|
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.
UNIFIED CREDIT - A federal
tax credit that offsets gift tax and estate tax liability.
For gift tax purposes, the unified credit remains at $345,800
through 2009, which is equivalent to an applicable exclusion
amount of $1 million. For estate tax purposes, the unified
credit is being gradually increased from $345,800 in 2003
to $1,455,800 in 2009, which is equivalent to an applicable
exclusion amount of $1 million in 2003 to $3.5 million in
2009.
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.
For a complimentary consultation,
or to answer your questions on how you might make a donation,
please contact:
Ted Meyers, ACFRE
Washington, DC 20009
(301) 421-5800
Please
note, individual financial circumstances will vary. The information
on this site does not constitute legal or tax advice. Donor
stories and photographs are for purposes of illustration only.
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 Gift Planning section has been developed for Central
Union Mission by IDS
and Future Focus. Please report any problems to section
webmaster. Revised: April 30, 2008 20:04 .
|
