Glossary
APPRECIATED ASSETS are assets that have a higher market value
than their basis or tax purpose value. Such assets would, if sold by
an individual or non-charitable organization at a price higher than
their basis, potentially generate a taxable capital gain (either long-term
or short-term depending on the holding period).
The ATTORNEY is the person licensed by the state to practice
law and assist the executor, trustee, and guardian. It is conceivable
that each could hire a separate attorney, but usually one attorney represents
all three.
The
BASIS is the tax purpose value of the property or asset used
in establishing the potential capital gain amount.
A BENEFICIARY is the person and/or organization that receives
the benefits (usually assets or income) of the trust.
A BEQUEST is a gift of property or assets to a beneficiary as
defined in a will.
A BYPASS TRUST is set up to avoid or bypass the surviving
spouse's estate, which enables each spouse to use the federal estate
tax exemption.
The CHARITABLE GIFT ANNUITY offered through
a charity is used by many to provide income for the annuitant and a
second beneficiary, if any. The annuitant (the person providing funds
to the charity) receives a contract or agreement from the charity which
states that the charity will pay the annuitant a fixed income for life
(lives) with payments to start immediately or at some set future time.
Probate or court involvement is avoided on these funds. The income paid
under the annuity is secured by the assets of the charity. See Benefits
of the Gift Annuity for more details.
A
CHARITABLE LEAD TRUST is almost the opposite of a charitable
remainder trust. During the term or life of the charitable lead trust,
an annuity or unitrust income interest is distributed each year to the
designated charitable beneficiary and the assets are eventually transferred
to the trustor's or grantor's designated non-charitable beneficiary(ies).
A CHARITABLE REMAINDER ANNUITY TRUST is a trust which is set
up to pay a return or fixed annual percentage of 5 percent (or more)
of the net fair market value of the assets placed in the trust. The
trust assets are valued initially, at the time the property is placed
in the trust. The trust assets are never revalued.
A CHARITABLE REMAINDER UNITRUST is a trust which is set up to
pay a return or fixed annual percentage of 5 percent (or more) of the
net fair market value of the assets placed in the trust. The trust assets
are revalued annually.
A CODICIL is a written change or amendment made to a will.
The EXECUTOR is the person or institution named in a person's
will who carries out the terms of the will.
The GUARDIAN is the person who is appointed by the Court to
care for the person and/or estate of a minor child or incompetent person.
One can nominate a guardian in a will, and though normally the court
will honor that nomination, the Court has the right to agree or disagree.
JOINT TENANCY is a type of ownership where any two or more persons,
related or not, may hold (own) property and the property passes to the
survivor or survivors on the death of one. This passing is not automatic,
as some think, and the procedure for passing will depend on local law.
But, this form of ownership does have the advantage of allowing property
to pass to the survivor without delays of probate and court administration
costs.
A LIFE INSURANCE TRUST is usually set up for the purpose of
excluding the proceeds of life insurance from the insured's and the
spouse of the insured's estate for death tax purposes. It is an irrevocable
trust.
A LIVING TRUST is a trust set up to operate
during the life (and can operate after the death) of the one setting
up the trust. It can be revocable, or, in other words, you can change
your mind and have some or all of the trust property returned to you
during your life. An irrevocable trust cannot be changed except in certain
legal circumstances (fraud, unlawful agreements, merger of interests,
decision of the Court). See Living Trust
- Advantages/Disadvantages.
POOLED INCOME FUND - also called a Charitable Remainder Pooled
Income Fund- is an investment fund much like a mutual fund. It is made
up of transfers by many persons to the fund who receive life income
interest in exchange for their transfers, based on the value of the
transfer into the fund and based on the income earned by the fund.
PROBATE is the legal process of proving a will, appointing an
executor, and settling an estate; but by custom, it has come to be understood
as the legal process whereby a dead person's estate is administered
and distributed.
A QUALIFIED TERMINABLE INTEREST PROPERTY TRUST (QTIP) is a trust
often set up to avoid transfer tax on the first spouse's death. The
deceased spouse establishes the ultimate disposition of the property,
rather than the surviving spouse including the property in their estate.
During their lifetime, the surviving spouse receives all income from
the principal and, in some cases, has access to the principal.
A
RETAINED LIFE ESTATE is a gift plan defined by federal tax law
allowing the donation of a personal residence (to include a vacation
home) or farm with the donor retaining the right to life enjoyment.
A life estate may be retained for one or more lives or it may be retained
for a term of years. All routine expenses - maintenance fees, property
taxes, repairs, etc. - are the responsibility of the donor. The donor
receives an income tax deduction for a significant portion of the value
of the contributed property (the property is irrevocably deeded to the
charity) and estate tax benefits.
TENANTS IN COMMON is a property ownership arrangement in which
two or more persons own property jointly. It is not necessary that the
ownership consist of equal shares or percentages of the property. Generally
there is no right of survivorship when a co-owner dies. The share of
the property belonging to the deceased co-owner passes to his or her
heirs and the shares of the remaining original co-owners do not change.
TESTAMENTARY TRUST - A will can have a trust written into it,
called a Testamentary Trust, which is set into motion by the Court after
the will reaches a certain point of execution, and is used only after
the death of the person whose estate it represents.
A TRUST is defined as any arrangement where property is to be
held and administered by a trustee for the benefit of those for whom
the trust was created. Depending on the type and how it is established,
a trust may be revocable (changeable) or irrevocable (not changeable).
The TRUSTEE is the person or institution named by a person making
the trust, or appointed by the court, to carry out the terms of the
trust. Assuming a trust has been set up through a will, when the executor's
job is finished, the trustee's job begins.
A TRUSTOR is the individual who establishes the trust. Also
referred to as the GRANTOR and/or SETTLOR.
A WILL is the legal expression or declaration of a person's
mind or wishes as to the disposition of the person's property, to be
performed or take effect after the person's death.
Please note, individual financial circumstances
will vary. The information on this site does not constitute legal or
tax advice. As with all tax and estate planning, please consult your
attorney or estate specialist. All material is copyrighted and is for
viewing purposes only. Use of this site signifies your agreement with
the terms of use. The content
in this Planned Giving section has been developed for the Brethren Home
Foundation by Future
Focus. Please report any problems to section
webmaster. Revised: October 11, 2006 10:35.
