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 a charitable gift plan used by
many to provide a future gift for a charity
and 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.
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
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Revised:
July 10, 2008 15:52
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