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Glossary

In this Section

Glossary of Gift Planning Terms

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501(c)(3)

Section of the Internal Revenue Code that designates an organization as charitable, tax-exempt and nonprofit. Organizations qualifying under the Code include religious, educational, charitable, amateur athletic, scientific or literacy groups; organizations testing for public safety; or organizations involved in prevention of cruelty to children or animals.

509(a)

Section of the Internal Revenue Code that defines public charities (as opposed to private foundations). A 501(c)(3) organization may also have a 509(a) designation to further define the agency as a public charity.

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Accrue

To grow to or be added to.

ACGA

See American Council on Gift Annuities

Actuarial Valuation

In annuities, the determination of value through the use of mortality tables, interest rates and expense factors.

Adjusted Basis

The cost of property purchased by the owner, plus additions and minus deductions required by statute for various types of expenditures, transactions or recoveries of capital.

Adjusted Gross Income

Amount of income remaining after the expenses of earning that income have been deducted.

AFR Applicable Federal Rate. See IRS Discount Rate.

Alternative Minimum Tax

An alternative tax to the regular income tax designed to ensure that individuals pay at least a minimum tax.

American Council on Gift Annuities

The American Council on Gift Annuities is a national organization that reviews and recommends payout rate schedules for charitable gift annuities. Clarkson adheres to this schedule through its registration in NYS. This rate schedule ensures a prudent investment policy and equal treatment of all annuitants.

Annual Gift Tax Exclusion

The first $14,000 (for 2013) that a taxpayer gives to another individual each year is excluded from gift tax.  For example, a couple with 2 children can give $56,000 to their children each year without making a taxable gift, since there are 2 donors and 2 recipients: 2 x 2 x $14,000 = $56,000.

Annual Report

A voluntary report published by a foundation or charity describing its activities and financial condition. It may be a simple typed document or an elaborately detailed publication.

Annuitant(s)

The person(s) receiving annual payments from a gift annuity.

Annuity

An agreement whereby an individual receives a stated amount of income on an annual basis.

Annuity Trust

See Charitable Remainder Annuity Trust.

Applicable Federal Midterm Rate

See IRS Discount Rate

Applicable Federal Rate See IRS Discount Rate.

Appreciated Property

Any non-cash property that has increased in value since you purchased it. That increase in value is known as "capital gain."

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Bargain Sale

A method whereby you can sell appreciated property at a price  lower than the fair market value to Clarkson, with Clarkson realizing the difference as a gift.

Basis

What you originally paid for something, often called “cost basis."

Beneficiary(ies)

One who "benefits," usually the recipient(s) of income from a gift with lifetime income, or recipients to a pension plan or life insurance policy.

Bequeath

 To dispose by will of personal property, especially money.

Bequest

A gift intention (especially money) described usually in a person's will or living trust. Bequests may be made to individuals, charities or other organizations. Bequests to charities are called "charitable bequests."

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Capital Campaign

An organized drive to raise substantial funds to finance major needs of a charity, most often facility construction or renovation projects. Funds from limited sources are counted in the campaign. (See also Comprehensive Campaign).

Capital Gain

The amount of appreciated value in excess of the original amount paid for the property.

Capital Loss

Loss sustained in the sale or exchange of capital assets.

Carry Forward Deduction

See Carryover Deduction

Carryover Deduction

Carryover is the amount of a charitable gift a taxpayer can deduct on his/her next income tax return. Also known as “carry forward,” it arises because the charitable income tax deductions that a taxpayer may take in a year are limited by the taxpayer’s adjusted gross income (AGI). Gifts of cash and other non-appreciated property are limited to 50% of the taxpayer’s AGI. Within the 50% limit, gifts of appreciated property are further limited to 30% of the taxpayer’s AGI.  A taxpayer can deduct on the next tax return the portion of a charitable deduction that he/she cannot use because of the 30% or 50% limitations, again subject to the same limitations. The taxpayer can continue to report this carryover, as needed, on up to six tax returns: the tax return for the year of the gift plus the following five tax returns.

