Planned Giving Glossary of Terms

These decisions are best made in consultation with a financial advisory or attorney. This glossary is meant as an overview of some of the most common vehicles for making a planned gift. More information is available from the IRS.

Bequest

A gift by will of personal property; a legacy. I give (cash of $________ or  ____% of my estate or specified property) to (legal name of organization and tax ID number) to be used for (designation).

Capital Assets

For federal income-tax purposes, the property held by the tax payer (e.g. house, car, stocks, bonds). However, property that the tax payer creates, such as business inventory, is considered ordinary-income property, not capital-gain property.

Capital Gain

The gain (or profit) realized on the sale or exchange of a capital asset.

Endowment

Funds are designated into an investment account in which the principal funds are kept intact permanently and only the interest earned is used to help with on-going year-to-year operating expenses.

Legacy or Planned Gift

A legacy gift (a.k.a. planned gift, bequest or deferred gift) is a gift made as a dollar amount or percentage of a donor’s estate. These are pledges only and are not considered income until the bequest is actualized.

IRA (Individual Retirement Account)

An investment account in which a person can set aside income up to a specified amount each year and usually deduct the contributions from taxable income, with the contributions and interest being tax-deferred until retirement.

Life Insurance

Insurance that guarantees a specific sum of money to a designated beneficiary upon the death of the insured or to the insured if the insured lives beyond a certain age. You can designate a nonprofit as one of your beneficiaries in any amount or proportion of your choosing.

Pension Plan

An arrangement for paying death, disability, or retirement benefits to employees. Payments into the plan are ordinarily a tax-deductible expense for the firm, but any contribution by employees may or may not be deductible on personal tax returns. Likewise, retirement benefits paid to employees will be wholly or partially taxable.