Planned Giving

Actuarial – A science that applies mathematical and statistical methods to calculate the value of lifetime payments for planned giving, and assess risk in life insurance and other financial areas.

Adjusted Gross Income (AGI) – In the United States income tax system, adjusted gross income (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.

Annuity – An annuity is a series of payments made at equal intervals. Examples of annuities are regular deposits to a savings account, monthly home mortgage payments, monthly insurance payments and pension payments. Annuities can be classified by the frequency of payment dates. The payments (deposits) may be made weekly, monthly, quarterly, yearly, or at any other regular interval of time.

Appraisal – The process of developing an opinion of value for real property (usually market value). Real estate transactions often require appraisals because they occur infrequently and every property is unique, unlike corporate stocks, which are traded daily and are identical. The location also plays a key role in valuation. However, since property cannot change location, it is often the upgrades or improvements to the home that can change its value. Appraisal reports form the basis for mortgage loans, settling estates and divorces, taxation, and so on. Sometimes an appraisal report is used to establish a sale price for a property.

Appreciated Property – A property or security that has risen in value since the last change in ownership. Generally, appreciated property held by the donor for more than a year may be donated at full fair market value with no capital gains cost.

Basis – The original purchase price of an asset, used for tax purposes.

Beneficiary – A person who receives the benefits from a will, trust, or life insurance policy.

Bequest – Property or cash given to a person or institute through a will.

Capital Gains Tax – A tax levied on profit from the sale of property or of an investment.

Codicil – A document that supplements, explains, or modifies a will – or a specific part of a will.

Cost Basis – See Basis, above.

Endowment Fund – A donation of money or property to a nonprofit organization for the ongoing support of that organization. Usually the endowment is structured so that the principal amount is kept intact, while the investment income is available for use, or part of the principal is released each year, which allows for their donation to have an impact over a longer period than if it were spent all at once. An endowment may come with stipulations regarding its usage.

Estate Tax – A federal tax placed on the net value of the estate of a deceased person before distribution to the heirs.

Executor – A person responsible for executing the terms of a will.

Fair Market Value – An estimate of the market value of a property, based on what a knowledgeable, willing, and unpressured buyer would probably pay to a knowledgeable, willing, and unpressured seller in the market.

Grantor – A person who creates a trust and transfers property into it.

Interest Income – The amount of interest that has been earned during a specific time period.

Inter Vivos Trust – A trust that is created during the settlor’s lifetime by a trust instrument.

Intestate – Intestacy is the condition of the estate of a person who dies without having made a valid will or other binding declaration. Alternatively this may also apply where a will or declaration has been made, but only applies to part of the estate; the remaining estate forms the “intestate estate”.

K-1 (also 1099-R) – The IRS forms sent to life-income gift participants detailing how payments they received from their gifts during the year will be taxed.

Life Expectancy – A statistical measure of the average years an individual is expected to live.

Life Income Gift – An irrevocable arrangement of property transfer to a nonprofit/charity from a donor, where the donor retains the income interest to his/her benefit.

Personal Property – Personal property is movable and can be understood in comparison to immovable property or real property, such as land and buildings. Securities and artwork fall into the personal property category.

Personal Representative – See Executor, above.

Planned Giving – Planned gifts are referred to as such because they require more planning, negotiation and counsel than many other gifts. Planned gifts can result in immediate income, income to charity over time or serve to delay a gift for life or other period of time while the donor or others retain income and/or access to the assets used to fund the gift. Because of the current or future charitable benefits, a number of state and/or federal income tax, capital gains, estate, and gift benefits are associated with giving in this way.

Present Value – The value of an expected income stream determined as of the date of valuation. The present value is always less than or equal to the future value because money has interest-earning potential, a characteristic referred to as the time value of money, except during times of negative interest rates, when the present value will be more than the future value.

Probate – The judicial process whereby a will is “proved” in a court and accepted as a valid public document that is the true last testament of the deceased.

Remainder Interest – A future interest given to a person (who is referred to as the transferee or remainderman) that is capable of becoming possessory upon the natural end of a prior estate created by the same instrument.

Remainderman – A person who inherits or is entitled to inherit property upon the termination of the estate of the former owner. Usually this occurs due to the death or termination of the former owner’s life estate, but this can also occur due to a specific notation in a trust passing ownership from one person to another.

Testamentary Trust – A trust which arises upon the death of the testator, and which is specified in his or her will. A will may contain more than one testamentary trust, and may address all or any portion of the estate.

Testator – A person who creates a will.

Trust – An agreement whereby one party (the trustee) agrees to hold ownership of a piece of real property for the benefit of another party (the beneficiary).

Trustee – Anyone in a position of trust and so can refer to any person who holds property, authority, or a position of trust or responsibility for the benefit of another. A trustee can also refer to a person who is allowed to do certain tasks but not able to gain income.