Planned Giving Options and Definitions

Planned Gift or Planned Giving: “planned giving” or “planned gift” refers to any charitable gift that requires more thought and planning to execute than the average donation. Planned giving has traditionally been defined as the gift that an individual creates during his or her lifetime that will take affect at or after their passing. There are many kinds of planned gifts, including, but not limited to: simple bequests in a will or trust or within an estate plan, charitable gift annuities, charitable remainder trusts, charitable lead trusts, non-cash assets and assets transferred using pay-on-death or transfer-on-death documents.

Bequest Intention or Planned Gift Intention: This is a donor’s indication of his or her intent to leave a future gift. An intention is neither a legal nor binding commitment upon the donor’s estate. Rather, it’s a courtesy notification of the donor’s desire to make a future gift.  Those who invest in Little Flower’s future through their estate plans receive the agency’s deepest gratitude and special recognition and membership in the Saint Therese Lisieux Planning Giving Society.  Your gift will create a personal legacy of hope for others.

Bequest Notification or Planned Gift Notification: This is an estate representative’s official notification that a bequest or other estate gift has come to realization.

Bequest Expectancy or Planned Gift Expectancy: This is a term commonly used within planned giving programs to unofficially report the value or approximate value of gifts to be received in the future.

Charitable Bequest: This is a provision in a will, trust, or estate plan that allocates a gift to a designated charity. The most common gifts to nonprofit beneficiaries are cash, securities, and real property including homes and personal property (things).  Many wills and trusts are still written with quite formal language and might be similar to this example:

“I give, devise, and bequeath to Little Flower Children and Family Services of New York, a non-profit entity, located at 2450 North Wading River Road, Wading River, NY 11792, …

…the sum of $______.”

Or

…_____% of my residue estate.”

Or

….The rest and residue of my estate.”

Contingent Bequest: This is a provision in a will, trust, or estate plan that allocates a gift to a designated charity as an alternative to a higher priority bequest or condition to be met. Contingent bequests can also incorporate specific amounts, percentage amounts, or remainder amounts, such as the examples above, within them. For instance:

“In the event that (named individual) predeceases me, I give Little Flower Children and Family Services of New York, a non-profit entity, located at 2450 North Wading River Road, Wading River, NY 11792, 25% of the residue of my estate to be used wherever the needs and opportunities are greatest.”

Non-probate Transfer Vehicles: Half of all states in the U.S. now allow the use of “Transfer on Death Deeds” that provide for the transfer of real estate directly to another person or charity – by-passing the probate process. 1 Savings and checking accounts, money market and other investment funds including retirement funds (beneficiary on IRA, etc.) and life insurance policies with built-up savings also allow non-probate transfers. This large variety of transfer vehicles, also known of “beneficiary designation form gifts”, are fast becoming a preferred way to leave charitable gifts, especially among Baby-Boomers and younger generations.

Securities: Used for planned gift purposes, “securities” is a general term that includes the following: shares of corporate stock or mutual funds, bonds issued by corporations or governmental agencies, stock options or other options, limited partnership units, and various other formal investment instruments that can be exchanged for money.

Non-Cash Asset: When related to an outright gift or a planned gift, this term usually refers to an asset such as securities, life insurance policies, CDs, retirement accounts, real property, and the like. Conversely, gifts of currency and checks, as well as gifts using credit cards, are considered cash or cash-equivalent assets.

Real Property: “Real property” is a general term that encompasses land, land improvements such as buildings and machinery sited on the land, as well as the various property rights associated with owning the land, buildings, and machinery.

Personal Property or Tangible Personal Property: Think of this as things that can be touched or things that are tangible. Examples of gifts of tangible personal property to charities include book collections, art, and jewelry. It does not include however, cash or cash equivalents such as checking accounts.

Charitable Remainder Trust: This is an irrevocable trust that pays a specified annual amount to one or more people for a fixed period of years (often the life of the individual).  At the end of the terms of th trust, the remaining trust assets are distributed to the charity.

  • A charitable remainder annuity trust provides a fixed payment as determined and stated in the trust document.
  • A charitable remainder unitrust pays out a fixed percentage of the trust value each year as determined and stated in the trust document. The value of the unitrust is recalculated annually to determine the current payout.

Charitable Lead Trust: This is similar to a charitable remainder trust, except that the annual payments are given to a charitable organization and the principal reverts to the donor or to his or her designated beneficiaries at the end of the trust term.  If the principal reverts to the donor, he or she gets a charitable income tax deduction; if to another, that person gets a charitable gift tax deduction.

Income or Current Beneficiary: This is the person(s) or entity(ies) that receives the current income or distributions from a trust according to its terms.

Remainder Beneficiary: This is the person(s) or entity(ies) that receives the remaining assets from a trust when its controlling terms have been met or its term of years for existence has come to an end.

Life-Income Gifts: A generic term used to describe a variety of charitable gift vehicles that provide an income, usually for life, to a donor and/or his or her designated beneficiaries.  Life-income gifts include, among other things, charitable gift annuities, charitable remainder trusts, both unitrust and annuity trusts, and charitable lead trusts.

Split Interest Gifts: These gifts, usually involving property or business interests, start with the idea of making a partial gift of an asset to a charity while still retaining a partial interest in it.  Because the donor retains some portion of the assets or the income from the assets, the term “split interest gift” is derived.  The “split” refers to the fact that ownership is now divided between the original owner and – in our case – a charity.

Present Value: The value of a gift expected in the future would be worth today.  A future gift of $100,000 is not as valuable as a gift of $100,000 today due to factors such as inflation, currency fluctuations, and investment risk.  Financial advisors may use the phrase time value of money, referring to the way the value of money changes over time.  The present value of a gift of $100,000 to be received fifteen years from now, given a 3% discount, would have a present value of only $64,186.19.

Fair Market Value: This is an estimate of what a willing buyer would pay to a willing seller, in a free market, for an asset or a piece of property.

Capital Gains: When investment (or capital) assets are held for longer than a year and then sold to another person or given to a charity, the gain or appreciation in the value of the asset may be subject to government taxation on the gain (or profit).  When property subject to capital gains tax is donated to a nonprofit institution, that is tax-exempt, capital gains normally imposed might be avoided by the donation.  If the price of the asset has declined instead of appreciated, this is called a capital loss.  Property with a capital loss is subject to different taxation rules by the IRS and proposed gifts with property where a capital loss exists should be dealt with differently than those with a capital gain.  Capital gains and capital loses occur in both real assets, such as property, as well as financial assets, such as stocks or bonds.

Source:

Swank, K. (2015, April). 24 Planned Giving Terms You Should Know. A Glossary of Common Terms. Retrieved July 2015, 2015, from Blackbaud: https://www.blackbaud.com/files/resources/downloads/WhitePaper_23PlannedGivingTermsYouShouldKnow.pdf