Any proceeding relating to a deceased person’s wishes.
A specified income, payable at stated intervals, for a fixed or contingent period, often for the lifetime of the recipient.
ANNUAL GIFT TAX EXCLUSION
A “present interest” gift of no more than $10,000 (indexed for inflation) which may be given by a donor (and an additional $10,000 by the donor’s spouse) to each of an unlimited number of individual donees (even unrelated), every year, free of federal gift tax.
Generally, a person’s investment in property for income-tax purposes used in determining his/her taxable gain or loss upon a sale or exchange; it may be “stepped up” (increased) at death to the fair market value reported on the estate tax return (original cost).
A gift by will of personal property; a legacy.
For federal income tax purposes, the property held by a taxpayer (e.g., house, car, stock, bonds, etc.). However, property that the taxpayer creates, such as business inventory, crops, a painting, is considered ordinary income property, not capital gain property.
The gain (or profit) realized on the sale or exchange of a capital asset.
CAPITAL GAINS TAX
Gain realized from the sale of property that has been held for more than one year is considered a capital gain and is subject to a capital gains tax. When a donor contributes such property to a qualified charitable organization, he/she avoids the capital gains tax.
An income, estate, or gift tax deduction allowed against certain transfers benefiting a qualified charitable organization.
CHARITABLE LEAD TRUST
An agreement between a donor and a charity. The reverse of a charitable remainder trust: in a lead trust, the charity is the “up-front” recipient of an annual fixed percentage or sum for a specified period of time, after which the trust assets revert to the donor or designated beneficiary/beneficiaries. It allows property to be transferred to other individuals (often children or grandchildren) at a low transfer tax cost. It is particularly attractive when an individual has property with high-appreciation potential.
CHARITABLE REMAINDER ANNUITY TRUST
An agreement in which a donor irrevocably transfers assets to a trustee. The trustee manages and invests the assets, and makes regular, periodic payments, at least annually, to the donor (and/or other persons, if desired) for life or a specified number of years (not to exceed 20). At the termination of the trust, the “remainder” goes to charity. The annual payments to the donor and/or beneficiary/beneficiaries are a fixed dollar amount (at least 5% of the initial fair market value of the assets placed in trust) that is stipulated by the donor when the trust is created.
CHARITABLE REMAINDER UNITRUST
A trust similar to the annuity trust, except that the unitrust pays a fixed percentage of the value of the trust funds, as re-determined annually. A unitrust may serve as a hedge against inflation. The percentage return to the income beneficiary must be stated in the trust instrument.
CLOSELY HELD STOCK
Stock in a “close corporation” where the shares are held by a single shareholder or closely knit group of shareholders. Closely held stock generally is not publicly traded.
The property making up the principal of a trust, as opposed to the income it produces.
A gift that a donor arranges in the present -- by trust, will, or other vehicle -- from which the donor receives current benefits and which will be available to the charitable organization at a future date (simply put, the benefit to the charity is “deferred” for a period of time).
A fund in which the donor designates the specific charitable uses or organizations to which the income and/or principal should be distributed.
Legal words to pass property under a will; devise refers to real property, bequest to personal property.
A person to whom land or other real property is devised or given by will.
The location (state or country) where a decedent’s estate will be probated and taxed; generally requires residence with an intention to remain or return there.
A fund that provides a permanent source of present and future income. The assets contributed to the fund are invested and the corpus is left intact; a fixed percentage of the fund’s value is used for immediate purposes. This income can be used to fund any specified program or one’s Annual Campaign gift in perpetuity (a so-called PACE, LOJE or Moses gift.)
All of the property, real or personal, in which a person has a right or interest.
A transfer tax imposed by the federal government and some states on the estate of a decedent.
A tax on the privilege of transmitting property at death, payable from the estate.
The person named by a decedent in his/her will to carry out the provisions of the will.
FAIR MARKET VALUE
What a willing buyer would pay a willing seller if neither were under any compulsion to buy or sell; the standard by which property is valued for estate-tax and other purposes. The fair market value of a gift of a listed marketable security is the average of its high and low quotations on the date the gift is made. For assets whose worth is not publicly listed, an appraisal is usually required to ascertain the fair market value.
A fund used for a specified area or purpose (e.g., care of the aged, Jewish education, etc.), giving the charity the discretion to name the beneficiaries.
A tax, at the highest marginal estate and gift rate, that may apply if the ultimate transfer of property will be to or for the benefit of a “skip person” (e.g., grandchildren), in an amount in excess of the statutory threshold.
A voluntary transfer of real or personal property to another made gratuitously and without consideration. Essential elements of a gift include: capacity of the donor; intention of the donor to make the gift; completed delivery to or for the benefit of the donee; and acceptance of the gift by the donee. A gift can be made during the donor’s lifetime (inter-vivos) or by will (testamentary).
A provision allowing a married couple to treat a gift made by one of them to a third party as having been made one-half by each (with a gift tax return showing the other spouse’s consent), generally for purposes of the “annual gift tax exclusion.”
