Planned Giving - Oral Roberts University

Glossary of Terms

Annuitant-- A person who receives, or who is planning to receive, payment from an annuity.

Annuity (Charitable)-- This is an irrevocable agreement between a nonprofit institution and a donor. The nonprofit agrees to pay the donor a fixed rate of return for life on assets transferred to the nonprofit. The asset value will exceed the value of the guaranteed annuity of the nonprofit.

Annuity (Charitable Deferred)-- The annuitant agrees to defer the start of payment until at least one year after the annuity has been funded.

Annuity Payments-- These are the principal and interest the annuitant or beneficiary receives as payment. A part of each payment is considered a return of assets; therefore, it is received tax-free. The remainder of the payment is considered ordinary income for tax purposes. When appreciated property is used to fund an annuity, parts of the payments are considered taxable capital gain.

Annuity Reserves-- Arequired amount of money held in investment by the nonprofit in order to guarantee the lifetime payment to the annuitant(s).

Appreciated Property-- This isproperty with greater current market value than when the property was first purchased.

Beneficiary-- An individual or entity named to receive some assets.

Bequest-- A testamentary gift .

Charitable Gift-- A gift to a qualified charitable organization that is eligible for tax benefits.

Charitable Lead Trust-- The Charitable Lead Trust provides income to the charity for a term of one year, then transfers the assets to a non-charity.

Charitable Remainder Annuity Trust-- An annuity trust pays a fixed amount annually to the contributor or designated beneficiary. The fixed amount must be equal to/not less than 5% of the initial fair market value of the property placed in the trust.

Charitable Remainder Interest-- This is the amount the charity expects to receive from the Charitable Remainder Trust at the death of the trustor.

Charitable Remainder Unitrust-- This is a vehicle for a donor to irrevocably transfer property into a trust. In exchange, the donor and/ or beneficiaries receive specified distributions, at least annually, for their life(s) or for a term of years. After the term of years or the life of the donor/beneficiaries, the remainder of the principal passes to the charity. The donor receives an income tax deduction, in the year of the contribution, for the fair market value of the remainder interest of the gift. The remainder interest must be at least 10% of the amount contributed.

Different Types of Payout Trusts

Standard Unitrust. The unitrust pays out a fixed percentage of the fair market value of the trust. If the trust income is not sufficient to make the agreed payout, the principal must be distributed to satisfy this requirement.
Net Income with Make-up. This trust pays a stated percentage or net income (earned by the trust), whichever is less. These payments may exceed the percentage up to, but not exceeding, the amount required to make up any accumulations deficiencies from prior years in which the trust income was less than the stated percentage.
Net Income Unitrust without Make-up. This trust payout requires the distribution of a fixed percentage (at least 5%) of the value of the assets in the trust or the net income, whichever is less. If income falls below the stated percentage of the assets, only the actual income earned has to be distributed. Income not paid is not made up in future payments.

Codicil-- An amendment to a will.

Contest of Will-- An attempt, by legal process, to prevent the probate of a will or the distribution of property according to the will.

Donor-- The person or persons making the gift.

Donee-- Any person or persons receiving a gift.

Estate Plan-- A plan to organize and manage an individual’s possessions and, after death, to arrange for the disposition of those assets for the benefit of their heir(s).

Fair Market Value-- I.R.S. Regulation Section 17OA-I(c)(2) says, regarding charitable deductions: "The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having a reasonable knowledge of relevant facts."

Fiduciary-- The person or entity who is responsible for managing the assets for the benefit of others.

Heir-- The person or entity who receives assets by way of will, trust, or virtue of law.

Holographic Will-- This is a handwritten will in the handwriting of the person who is making the will. It must be signed and dated in the same handwriting. Not all states recognize the holographic will.

Joint Tenancy with Right of Survivorship-- This is when two or more people hold title jointly and equally to share during their lives. Each owner can sell or give away their share during their life but cannot pass it on by way of will or trust.

Life Income Gift-- A irrevocable gift of an asset (cash, stock, or real estate) to a charitable organization. The donor receives a life income in the form of an annuity or trust agreement. This can be set up to pay one life or two lives.

Revocable Living Trust-- A trust that can be rescinded, canceled, or repealed by the creator or grantor of the trust. Specified instructions are also included for the successor trustee in case the grantors are unable to perform their duties.

Successor Trustee-- The designated person or institution who will assume administrative responsibilities if the grantor or first-named trustee should die or become unable to perform his or her duties.

Trustee-- The person or entity who administers the assets in a trust agreement. This person holds legal title to the assets in the trust and must abide by the instructions outlined in the trust document.

Trustor(Grantor)--The person(s) who creates a trust.

Trust-- A legal, contractual written agreement created and funded by an individual whereby one or more persons or institutions hold and manage assets for the benefit of a beneficiary. The beneficiary can be one or more people or a charity. Both of the following types of trust avoid probate:

Irrevocable-- Once the trust documents have been executed, the trust cannot be changed.
Revocable-- This trust, also known as a living trust, can be changed and edited during the lifetime of the grantor.

Will-- This is an individual’s legal declaration of his or her desires to distribute his or her assets after death. Upon the death of the creator of the will, the will is filed with the Probate Court. Each state has its own governing laws for the probate system. The will then becomes a public document.