trust which takes effect upon the death
of the settler and which is commonly found
as part of a will. Trusts that take effect
during the life of the settlor are called
inter vivos trusts.
Testator/Testatrix:
The man or woman signing a valid will.
Trust:
A transfer of property by the grantor to
the care of an individual or organization,
for the benefit of the grantor or others.
Trustee:
An individual or organization carrying out
the wishes of the person who established
the trust, paying income to the beneficiaries
and preserving the principal for ultimate
distribution. |
