Actuarial: As used in Gift Planning, refers to the factors used to calculate the value of lifetime payments to individuals or organizations.
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.
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 Planned Parenthood that secures fixed lifetime payments to the benefactor and/or another individual.
Adjusted Gross Income ("AGI"): The sum of an individual’s taxable income for the year is the total at the bottom of the first page of Form 1040. Individuals may deduct outright charitable cash contributions up to 60% of AGI; they may deduct outright gifts of appreciated securities and appreciated property up to 30% of AGI. Any excess deduction may be carried over for up to five years following the year of the gift. *Note: For 2021, cash gifts can be deducted up to 100% of AGI.
Attorney-in-Fact: An individual who is legally authorized to act on behalf of another by virtue of a power of attorney.
Appraisal: An assessment of the value of a piece of property. Benefactors contributing real or tangible personal property (art, books, collectibles, etc.) must secure an independent appraisal of the property to substantiate the value they claim as a charitable deduction.
Bargain Sale: When an individual sells property to a charity for less than its market value. Tax law considers this part sale and part charitable gift with tax benefits and capital gain apportioned to each part.
Basis: The benefactor’s purchase price for an asset, possibly adjusted to reflect subsequent costs or depreciation. If Mrs. Jones bought stock for $100 per share and sold it for $175, her cost basis in the stock is $100 per share.
Beneficiary: The recipient of a bequest from a will or a distribution from a trust.
Bequest: A distribution of property or money through a will, living trust, or other estate plan.
Capital Gains Tax: A federal tax on the appreciation in an asset when it is sold.
Codicil: An amendment to a will which can avoid the cost and complication of re-writing the entire will. Generally, a codicil must be signed and witnessed or notarized like a will.
Cost Basis: See Basis, above.
Durable General Power of Attorney: Legally appointing an individual as your "Attorney-in-Fact" for financial matters. This allows that person to take charge of your financial affairs in the event of incompetency or disability.
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 needs.
Estate Tax: A federal tax on the value of property or money held by an individual and given to others upon death.
Executor: The person named in a will to administer the estate (known in some states as the "personal representative").
Fair Market Value: The price that an asset would bring on the open market.
Grantor: The individual transferring property into a trust.
Gift Planning: Also “Planned Giving”. The process of charitable giving in light of financial, estate and/or tax planning. Such gifts often require the assistance of an attorney, financial professional, or Gift Planning officer.
Health Care Power of Attorney: Legally appointing an individual as your "Attorney-in-Fact" for health care decisions. This allows that person to make decisions about your medical treatment in the event you are unable to do so.
Income Interest: In a trust, the right to receive payments from the trust for lifetime or a term of years.
Income in Respect of a Decedent (IRD): Taxable income earned by a decedent that was not yet received before death. The most common IRD assets are IRAs and qualified retirement plans. Income tax will be assessed on those assets after the decedent's death and in the hands of beneficiaries.
Intestacy: When a person dies without a valid will, state laws will determine how the individual's probate estate will be divided by any heirs. If there are no heirs, then the state absorbs any remaining probate assets.
Joint Ownership: The ownership of property by two or more persons, usually with rights of survivorship. The property passes by operation of law to the surviving joint owner. The descendent's will does not affect the property.
K-1 (also 1099-R): As used in gift planning, the IRS forms that are sent annually to the beneficiaries of life-income gifts detailing how payments they received 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.
Living Trust: Also "Revocable Living Trust." A trust that is created by a living individual (grantor) that is used to manage assets for the benefit of the grantor and/or other persons. At the grantor's death the assets in the trust are passed to named beneficiaries, or the trust can continue to operate providing benefits to beneficiaries for their lives or for a predetermined period of time.
Living Will: A legal document which allows you to indicate your wishes regarding medical treatment to prolong your life in the event you are terminally ill and unable to communicate or no longer competent. Living wills are often used in conjunction with a health care power of attorney, which appoints someone to make health care decisions on your behalf.
Personal Property: Securities, artwork, business interests, and items of tangible property. Personal property is any property other than “real property”, which refers to land and the structures built on it.
Personal Representative: See Executor, above.
Probate: The court that determines the validity of a will and provides judicial oversight over the distribution of the estate. If there is no valid will then the Probate Court will appoint an administrator of the estate to facilitate the estate's distribution in accordance with state intestacy law.
Qualified Appraisal: A written appraisal conducted by a knowledgeable professional to determine the fair market value of property (other than marketable securities) donated to a charity. If the donor wishes to use the value of the donated property for a charitable income tax deduction, the appraisal must be obtained by the donor and attached to his/her tax return if the property has a value of $5,000 or more.
Remainder Interest: In a trust, the amount left after the income interest has ended. A charitable remainder trust pays income to the benefactor or other individuals and then passes its remainder to charity.
Related-Use Rule: A charitable income tax deduction is allowed for the full fair market value of donated tangible personal property if that property can be used by the charity in a way that is related to its tax-exempt purpose. Otherwise, the deduction is limited to the cost basis.
Remainderman: A legal term for the individual or organization who receives the trust principal after the income interest has been satisfied.
Rights of Survivorship: A type of titling arrangement whereby assets would automatically transfer from one person to another upon the death of the first person. See joint ownership above.
Stepped-Up Basis: When an individual inherits property from a decedent, the property's cost basis is stepped-up to its fair market value on the date of death which allows the recipient of the property to avoid capital gains tax on appreciation that occurred before the date of death.
Testamentary Trust: A trust that is created and goes into effect only when an individual dies. Such a trust is usually set up under the terms of a will.
Testator: The individual making the will.
Trust: An entity created when a grantor transfers property to the care of an individual or organizational trustee for the benefit of one or more beneficiaries.
Trustee: An individual or organization carrying out the wishes of the person who established the trust (the "grantor").