The Center for Estate and Gift Planning
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Glossary
A B C D E F G H I J K-L M N O P Q R S T U V-Z
A Trust
The surviving spouse’s portion of an A-B trust. Also called marital trust or survivor’s trust.
A-B Trust
A living trust with a provision that lets you provide for your surviving spouse, keep control over who will receive your assets after your spouse dies, and leave up to $2 million (in 2002 and 2003) to your beneficiaries, estate-tax free. (Under current tax law, this amount will increase over the next several years as the federal estate tax exemption increases.)
Administration
The court-supervised distribution of an estate during probate. Also used to describe the same process for a trust after the grantor dies.
Administrator
Person named by the court to represent a probate estate when there is no will or the will did not name an executor. Female is administratix. Also called personal representative.
Alternate Beneficiary
Person or organization named to receive your assets if the primary beneficiaries named in your Trust die before you do.
Ancillary Administration
An additional probate in another state. Typically required when you own real estate in another state that is not titled in the name of your trust.
Annual Exclusion
Amount you can give someone each year without having to file a gift tax return or pay a gift tax. Currently $11,000 per recipient ($22,000 if married). The amount of tax-free gifts is tied to inflation and may increase from year to year.
Annual Gift
These are gifts that are made every year. Annual gifts provide ongoing support for Pepperdine University campuses, schools, departments, and programs.
Assets
Basically, anything you own, including your home and other real estate, bank accounts, life insurance, investments, furniture, jewelry, art, clothing, and collectibles.
Assignment
A short document that transfers your interest in assets from your name to another. Often used when transferring assets to a trust.
B Trust
The deceased spouse’s portion of an A-B trust. Also called credit shelter or bypass trust.
Basis
What you paid for an asset. The value that is used to determine gain or loss for income tax purposes.
Beneficiaries
In a living trust, the persons and/or organizations who receive the trust assets (or benefit from the trust assets) after the death of the trust grantor.
Bequest
A bequest is a very simple and uncomplicated way to help provide for the future excellence of Pepperdine University. A bequest may be of a specific sum, a percentage, or the residue of an estate, and may consist of cash, securities, life insurance proceeds, real estate, and/or personal property. A bequest may be made through a will or by a living trust, and should be directed to Pepperdine University "for the general benefit of Pepperdine University." Similar language can be used to direct a bequest to specific uses at the University.
By-Pass Trust
Another name for the "B" part of an A-B living trust because the assets in this trust bypass federal estate taxes.
C Trust
See "QTIP."
Cash
Cash gifts are outright gifts of checks, drafts, and money orders. If mailed before the end of the year, will enable those who itemize to take an income tax deduction for that year. Gift of cash are deductible for up to 50% of the donor's adjusted gross income. Cash contributions in excess of the deduction limitations may be carried over and deducted in the five tax years following the gift.
Certificate of Trust
A shortened version of a trust that verifies the trust’s existence, explains the powers given to the trustee, and identifies the successor trustee(s). Does not reveal any information about the trust assets, beneficiaries, or their inheritances.
Charitable Gift Annuity
In this case, the donor makes an irrevocable gift to Pepperdine University in exchange for life income payments. A charitable gift annuity is a contract between the donor and Pepperdine University, under which Pepperdine University guarantees payment of the annuity, unlike a trust, which pays the annuity from its assets alone. Two features in particular make charitable gift annuities appealing. An individual may specify whether he or she wants an immediate annuity, with payment to begin not later than one year from the date of the gift, or a deferred gift annuity, from which payments are not to begin until a specified future date. In addition, the income stream from such an arrangement can be higher than current market rates.
Charitable Lead Trust
These trusts provide income-either a percentage or a specified amount-to Pepperdine University for a specific number of years. At the termination of this period, the principal is returned to the donor or others whom the donor has designated. Under one type of charitable lead trust the donor includes the income in his or her taxable income, but is entitled to a corresponding charitable deduction, if he or she itemizes, of the amount of income paid to Pepperdine University in that year.