Cash Surrender Value

The amount of money received by a policyholder from a life insurance company when the holder surrenders the policy for cash prior to the maturity date.

Challenge Grant

A gift made on the condition that other funding be secured, either on a matching basis or by some other formula, usually within a specified period of time, with the objective of encouraging expanded fundraising from additional sources.

Charitable Estate Planning

Estate planning which includes provision(s) for a charity (like Clarkson) to receive a portion of the person's assets.

Charitable Gift Annuity

An agreement in which you make a gift to Clarkson, which in turn provides guaranteed annual income payments to 1 or 2 annuitants for life.

Charitable Income Tax Deduction

The amount you can deduct from your federal income tax return for a gift to Clarkson.

Charitable Lead Trust

A gift vehicle often used to transfer high value assets to heirs at reduced tax cost while making a gift to Clarkson. The donor irrevocably transfers assets to a trustee. The donor receives a gift tax deduction equal to the value of the income stream promised to Clarkson.  Unlike income tax deductions, gift tax deductions are not subject to IRS limitations. Each year, the trust pays an amount, either fixed (charitable lead annuity trust) or variable (charitable lead unitrust), to Clarkson. The lead trust's term may be for a specific number of years (10-20 years is common), one or more lifetimes, or a combination of the two.  Payments are made out of trust income, or trust principal if the trust income is not adequate.  If trust income exceeds the charitable payment in a given year, the trust pays income tax on the excess. When the lead trust term ends, the trust distributes all of its accumulated assets to family members or other beneficiaries named by the donor.

Charitable Midterm Federal Rate See IRS Discount Rate.

Charitable Remainder Annuity Trust

You transfer property to a trustee (like Clarkson) subject to your right to receive a fixed percentage of the initial fair market value of the property for as long as you live (or for a period of up to 20 years). The remainder in the trust ultimately goes to Clarkson.

Charitable Remainder Interest

The amount expected to be ultimately received by charity from a charitable remainder trust.

Charitable Remainder Unitrust

Similar to the Charitable Remainder Annuity Trust (above), except that the income is a percentage of the fair market value of the property, determined annually.

CGA

See Charitable Gift Annuity

CLAT

Charitable Lead Annuity Trust. See Charitable Lead Trust

Closely Held Stock

Generally refers to stock in a family business where 1 or 2 individuals own most or all of the shares.

CLUT

Charitable Lead Unitrust. See Charitable Lead Trust

CMFR Charitable Midterm Federal Rate.  See IRS Discount Rate.

Codicil

An addition or amendment to your will.

College Gift Annuities See Commuted Payment Gift Annuity.

Community Foundation

A community foundation is a publicly supported foundation that supports charitable organizations in a specific geographic area.

Community Property

Assets held by spouses in a community property state which are attributable to earnings by either spouse during the marriage; each spouse holds a half ownership and income right in such community property.

Commuted Payment Gift Annuity This annuity includes an option for the annuitant to exchange his/her lifetime payments for a fixed number of payments.  Often called a "college annuity plan" to make payments while a student is attending school.  New York State law prohibits charities in NYS to create commuted payment gift annuities.

Comprehensive Campaign

An organized drive to raise substantial funds to finance major needs of a charity, including construction, renovation, endowment, outright, program and scholarship needs. Many types of gifts from many sources are counted in the campaign. (See also Capital Campaign).

Consideration

A thing of value exchanged for something else of value.

Corporate Foundation

A foundation that receives its income from a profit-making company but is a legally independent entity. This type of foundation often carries the name of the parent company. Corporations may fund these foundations with a donation of permanent assets or with periodic contributions.

Corpus

The amount (body) of principal in a trust or endowment.

Cost Basis

What you originally paid for something. The term is often shortened to "basis."

CRAT

Used to describe a Charitable Remainder Annuity Trust, whereby your annual income is determined by a percentage of the trust when it is created. The amount of that annual income does not change in subsequent years.

