Annual Exclusion
The amount of property (presently $11,000 or $22,000 for a married couple) that may annually be given to a donee, regardless of the donee’s relationship to the donor, free of gift tax. Only gifts of present interests qualify for the annual exclusion. Pursuant to the Taxpayer Relief Act of 1997, beginning in 1999, but using 1997 as the base year, the gift tax annual exclusion will be adjusted annually for inflation, rounded down to the nearest $1,000.
Annuitant
An individual who receives or is qualified to receive an annuity.
Annuity
The financial arrangement or contract an annuitant makes with a third party (family members, insurance company or charity) in which he or she will receive a specific amount at stated intervals for life or for a term certain in consideration of either cash or other assets.
Appreciated Assets
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 gains (either long-term or short-term depending on the holding period).
Basis
The original acquisition price is the cost basis. Adjusted basis is generally cost basis less any allowance against basis, such as depreciation, plus any additional investment in the asset. Adjusted basis normally is the value used for tax purposes to determine gain or loss.
Beneficiary
(1) The person for whose benefit a trust is created. (2) The person to whom the amount of an insurance policy or annuity is payable.
Bequest
A gift of personal property by will; a legacy.
Capital Gains (and Losses)
The difference between purchase price and selling price in the sale of assets. The computation is used primarily in tax computations.
Carryover Basis
Treatment for capital gains tax purposes of a recipient’s basis in appreciated property when a recipient takes the donor’s basis. For gift tax purposes, the recipient takes the donor’s basis. Pursuant to the 2001 Tax Act, upon full repeal of the estate tax currently scheduled for 2010, a modified carryover basis regime will apply to property passing at a decedent’s death rather than the current step-up in basis.
Charitable Bequest
A gift of personal property to a legal charity by will.
Charitable Gift Annuity
Offered through a charity and provides income for the annuitant and a second beneficiary, if any. The annuitant (the person investing funds through 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.
Charitable Lead (Or Up-Front) Trust
A trust for a fixed term of years wherein a charity is the beneficiary of an annuity or unitrust payment and the remainder goes to a non-charitable beneficiary.
Charitable Lead Annuity Trust
A charitable lead trust in which an annuity is paid to one or more charities for a set term or the life or lives of one or more individuals with the remainder passing to one or more private individuals.
Charitable Lead Unitrust
A charitable lead trust in which a fixed percentage of the trust assets, valued annually, are paid to one or more charities for a set term of years or the life or lives of one or more individuals with the remainder passing to one or more individuals.
Charitable Remainder Trust
An arrangement wherein the remainder interest goes to a legal charity upon the termination or failure of a prior interest.
Charitable Remainder Annuity Trust
A trust which provides a sum certain, not less than five percent of initial fair market value of all property placed in trust, to be distributed at least annually to a non-charitable beneficiary, with remainder to a qualified charity.
Charitable Remainder Unitrust
A trust which provides a fixed percentage, not less than five percent of net fair market value of property, valued annually, to be distributed at least annually to a non-charitable beneficiary, with remainder to a qualified charity.
Codicil
A written change or amendment made to a will.
Corpus
The fund or capital upon which income is earned; also called principal.
Cost Basis
The original price or cost of an asset usually based on the purchase price or, in the case of assets received from an estate, or the appraised value of the assets at the death of the donor or some anniversary or other fixed date.
Deferred Gift
Any arrangement whereby money or property is set aside for the future use of a charity.
Donor Advised Fund
An account established with a public charity or with a public charity created by a private financial institution which permits the donor to have, in effect, a separate charitable entity without the need to establish a private foundation.
Estate Tax
A tax imposed on a decedent’s estate as such and not on the distributive shares of the estate or on the right to receive the shares; to be distinguished from an inheritance tax.
Executor
The person or entity (often a bank) nominated in the will of another to carry out the terms of the will.
Fair-Market Value
The price at which a fully informed seller who is not being forced to sell would be willing to sell an asset to a fully informed buyer who is not being forced to buy.
Fiduciary
An individual or a trust institution charged with the duty of acting for the benefit of another party as to matters coming within the scope of the relationship between them. The relationship between a guardian and his ward, an agent and his principal, an attorney and his client, one partner and another partner, a trustee and a beneficiary, each is an example of fiduciary relationship.
Gift Tax
A tax imposed by the federal government since 1932 and by some states on transfers of property by gift during the donor’s lifetime. Gifts, under this law, may include irrevocable living trusts.