Charitable Remainder Annuity Trust
One of many types of available trusts, charitable remainder annuity trusts provide that a specified dollar amount (at least 5% of the fair market value of the assets at the time the trust is created) be paid at least once a year to the beneficiary(ies) for their lifetime(s) or for a term of years, not to exceed twenty.
Charitable Remainder Trust
In turn for the irrevocable transfer of cash or property to a trustee such as Pepperdine University, you receive a certain percentage or amount of the annual income from the property to you and/or another named beneficiary(ies) for life or for a specified term of years. The remainder interest in the property would then pass to Pepperdine University, for the benefit of Pepperdine University. You would be entitled to a federal income tax deduction for the value of that charitable remainder interest, which is based on the number and ages of life income beneficiaries and the percentage of payout you and the trustee agree upon. Some advantages of these charitable remainder trusts are: If you fund the trust with appreciated property, you will recognize no capital gain on the appreciation, and the trust will be funded with the full fair market value of the gifted asset. You may designate anyone alive at the time of creation of the trust, including yourself and your spouse, as income beneficiary(ies). The trust itself is not taxed. The burden of investment and management decisions regarding the corpus of the trust is removed. If the trust is funded with cash or tax-exempt securities, the trustee can purchase or retain such securities to produce tax-exempt income for yourself and/or other beneficiaries. The asset is essentially removed from your estate, which may mean additional tax benefits.
Charitable Remainder Unitrust
This type of trust provides that a fixed percentage (at least 5% of the fair market value of the assets in trust, computed each year) be paid to the beneficiary(ies) at least once a year. In a unitrust, however, the amount paid to the beneficiary(ies) will vary on a yearly basis according to the annual reevaluation of the trust principal.
Children's Trust
A trust included in your living trust. If, when you die, a beneficiary is not of legal age, the child’s inheritance will go into this trust. The inheritance will be managed by the trustee you have named until the child reaches the age at which you want him/her to inherit.
Codicil
A written change or amendment to a Will.
Co-Grantors
Two or more persons who establish one living trust together.
Common Trust
One living trust established by two or more individuals (usually a married couple).
Community Property
Assets a husband and wife acquire by joint effort during marriage if they live in one of the eight community property states. (Wisconsin also has a similar law, but does not use the term "community property.") Each spouse owns half of the assets in the event of divorce or death.
Conservator
One who is legally responsible for the care and well-being of another person. If appointed by a court, the conservator is under the court’s supervision. May also be called a guardian. (Duties and titles can vary by state. For example, in Missouri, there is a guardian of the person and a conservator of the estate.)
Conservatorship
A court-controlled program for persons who are unable to manage their own affairs due to mental or physical incapacity. May also be called a guardianship.
Contest
To dispute or challenge the terms of a will or trust.
Corporate Gift
If you are an owner or CEO of a business, you might wish to consider making a corporate gift through which you may derive federal tax benefits as well as additional benefits in some states. In California, for instance, corporations making gifts to institutions of higher education within the state are entitled to a credit against California Gross income tax, subject to applicable limits.
Corporate Matching Gift
Corporations will often match gifts made by employees, officers, directors, and in some cases spouses and/or retired employees, officers, or directors. More than 1,000 American companies have adopted corporate matching gift plans to help support higher education. Consult your company's personnel or community relations department for guidelines. A list of companies that match gifts to higher education may be obtained by writing the IU Foundation.
Corporate Trustee
An institution, like a bank or trust company, that specializes in managing trusts.
Co-Trustees
Two or more individuals who have been named to act together in managing a trust’s assets. A corporate trustee can also be a co-trustee.
Credit Shelter Trust
Another name for the B Trust in an A-B living trust because this trust "shelters" or preserves the federal estate tax "credit" of the deceased spouse.
Creditor
Person or institution to whom money is owed.
Custodian
Person named to manage assets left to a minor under the Uniform Transfer to Minors Act. In most states, the minor receives the assets at legal age.
Deceased
One who has died.
Deed
A document that lets you transfer title of your real estate to another person(s). Also see warranty deed and quitclaim deed.