CRUT

Used to describe a Charitable Remainder UniTrust, whereby your annual income is a set percentage of the trust's value as determined each year.

Current Gift

A gift that you make now and that the charity will use now.

Current Market Value

A price representing what a willing and unpressured buyer would pay for property held by a similarly situated seller. This term is used interchangeably with fair market value.

Current Pledge

A promise to make a gift, in whole or in parts, within the near future, generally up to a maximum of 5 years.

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"Death Tax"

See Federal Estate Tax.

Declining Grant

A multi-year grant that lessens each year in the expectation that the recipient organization will increase its fundraising from other sources.

Deduction

A legislatively granted privilege to subtract some amount from a taxpayer's income.

Deferred Gift

A gift to charity that is planned now, but is not received by the charity until some time in the future.

Deferred Gift Annuity

A gift annuity agreement providing for payments to commence at least one year into the future and to continue for life.

Depreciated Property

Property that has decreased in value since purchased. The decrease in value is known as "capital loss."

Depreciation

Depreciation is a reduction in the value of property, such as stock or real estate.

Devise

A will or clause in a will disposing of property, especially real property.

Discount Rate

See IRS Discount Rate

Dividends

The amount of money paid each year on a life insurance policy or share of stock to the shareholder or the policyholder.

Donee

Individual or organization that receives a grant. Also called a grantee.

Donor

Individual or organization that makes a grant. Also called a grantor.

Donor Advised Fund

A fund, often at a charity, established by an individual or family that allows distributions to be made to various charities.

Durable Power of Attorney

A written document given by one person or party to another authorizing the latter to act for the former. Also known as a Power of Attorney.

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Eleemosynary

Dependent on, or supported by the charity of others; pertaining to charitable donations; derived from or provided by individual charity.

Endowment

A pool of property held by charity and invested to provide an annual income for use by the charity.

Estate Planning

Planning for the management of all of your assets for your benefit and the benefit of your heirs.

Estate Tax

See Federal Estate Tax.

Exclusion Ratio

A division of annuity payments which permits the recipient to exclude from his or her taxable income the portion representing return of capital.

Executor

The personal representative (male) named in a will to settle the testator's estate.

Executrix

The personal representative (female) named in a will to settle the testator's estate.

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Fair Market Value

The amount of money a willing buyer will pay a willing seller for property.

Family Foundation

A form of private foundation funded through family contributions and investment income and run by family members, who determine the charitable distributions, reflecting the goals and values of the family.

Federal Estate Tax

The tax on an individual's right to transfer property to others at death.

Federal Gift Tax

The tax imposed on the transfer of property from one individual to another during the lifetime of the donor. The donor pays this tax (this does not include charitable gifts).  See also Annual Gift Tax Exclusion.

Federal Income Tax

The tax on an individual's right to receive income.

Fiduciary

A person or entity charged with taking certain actions for the benefit of another person (a beneficiary).

Five-year Carryover Rule

A federal income tax provision that permits a taxpayer to carry over into 5 succeeding tax years any amount of a gift that exceeds the deductible amount in the year the gift is made.

Flexible Deferred Gift Annuity A flexible deferred gift annuity contract lists a series of elective payment start dates and the annuity amounts Clarkson will pay when the annuitant(s) selects a particular start date.

Flip Trust

A charitable trust that "flips" based on a predetermined event (like a certain birthday) from a net income to a standard unitrust.

Form 990

The tax information form filed annually with the IRS and the state Attorney General's office by all tax-exempt organizations.

Form 990 PF

The tax information form filed annually with the IRS by all private foundations. This form provides financial information, names of officers, trustees or directors, and a list of grant recipients and amounts contributed during the year.

Foundation

A private nonprofit organization with funds and a program managed by its own trustees and directors, established to further social, educational, religious or other charitable activities by making grants. A private foundation receives its funds from, and is subject to control of, an individual family, corporation or other group of limited number.

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Generation Skipping Transfer Tax

A federal tax imposed when a gift is made that "skips" a generation, e.g. from grandparent to grandchild. Also known as generation skipping tax.

