Here are some terms associated with estate planning and planned giving.
ADMINISTRATOR – The personal representative appointed by the probate court to settle the estate of a person who dies without a will.
ANNUITANT – The person receiving annual or more frequent payments from a gift annuity.
ANNUITY PAYMENTS – The annual or more frequent payment of principal and interest to an annuitant or to his or her beneficiary.
APPRECIATED PROPERTY – Property with a value greater than the cost basis (the value at the time it was acquired plus improvements and other expenses).
BARGAIN SALE – When the proceeds from the sale of a property to a qualified charity are less than the property’s fair market value. The excess of the fair market value over the sales price represents a charitable contribution.
BEQUEST – When a donor decides to leave some assets to charity in his/her will or trust. The donor’s estate will receive a charitable tax deduction when the gift is made to a qualified charity.
CHARITABLE ESTATE PLANNING – Estate planning which includes a provision for a charitable organization or institution to receive a portion of the person’s assets.
CHARITABLE INCOME TAX DEDUCTION – The amount a donor can deduct from a federal income tax return for a gift to a qualified charity.
CHARITABLE LIFE INSURANCE – Any type of life insurance policy which pays death proceeds or living benefits to a qualified charity.
CHARITABLE LEAD TRUST – A trust which makes payments – either a fixed amount (annuity trust) or a percentage of trust principal (unitrust) – to qualified charity(ies) for a defined term of years. At the end of the term, the principal can either go back t the donor or to heirs named by the donor. The donor may claim a charitable tax deduction for making a lead trust gift.
CHARITABLE REMAINDER ANNUITY TRUST – A trust which provides for a donor to transfer property to a trustee subject to the donor’s right to receive a fixed percentage of the initial fair market value of the property for as long as he or she lives. Whatever remains in the trust at his or her death becomes the property of the beneficiary charity.
CHARITABLE REMAINDER UNITRUST – A trust with the same basic components of a charitable remainder annuity trust except that the income to the donor is a percentage of the fair market value of the property determined annually rather than a fixed amount.
CODICIL – An addition or amendment to a person’s will.
CORPUS – The amount of principal in a trust.
COST BASIS – The original cost of property plus improvements and other expenses paid by the owner during the period of ownership.
DEATH BENEFIT – Proceeds of a life insurance policy paid to a beneficiary of the policy at the death of the policy-holder.
DEFERRED GIFT – A gift that is made now whereby the recipient does not benefit until some time in the future according to conditions stated in a contract.
DEFERRED PAYMENT GIFT ANNUITY – A gift annuity agreement issued by a qualified charity providing for payments to the beneficiary to commence at a future date and to continue for life.
DIVIDENDS – The amount of money paid each year on a life insurance policy, share of stock, or other investment paid to the policy-holder or the shareholder.
DURABLE POWER OF ATTORNEY – A legal document that authorizes another person to act as your agent or attorney. This agent has authority until your death or until you revoke the power. Authority is retained if you become incompetent.
ENDOWMENT POLICY – A life insurance policy which provides a death benefit of the face amount should the insured die during the premium paying period. If the policy-holder lives to the end of the premium paying period he or she receives the face amount of the policy.
ENDOWMENT – Assets which are held and invested to provide an income or source of funding.
ESTATE PLANNING – Planning for the management of all of an individual’s assets for the benefit of this person and his or her heirs or other distributees.
EXECUTOR/EXECUTRIX – The personal representative (male or female) named in a will to settle the testator’s estate.
FAIR MARKET VALUE – Amount of money a willing buyer will pay a willing seller for property.
FEDERAL ESTATE TAX – The federal tax imposed on the transfer of property to others at death.
FEDERAL GIFT TAX – The federal tax imposed on the transfer of property during the lifetime of the donor. This tax is paid by the donor.
FEDERAL INCOME TAX – The federal tax on an individual’s income.
FIVE-YEAR CARRY-OVER RULE – A federal income tax provision which permits a donor to carry over into the five succeeding tax years any amount of a charitable deduction which exceeds the deductible amount which can be used in the year the gift is made.
GIFT ANNUITY AGREEMENT – An agreement in which a donor makes a gift to a charity which in turn provides stipulated annual payments for the life of one or two persons.
IN PERPETUITY – To be held in the same form forever.
INTESTATE – Dying without a valid drawn will.
IRREVOCABLE LIVING TRUST – A trust which cannot be revoked by the trustor.
LAWS OF DESCENT AND DISTRIBUTION – State laws controlling distribution of property when a person dies without a will.
LIFE ESTATE AGREEMENT – An agreement between a donor and a charity in which the donor deeds real estate to the charity but reserves the right to use or reside on the property for life.
LIFE EXPECTANCY – The actuarial estimate of the number of years a person will live from any given age.
LIVING TRUST – A revocable trust into which you can transfer and title assets while you are alive rather than at your death. A testamentary trust is activated at your death.
LIVING WILL – A document that tells your family and physician your desires regarding the use of life-sustaining machines if you become terminally ill.
LONG-TERM CAPITAL GAINS – The capital appreciation realized from the sale of property (stocks, bonds, land, etc.) which the seller has owned more than one year. (Note: The long-term holding period is set by federal law and is subject to change. If in doubt, check with a tax advisor.)
MARITAL DEDUCTION – According to federal law, the amount of assets that an individual can transfer tax-free to a surviving spouse through his or her will without estate taxes having to be paid on those assets. Currently, the marital deduction is unlimited.
MEMORIAL GIFT – A gift to a charity in memory of a deceased person.
ORDINARY INCOME PROPERTY – Property which produces income taxed at the owner’s regular income tax rate.
PLANNED GIFT _ A gift of accumulated assts given to a nonprofit organization or church. The gift is usually transferred through the deeding assets in a living trust, charitable remainder trust, or inclusion of the beneficiary in the donor’s will.
POOLED INCOME FUND – A trust funded by a number of donors, each retaining an income for life. Each donor is paid a pro-rata share of the fund’s earnings. Each donor’s portion of the principal becomes the property of the charity at the death of the donor.
PROBATE – The “proving” of a will. When a person dies, the will is taken to the probate court to prove that the will is indeed that person’s last will and testament.
REMAINDERMAN – The person, institution, or charity receiving the assets of a trust upon the death of the trustor.
RESIDUARY CLAUSE – A clause in the will which bequeaths or devises property which is not specifically bequeathed or devised earlier in the will.
RESIDUE – Property left for the final beneficiaries named in a will after all other bequests have been paid.
REVOCABLE LIVING TRUST – A trust which may be revoked by the trustor.
TESTAMENTARY GIFT – A gift made through a will.
TESTAMENTARY TRUST – A trust created by a provision in a person’s will.
TESTATOR/TESTATRIX – The person (male or female) making the will.
TRUSTEE – The person or institution responsible for the administration of a trust.
TRUST INSTRUMENT – The legal document which provides operating instructions for a trustee in carrying out the terms of a trust.
TRUST CORPUS – The assets held in a trust.
WILL – A person’s legal statement regarding the disposition of his or her property following death. A will can be changed at any time during the person’s life. It is generally the only document in which a person can name a guardian for minor children and a trustee for their funds. In order to be valid, it must be witnessed and written to conform to the laws of the state of residence.