Disclaim
To refuse to accept a gift or inheritance so it can go to the recipient who is next in line.
Discretion
The full or partial power to make a decision or judgment.
Disinherit
To prevent someone from inheriting from you.
Distribution
Payment in cash or asset(s) to one who is entitled to receive it.
Durable Power of Attorney for Asset Management
A legal document that gives another person full or limited legal authority to sign your name on your behalf in your absence. Valid through incapacity. Ends at death.
Durable Power of Attorney for Health Care
A legal document that lets you give someone else the authority to make health care decisions for you in the event you are unable to make them for yourself. Also called a health care proxy or medical power of attorney.
Endowment
In an endowment fund, the principal is invested, and only a portion of the investment earnings is spent. The rest of the earnings are channeled back into the fund, so that the endowment grows over time. In this way, the endowment becomes a perpetual source of funding for whatever the donor wishes to achieve.
Equity
The current market value of an asset less any loan or liability.
Estate
Assets and debts left by an individual at death.
Estate Planning
The process of working out, with an attorney, accountant, trust officer, life insurance agent, or other adviser, an orderly and desirable arrangement for the disposition of your estate. The primary objective in any plan should be the fulfillment of your wishes regarding the security of your family and others that you wish to benefit. Tax consequences, although secondary, are an important part of estate planning and are often directly related to the accomplishment of your primary goals.A well-drafted estate plan can provide benefits to you and/or your family and also make it possible for a substantial gift to be made to a charitable organization such as Pepperdine University at a relatively small cost to you or your estate. The importance of working with professionals in estate planning and making a will or establishing a trust cannot be overemphasized. Whenever desired, counsel for Pepperdine University will be available to consult with you and your attorney or other adviser, in order to ensure that your gift arrangement carries out your specific wishes. All communications will be held confidential unless you wish us to disclose information regarding your gift to Pepperdine University.
Estate Taxes
Federal or state taxes on the value of assets left at death. Also called inheritance taxes or death taxes.
Executor
Person or institution named in a will to carry out its instructions. Female is executrix. Also called a personal representative.
Family Business Deduction
An additional federal estate tax exemption for family-owned businesses and farms that qualify. When added to the individual federal estate tax exemption, the maximum amount exempt from federal estate taxes is $1.3 million. Under current law, this deduction will be eliminated in 2004 when the federal estate tax exemption is increased to $1.5 million.
Federal Estate Tax Exemption
Amount of an individual’s estate that is exempt from federal estate taxes. In 2002 and 2003, the exemption amount is $1 million. Under current law, it is scheduled to increase to $3.5 million by the year 2009, disappear in the year 2010 (when the federal estate tax is scheduled to be repealed) and return in 2011 at $1 million.
Fiduciary
Person having the legal duty to act primarily for another’s benefit. Implies great confidence and trust, and a high degree of good faith. Usually associated with a trustee.
Funding
The process of transferring assets to your living trust.
Gain
The difference between what you receive for an asset when it is sold and what you paid for it. Used to determine the amount of capital gains tax due.
Generation Skipping Transfer Tax (GSTT)
A steep tax (50% in 2002) on assets that "skip" a generation and are left directly to grandchildren and younger generations. Everyone has an exemption from this tax. In 2002, the GSTT exemption is $1,100,000.
Gift
A transfer from one individual to another without fair compensation.
Gift Tax
A federal tax on gifts made while you are living. In 2002, $11,000 per person per year is exempt from gift tax. Also see "Annual Exclusion."
Grantor
The person who sets up or creates the trust. The person whose trust it is. Also called creator, settlor, trustor, donor or trustmaker.
Gross Estate
The value of an estate before debts are paid.
Guardianship
See "Conservatorship."
Health Care Proxy
See "Durable Power of Attorney for Health Care."
Heir
One who is entitled by law to receive part of your estate.
Holographic Will
A handwritten will.
Homestead Exemption
Portion of your residence (dwelling and surrounding land) that cannot be sold to satisfy a creditor’s claim while you are living.