Gift

Generally refers to an asset, or your time, given freely to charity to advance the work of the charity.

Gift Annuity

See Charitable Gift Annuity.

Gift Planning

The process of making the most of your charitable volunteering and giving over the course of your lifetime, maximizing the benefits of your gifts and your plans, both for you and for charity.

Gift Planning Officer

That's the real nice person at Clarkson who helps you plan your giving.

Gift Tax

See Federal Gift Tax.  See also Annual Gift Tax Exclusion.

Gift With Lifetime Income

A charitable giving arrangement where you generally receive an annual income of some percentage of the gift for the rest of your life.

Grant

The award of funds to an organization to undertake charitable or tax-exempt activities.

Grantee

Individual or organization that receives a grant. Also called a donee.

Grantor

Individual or organization that makes a grant. Also called a donor.

Gross Estate

All assets which a decedent owned at his or her death (plus any gift tax paid by decedent on gifts made within three years before death), to deductions and exemptions allowed against the estate tax.

Gross Income

For federal income tax purposes, all receipts of income (minus cost of goods sold for businesses), except items (such as pension benefits accrued but not yet paid) exempted from gross income by specific statutory provision.

GST Tax See Generation Skipping Transfer Tax.

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Health Care Proxy

A document authorizing someone else to make health care decisions for you if you are unable.

Holding

Your ownership of something, e.g. "holding property for one year and a day."

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Income Beneficiary

A person who receives payments from a life income plan, such as a charitable gift annuity or charitable remainder trust.

Income in Respect of a Decedent

Income in respect of a decedent (IRD) is income to which a person is entitled at death and that was never taxed during the person's life. Examples include unpaid wages, deferred compensation and qualified retirement plan distributions (including IRAs). IRD is subject to both estate tax and income tax. A donor can avoid much or all of these taxes by funding a gift to charity with IRD rather than other assets.

Income Tax

The tax a taxpayer must pay on his or her taxable income. Taxable income equals a taxpayer's adjusted gross income minus all allowable deductions.

Income Tax Deduction

A deduction that an individual may declare on his/her income tax return that reduces the amount of income tax the taxpayer owes.

In-Kind Contribution

A gift to charity in the form of goods or services rather than a cash contribution.

Internal Revenue Code

The laws governing taxation in the United States, administered by the Internal Revenue Service.

Intestate

Having died without a valid will. In this case, state law determines the distribution of the decedent's assets.

Investment in the Contract

For annuities, the cost of the annuity.

IRA Charitable Rollover

When authorized by law, the ability to make a gift directly from your IRA to charity without declaring the transfer as income.

IRA Rollover

See IRA Charitable Rollover, above

IRD

See Income in Respect of a Decedent

Irrevocable

A decision that cannot be changed. An irrevocable gift cannot be taken back once it has been made.

IRS Discount Rate

The IRS discount rate is used to determine the charitable deduction for planned gifts such as charitable remainder trusts and gift annuities. The rate is the annual rate of return that the IRS assumes the gift assets will earn during the gift term. The IRS discount rate is published monthly. It equals 120% of the annual mid-term rate, rounded to the nearest 0.2%. The higher the IRS discount rate, the higher the deduction for charitable remainder trusts and gift annuities, and the lower the deduction for charitable lead trusts and retained life estates.

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Joint-and-Survivor

In life income gifts, the ownership of income rights by two (or more) persons (usually husband and wife) until the death of the survivor of such persons.

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Legacy

The result of your lifelong philanthropy. Also, an estate gift of property, especially personal property and money.

Life Estate Contract

A contract whereby you transfer title to your home or farm to Clarkson, reserving the right to live in or on the property and receive any income therefrom. The property ultimately passes to Clarkson.

Life Expectancy

The actuarial estimate of the number of years someone will live from any given age.

Life Insurance Gift

An assignment of life or death benefits to charity through an insurance policy.

Life Income Beneficiary

The recipient of income from property during the life of a person (usually for the life of the recipient).