A transfer tax on the privilege of making irrevocable gifts; comparable to prepayment of a portion of the estate tax.
The right to receive the income from property.
The tax imposed by a state on the privilege of receiving property from the deceased.
Property which has no intrinsic or marketable value but rather is the representation or evidence of value, such as certificates of stock, bonds, promissory notes, franchises, etc.
Latin for “during life”; describes a transfer that is created and becomes operative during the grantor’s lifetime.
Refers to a situation where, at death, with no valid will in effect, state statutes prescribe the distribution of the estate.
A trust that cannot be amended, modified, or terminated (except by the terms of the trust).
Co-ownership between two or more people with rights of survivorship such that a survivor automatically becomes the owner of a decedent’s interest, thereby avoiding probate.
A gift of personal property under a will -- also called a bequest -- received by a legatee.
LETTER OF INTENT
A signed letter indicating an intention to make a charitable contribution. It is non-binding; it creates no legal obligation.
The right to use and enjoy property and/or receive the income from the property for one’s lifetime.
LIFE INCOME PLAN
A plan that provides life income to a donor with the “remainder” going to charity.
A person who is in possession of a life estate.
A trust established during the lifetime of the grantor (sometimes referred to as an inter-vivos or revocable trust).
The right of a surviving spouse to receive all of the marital property free from federal estate taxes via a 100% marital deduction.
MARITAL (DEDUCTION) TRUST
A trust consisting of property for the benefit of the surviving spouse and qualifying for the marital deduction, also referred to as a QTIP Trust.
For Federal Income Tax purposes, ordinary income includes wages, earnings, dividends, interest, and any gain from the sale or exchange of property which is not a capital asset.
Latin for “by the head”; describes an inheritance in equal shares (such as between children and grandchildren) without representation.
Describes an inheritance that is payable to the children of a pre-deceased legatee.
A fund bearing the name of a donor or someone designated by the donor and maintained as a component fund of a charity. It can be established by a gift of cash or property and by completing an agreement letter. The donor and/or others can make recommendations for distributions from the fund which are approved by the charity if they are to go to recognized charitable organizations that are within the scope of the charity’s purposes. Initial and subsequent contributions are fully deductible as charitable contributions.
A gift that is “customized” to the needs and objectives of an individual donor to help that donor maximize his/her gift to charity and realize personal, financial, and tax benefits.
POOLED INCOME FUND
A charitable trust in which gifts of cash or marketable securities are commingled for investment purposes with those of other donors. The donor and/or any person designated is paid his/her pro-rata share of all the income earned annually by the trust. After the death of the income beneficiary/beneficiaries, the donor’s gift is removed from the pool and goes to the charity that sponsors the trust.
Property interests involving the immediate right of possession or enjoyment.
The act or process of proving a will.
Generally, all assets of a decedent, except for life insurance not payable to the estate and property held jointly with the right of survivorship.
The property that is disposed of under a decedent’s will.
QUALIFIED TERMINABLE INTEREST PROPERTY (QTIP)
Property in which the surviving spouse has a lifetime interest but which qualifies for the marital deduction.
The interest in property that will be received by the remainderman after the interest of someone with a life estate or term of years has expired.
The right to receive property after all intervening income interests have expired.
The balance of the decedent’s estate, subject to disposition under the will, after specific bequests have been distributed.
That property which remains after debts and expenses of administration, legacies, and devises have been satisfied.
A fund to be used for a specific purpose (or purposes) designated by the donor.
A trust that can be amended, modified, or terminated by the donor or other(s) designated by him/her and which is generally not eligible for an income-tax charitable deduction.
Separate corporation or trust that has public charity status because of its connection with and support of a named public charity. The donor or his/her appointees make up the minority of directors (trustees) and can participate in all operational decisions of the foundation, which can bear the donor’s name.
TANGIBLE PERSONAL PROPERTY
Movable property (as opposed to real property, which is fixed), such as works of art, collectibles, jewelry, gems, musical instruments, manuscripts, etc., which themselves represent value.
An amount determined by subtracting the allowable deductions from the gross estate. (All that a decedent owns -- or has an interest in -- that is not exempt from estate taxes.)
Established under a will to take effect at death.
A trust established by an individual by will to take effect at his/her death. An inter-vivos trust is a trust that is established and takes effect during one’s lifetime.
A person who dies leaving a will; feminine, testatrix (as opposed to one who dies intestate).
A legal entity in which property is transferred with the intention that it be administered by one party -- the trustee -- for the benefit of another.
The length of time during which a trust is in existence (it may be for a specified number of years, or for the lifetime of one or more named individuals).
One who holds the legal title to real or personal property that he/she/it manages for the benefit of another.
The person who creates a trust (also settlor or grantor).
A fund that does not restrict the ways in which the assets in the funds may be used.
A dollar figure that is a credit against the federal estate and/or gift tax.
A written instrument taking effect at the death of the testator, disposing of his/her property. To be legally effective, the will must be written in compliance with the laws of the state in which the testator is domiciled at the time of its execution or where his/her real property is located.