Incapacitated/ Incompetent
Unable to manage one’s own affairs, either temporarily or permanently. Lack of legal power.
Independent Administration
A form of probate available in many states. Intended to simplify the probate process by requiring fewer court appearances and less court supervision.
Inheritance
The assets received from someone who has died.
Inter vivos
Latin term that means "between the living." An inter vivos trust is created while you are living instead of after you die. A revocable living trust is an inter vivos trust.
Intestate
Without a will.
Irrevocable Trust
A trust that cannot be changed (revoked) or cancelled once it is set up. Opposite of revocable trust.
Joint Ownership
When two or more persons own the same asset.
Joint Tenants with Right of Survivorship
A form of joint ownership in which the deceased owner’s share automatically and immediately transfers to the surviving joint tenant(s).
Life Income Gifts
This group of planned gift options, allow you to make a substantial gift to Pepperdine while still retaining income. Life income gifts include: charitable remainder annuity trusts, charitable remainder unitrusts, charitable gift annuities, and gifts of retirement plan proceeds and real property subject to life estate.
Life Insurance
Gifts of life insurance allow donors to make sizeable gifts to Pepperdine University at a relatively low cost. To make such a gift, you would name Pepperdine University irrevocable beneficiary of a life insurance policy, then deliver and assign ownership of the policy to Pepperdine University. When you pay the annual premium, you will be entitled to deduct the amount of the premium, if you itemize. Gifts of life insurance policies may offer estate-planning possibilities. You may designate Pepperdine University as the primary, secondary, remainder, or residual beneficiary of a policy. There are a variety of policy options available. You will want to discuss your plans with Pepperdine University's Planned Giving staff and/or an insurance adviser.
Liquid Assets
Cash and other assets (like stocks) that can easily be converted into cash.
Living Probate
The court-supervised process of managing the assets of one who is incapacitated.
Living Trust
Under a living trust, the management of a person's property is left to a trustee with instructions for distributions during the lifetime of the individual and at his or her death. These distributions may include charitable gifts, such as those to Pepperdine University.
Living Trust (Planning)
A written legal document that creates an entity to which you transfer ownership of your assets. Contains your instructions for managing your assets during your lifetime and for their distribution upon your incapacity or death. Avoids probate at death and court control of assets at incapacity. Also called a revocable inter vivos trust. A trust created during one’s lifetime.
Living Will
A written document that states you do not wish to be kept alive by artificial means when the illness or injury is terminal.
Marital Deduction
A deduction on the federal estate tax return that lets the first spouse to die leave an unlimited amount of assets to the surviving spouse free of estate taxes. However, if no other tax planning is used, and the surviving spouse’s estate is more than the amount of the federal estate tax exemption in effect at the time of his/her death, estate taxes will be due at that time.
Marital Trust
See "A Trust."
Medicaid
A federally-funded health care program for the poor and minor children.
Medicare
A federally-funded health care program, primarily for Americans over age 65 who are covered by Social Security or Railroad Retirement benefits.
Minor
One who is under the legal age for an adult, which varies by state (usually age 18 or 21).
Net Estate
The value of an estate after all debts have been paid. (Federal estate taxes are based on the net value of an estate.)
Net Value
The current market value of an asset less any loan or debt.
Outright Gift
The value of an outright gift immediately benefits the University. Outright gifts include: cash, checks, and money orders; gifts of securities, real estate, and tangible personal property; and corporate gifts, corporate matching gifts, and gifts-in-kind.
Payable-on-Death Account
See "Totten Trust."
Per Capita
A way of distributing your estate so that your surviving descendents will share equally, regardless of their generation.
Per Stirpes
A way of distributing your estate so that your surviving descendents will receive only what their immediate ancestor would have received if he/she had been living at your death.
Personal Property
Movable property. Includes furniture, automobiles, equipment, cash and stocks. Opposite of real property that is permanent (like land).
Personal Representative
Another name for an executor or administrator.