Living Trust

A flexible agreement whereby you transfer and manage property in a trust, (not a charitable remainder trust). Whatever remains in the trust ultimately passes to the beneficiaries of the trust as stated in the trust document. Also known as a revocable living trust.

Living Will

A legal document that expresses your wishes for the extent of life-prolonging medical care you wish to receive if you are unable to communicate.

Long Term Capital Gain

The capital appreciation realized from the sale of property that you have owned more than 12 months.

Long Term Property

For charitable giving purposes, this is property, real or personal, that you have owned for at least 1 year and 1 day.

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Marital Deduction

The unlimited amount of money and property you can transfer to your spouse tax-free.

Matching Grants Program

A corporate contributions program that will match contributions made by employees, retirees and their spouses to qualifying nonprofit organizations. Specific guidelines regarding the type of organizations included, donor eligibility and the dollar amount which will be matched are established by each corporation.

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Net Income Plus Make-up Unitrust

(NIMCRUT) The same as the net income unitrust (see below) except for the provision that the payments may exceed the stated percentage, up to but not exceeding the amount required to make up any accumulated deficiencies for prior years.

Net Income Unitrust

(NICRUT) A variation of the charitable remainder unitrust which provides that the trustee pays you either an amount equal to a fixed percentage of the net fair market value of the trust assets determined annually, or the actual income earned, whichever is less.

Net Present Value

The equivalent value of an amount in today’s dollars, given its value at a specific time in the future. Also known as present value.

NICRUT

See Net Income Unitrust.

NIMCRUT

See Net Income Plus Make-Up Unitrust.

Nonprofit

A term describing the Internal Revenue Service's designation of an organization whose income is not used for the benefit or private gain of stockholders, directors or any other persons with an interest in the company. A nonprofit organization's income must be used solely to support its operations and stated purpose.

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Operating Support

Contributions toward an organization's day-to-day, ongoing expenses, such as salaries, utilities, office supplies, etc.

Ordinary Income

Income that is subject to ordinary income tax rates. Sources of ordinary income include wages, dividends, interest, and retirement plan distributions.

Ordinary Income Property

Property which produces income which is taxed at your ordinary income tax rate.

Outright Gift

An irrevocable transfer from a donor to a charity of securities, real estate, tangible personal property, or other assets in which the donor receives nothing of value from the charity in return. 

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Payout Percentage

The percentage that is used to determine how much you will be paid annually by creating a gift-with-income arrangement.

Pension Plan Gift

A gift to charity by way of an assignment of a beneficiary interest in a retirement plan.

Personal Property

All movable property not fixed to land. This includes money, stocks and bonds and other types of intangible assets of value.

Philanthropic Advisor

An individual or firm who provides counseling and evaluative services to donors before and after grantmaking decisions.

Philanthropy

The planning and donation of your "time, talent and treasure" for the greater good of society and our world.

Planned Giving

Making gifts to charity resulting from a planning process which considers the effects of the gift on your estate.

Pledge

A promise to make a charitable gift, either in whole or in parts, within a certain period of time, usually a maximum of 5 years.

Pooled Life Income Fund

An arrangement whereby you, and many other donors, transfer cash or securities to a charity's pooled life fund trust and receive a pro rata share of the net income for life. The remainder ultimately goes to charity.

Power of Attorney

A written document given by one person or party to another authorizing the latter to act for the former. Also known as a Durable Power of Attorney.

Present Value

The equivalent value of an amount in today’s dollars, given its value at a specific time in the future. Also known as net present value.

Primary Annuitant

A person who receives the annuity payments prior to the second (survivor) annuitant.

Primary Beneficiary

The first person (or maybe charity) named to receive the proceeds of a will or pension plan.

Principal

The core asset(s) in an endowment or trust, the amount that is invested. Also known as corpus.

Principle

Not an asset in an endowment or trust. You may give to charity because of your principles. What you give may become the principal in an endowment.

Private Foundation

A form of charitable organization set up by an individual or group of individuals, typically family members, to support public charities of their choosing. 