Inter Vivos Trust
A trust created during the settlor’s lifetime; the same as a living trust; to be distinguished from trust under will or testamentary trust.
Intestate
(Adjective) (1) Without having made and left a valid will. (2) Not devised or bequeathed; not disposed of by will. (3) (noun) A person who dies intestate.
Irrevocable Trust
A trust which by its terms (1) cannot be revoked by the settlor or (2) can be terminated by him only with the consent of someone who has an adverse interest in the trust-that is, someone to whose interest it would be for the trust not to be terminated, such as a beneficiary; to be distinguished from a revocable trust with consent or approval.
Joint And Survivorship
A phrase usually applied to annuities under which, during the lifetime of both husband and wife, they are joint beneficiaries of the annuity and, after the death of either, the survivor becomes the sole beneficiary.
Joint Tenancy
The holding of property by two or more persons in such a manner that, upon the death of one joint owner, the survivor or survivors take the entire property; to be distinguished from tenancy in common and tenancy by the entirety
Last Will And Testament
A legally enforceable declaration of a person’s wishes regarding matters to be attended to after his death and not operative until his death; usually but not always relating to property; revocable (or amendable by means of a codicil) up to the time of his death or loss of mental capacity to make a valid will. Originally, "will" related to real property; "testament", to personal property, but at the present time, "will" is equally applicable to real and personal property.
Life Estate
Either an estate for the life of the life tenant alone or an estate for the life or lives of some other person or persons. If the estate is the life of a person other than the life tenant, it is known as an estate pur autre vie.
Life Interest
The estate or interest that a person has in property that will endure only during his own or someone else’s lifetime.
Life Tenant
One who owns an estate in real property for his own life or for another person’s life or for an indefinite period limited by a lifetime.
Living Trust
A trust that becomes operative during the lifetime of the settlor; as opposed to a trust under will. The same as a trust inter vivos.
Living Will
A document which allows a person to state in advance his or her wishes regarding the use or removal of life-sustaining or death-delaying procedures in the event of a terminal illness or injury.
Marital Deduction
The portion of a decedent’s estate that may be given to the surviving wife or husband without its becoming subject to the federal estate tax levied against the decedent’s estate. Currently, the deduction is unlimited in amount. Also applies to lifetime gifts to a spouse that are not subject to federal gift tax. See Qualified Domestic Trust.
Private Foundations
In general, all charitable foundations except those deriving substantial support from the public. They fall into two categories: private operating foundations, those where substantially all of the assets and income are used to carry on its exempt function, e.g., a museum; or private nonoperating foundations, which include most family foundations.
Remainder Beneficiary
The beneficiary of a trust who is entitled to the principal outright after the interest of the prior beneficiary has been terminated.
Residuary Estate
The property that remains after all other gifts in the will have been satisfied. Those who take the residuary estate are known as residuary legatees (as to personal property) and residuary devises (as to real property).
Retained Life Estate
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 income tax benefits in the year of the gift (the property is irrevocably deeded to the charity) and estate tax benefits.
Revocable Trust
A trust which may be terminated by the settlor or by another person; opposed to an irrevocable trust.
Stock Power
A form of assignment executed by the owner of stock which contains an irrevocable appointment of an attorney in fact to make the actual transfer on the books of the corporation. See also Power of Attorney.
Tangible Personal Property
Property other than cash, securities, or real estate (e.g., a painting, stamp collection, or automobile).
Testamentary Trust
A trust established by the terms of a will.
Trust
A fiduciary relationship in which one person (the trustee) is the holder of the legal title to property (the trust property) subject to an equitable obligation (an obligation enforceable in a court of equity) to keep or use the property for the benefit of another person (the beneficiary).
Trustee
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 executors job is finished, the trustees job begins.
Unified Credit
A credit of a specified dollar amount allocated to each taxpayer that may be used to offset gift and estate taxes that would otherwise be owed.
Will
A legally enforceable declaration of a person’s wishes in writing regarding matters to be attended to after his death and inoperative until his death. A will usually, but not always, relates to the testator’s property, is revocable (or amendable by means of a codicil) up to the time of his death, and is applicable to the situation which exists at the time of his death.
Contact Us
For a confidential discussion about making a gift to Cleveland Clinic, please call Institutional Relations and Development at 216.444.1245 and ask to speak with a member of our gift planning team or email giftplanning@ccf.org.
