501(c)(3) - Section of the Internal Revenue Code that designates an organization as charitable and tax-exempt. Organizations qualifying under this section include religious, educational, charitable, amateur athletic, scientific or literary groups, organizations testing for public safety or organizations involved in prevention of cruelty to children or animals.
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
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
The CHARITABLE GIFT ANNUITY offered through a charity is used by many to provide
income for life 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 charitable remainder 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 charitable remainder 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.
An ENDOWMENT is the principal amount of gifts and bequests that are accepted subject to a requirement that the principal be maintained intact and invested to create a source of income for a foundation. Donors may require that the principal remain intact in perpetuity, or for a defined period of time or until sufficient assets have been accumulated to achieve a designated purpose.
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
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.
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
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.
RESTRICTED FUNDS are assets or income that is restricted in its use, in the types of organizations that may receive grants from it or in the procedures used to make grants from such funds.
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
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.
UNRESTRICTED FUNDS are funds not specifically designated to particular uses by the donor, or for which restrictions have expired or been removed.
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.
Return to the Legacy Giving home page or to the Quick Guide to Legacy Gifts.