Probate

The "proving" of your will. When a person dies, the will is taken to the probate court to prove that it is indeed that person's last will and testament.

Publicly Traded Securities

Stocks, bonds, and other securities that are traded on a public exchange, such as the New York Stock Exchange or NASDAQ.

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Real Estate

A term used to describe land and/or constructions on that land.

Realized Capital Gains

Gain from a sale of capital gain assets that the income recipient must report as taxable income on his or her income tax returns. (By contrast unrealized capital gain is appreciation in capital assets prior to the sale of such assets).

Real Property

Generally refers to items, other than real estate, that have physical substance, e.g. jewelry, artwork, automobiles, etc.

Related Use

Whether or not a charity will put a gift of tangible personal property, such as artwork, to a use that is related to the organization’s charitable purpose. The deduction for a gift of tangible personal property is based on the fair market value of the property only if the charity will put it to a related use. Otherwise, the deduction is based on the donor’s cost basis in the property.

Remainder

In charitable giving, that's what is left when the gift plan ends. The remainder is what ultimately passes to the charity.

Remainderman

In charitable gift plans, this usually refers to the charity that will receive what is left when the gift plan terminates.

Residue

Property left for the final beneficiaries named in a will after all other bequests have been satisfied.

Residuum In Charitable gifts, this is what is left to pass to charity when the gift plan ends.  Often used to describe the remainder for charity when a gift annuity ends. 

Restricted Gift

A gift that is used for a purpose as defined by the donor. For example, a donor might restrict his/her gift to scholarship support.

Retained Life Estate

A gift plan that allows an individual to donate a home or farm to Clarkson while retaining the right to live there for life.

Return of Principal

A distribution to an individual of property that was originally used to fund the trust or annuity.  Typically, such property was taxed before it was used to create the trust or annuity.  Therefore, return of principal typically is not taxed to the recipient.

Revenue Ruling

A declaration of practice by the Internal Revenue Service based on a definite set of facts.

Revocable

A decision that can be changed. If your plan for a future gift is revocable, it means that you can change your mind about making the gift. For example, a bequest intention can be changed, therefore it is revocable.

Revocable Living Trust

A flexible agreement whereby you transfer and manage property in a trust, (not a charitable remainder trust). Whatever remains in the trust ultimately passes to the beneficiaries of the trust as stated in the trust document.

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S Corporation

A form of corporation in which all taxes of the corporation flow through to the tax returns of the shareholders.  Like shareholders of public corporations, the shareholders of an S corporation are not responsible for the liabilities of the corporation.

Savings Bonds

See Series EE Bonds 

Secondary Beneficiary

Person (or charity) named to receive the proceeds of a life insurance policy or retirement plan should the primary beneficiary predecease.

Securities

A term that describes ownership of something as represented by a certificate, used today to describe stocks, bonds and mutual funds whether a certificate is issued or not.

Seed Money

A grant or contribution used to start a new project or organization.

Self-and-Survivor

In annuities, a contract providing that payments should go first to the purchaser for his or her life and then to a second person for the period of his or her survivorship.

Series EE Bonds

A form of U.S. Savings Bond that was introduced in 1980. Series EE bonds are purchased at a discount and redeemed for their face value when they mature. Federal income tax is due on a Series EE bond only when it matures. The tax is applied to the difference between the face value and purchase price of the bond at ordinary income tax rates. The owner of a maturing Series EE bond can exchange it for an interest bearing Series HH bond in lieu of paying federal income tax on part of the bond proceeds. The transfer of Series EE bonds is severely restricted. Generally speaking, they cannot be given directly to charity; they must be cashed in and the proceeds given instead.

Series HH Bonds

A form of U.S. Savings Bond that was introduced in 1980. Series HH bonds bear interest that is exempt from state and local taxes. The only way to acquire Series HH bonds is for the owner of a maturing Series EE bond to exchange it for a Series HH bond. The transfer of Series HH bonds is severely restricted. Generally speaking, they cannot be given directly to charity; they must be cashed in and the proceeds given instead.

Short-Term Property

For charitable giving purposes, this is property, real or personal, that you have owned for less than 1 year. The charitable income tax deduction of the cost basis for a gift of short-term property can usually be up to 50% of adjusted gross income.

STANCRUT

A "standard" or "straight" unitrust. See Charitable Remainder Unitrust.

Standard Deduction

The federal income tax deduction for taxpayers that do not itemize their deductions. Taxpayers who take the standard deduction instead of itemizing currently enjoy no income tax benefit from making charitable donations.

State Inheritance Tax

A state tax on your right to receive property at the death of someone else.

Stepped-up Basis

The recognition of a new cost basis value because of some defining event, e.g., the inheritance of stock from a deceased individual.

Surviving Annuitant

A second person who outlives the primary annuitant and enjoys the annuity payments for the balance of the surviving annuitant's life.

Survivorship Gift Annuity

An annuity that provides income to a second beneficiary at the death of the first beneficiary.

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Tangible Personal Property

A physical object or objects, such as a car, a plane, or a coin collection. A charitable gift of tangible personal property is deductible up to its fair market value only if the charity puts the gift to a use that is related to the organization’s charitable purpose.  Otherwise, the gift is deductible only up to the donor’s cost basis.

Taxable Gift

A transfer of assets from one person to another that is subject to gift tax. The federal annual gift tax exclusion allows every person to transfer up to $14,000 in 2013 to each of any number of other people (the $14,000 is indexed for inflation and may change in future years).  Transfers above this amount are taxable gifts.

Tax Credit

A deduction from taxes owed.

Tax Exempt Bonds

Bonds issued by a municipality. In many states they are free from federal and state income tax.

Tax Exempt Status

Freedom from any tax obligations of a designated nature. A public charity usually has tax-exempt status, which means both that the charity itself is exempt from paying most income taxes, and contributions to the charity may be deductible by the donor for income tax, gift tax, and estate tax purposes.

Tax-Free Income

Earned income that is not subject to income tax. For example, municipal bonds generate income that is not subject to federal or state income tax in the state of origin.

Term Life

Life insurance that is purchased for a term of years. The policy expires at the end of the stated number of years.

Testamentary

An action taken through your will. A testamentary charitable gift, for example, is a gift to charity that is designated in your will.

Testamentary Gifts

Gifts made through your will.

Testamentary Trust

A trust created by a provision in your will.

Testator

That's you when you are making your will.

Tier Structure

The order in which you must report income from a gift with income vehicle: 1. Ordinary income; 2. Capital gain income; 3. "Other" income; 4. Return of principal.

Trust

A separate legal entity that is used to hold assets, usually for management and investment.

Trustee

The person or institution responsible for the administration of a trust.

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Unitrust

See Charitable Remainder Unitrust.

Unlimited Marital Deduction

The transfer tax deduction available for qualifying transfers between spouses.  There is no limit to this deduction, no matter how large the transfer.

Unrealized Capital Gain

The difference between the current fair market value of property and its original cost basis. The gain is not realized until the property is sold.

Unrelated Business Income

Receipts of a charitable institution which are so unconnected with its charitable purpose that the income is subject to income tax.

Unrestricted Gift

A gift that can be used by charity where the need is greatest at the time the gift is made. You place no restrictions on how the gift may be used.

U.S. Savings Bonds

See Series EE Bonds

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Vested

An immediate and fixed right to present or future enjoyment of a property interest (as opposed to a contingent interest, which will vest only if certain specified events occur in the future).

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Wealth Replacement Plan

A charitable giving plan combining an income producing planned gift with the purchase of a life insurance policy. The policy "replaces" for the donor’s heirs the assets used to fund the gift.

Will

Your statement to the public regarding the disposition of your property at death.

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Zero Coupon Bond

A bond that makes no periodic interest payments, but is instead sold at a deep discount from its face value. Although the owner of the bond receives no interest payments, he or she is taxed on the income of the bond each year.

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