Pledge
Though a cash gift, a pledge to make a gift may not be deducted until the year in which actual payment is made. Multi-year pledges allow you to spread your gift payments out over a period of time.
Pour Over Will
A short will often used with a living trust. It states that any assets left out of your living trust will become part of (pour over into) your living trust upon your death.
Power of Attorney
A legal document giving someone legal authority to sign your name on your behalf in your absence. Ends at incapacity (unless it is a durable power of attorney) or death.
Probate
The legal process of validating a will, paying debts, and distributing assets after death.
Probate Estate
The assets that go through probate after you die. Usually this includes assets you own in your name and those paid to your estate. Usually does not include assets owned jointly, payable-on-death accounts, insurance and other assets with beneficiary designations. Assets in a trust also do not go through probate.
Probate Fees
Legal, executor, and appraisal fees and court costs when an estate goes through probate. Probate fees are paid from assets in the estate before the assets are fully distributed to the heirs.
Property
Real property includes all gifts of real estate. In considering whether to accept the gift, Pepperdine University weighs its potential value to the University and determines whether a management plan can be implemented to maximize that potential. In most instances, such a property will be sold; in other cases, it may be kept as an investment. Many of the tax advantages that apply to gifts of appreciated securities also apply to gifts of appreciated real property. Tangible personal property, include works of art, furniture, equipment, collections, and personal mementos. For tax purposes, the date of the gift is the date of physical delivery, and the value is the item's fair market value on that date as determined by a competent appraiser.
Qualified Domestic Trust (QDOT)
Allows a non-citizen spouse to qualify for the marital deduction.
Qualified Terminable Interest Property (QTIP)
A trust that delays estate taxes until your surviving spouse dies so more income will be available to provide for your spouse during his/her lifetime. You can also keep control over who will receive these assets after your spouse dies.
Qualifying Subchapter S Trust (QSST)
Trust that meets certain IRS qualifications and is allowed to own Subchapter S stock.
Quitclaim Deed
Document that allows you to transfer title to real estate. With a quitclaim deed, the person transferring the title makes no guarantees, but transfers all his/her interest in the property.
Real Property
Land and property that is permanently attached to land (like a building or a house).
Real Property Subject to a Life Estate
You may transfer a personal residence or farm to Pepperdine University, while retaining a life estate (the right to use the property for the remainder of your life.) You are entitled to a federal income tax deduction for the fair market value of the remainder interest in the property at the time it is transferred.
Recorded Deed
A deed that has been filed with the county land records. This creates a public record of all changes in ownership of property in the state.
Required Beginning Date (RBD)
The date you must begin taking required minimum distributions from your tax-deferred plans. Usually, it is April 1 of the calendar year following the calendar year in which you turn age 70 1/2. If your money is in a company-sponsored plan, you may be able to delay your RBD beyond this date if you continue working (providing you are not a 5% or greater owner of the company).
Required Minimum Distribution (RMD)
The amount you are required to withdraw each year from your tax-deferred plan after you reach your Required Beginning Date. This amount is determined by dividing the year-end value of your tax-deferred account by a life expectancy divisor found on a chart provided by the IRS.
Revocable Trust
A trust in which the person setting it up retains the power to change (revoke) or cancel the trust during his/her lifetime. Opposite of irrevocable trust.
Securities
Long-term appreciated securities are those that have been owned for more than one year, and have increased in value. If you itemize deductions, such a gift would entitle you to a federal income tax deduction for the full fair market value of the securities on the date of the gift, up to a maximum deduction of 30% of your adjusted gross income for the year. Short-term securities are those held for less than one year. If you itemize, you will be entitled to a federal income tax deduction for only the purchase price of the securities. Depreciated securities are those that have declined in value since purchase. Pepperdine University suggests that the donors sell them, take the tax loss, and donate the cash proceeds. This will provide the maximum tax benefits from the gift.
Separate Property
Generally, all assets you acquire prior to marriage and assets acquired by gift or inheritance during marriage.
Separate Trust
A trust established by one person. A married couple has separate trusts if each spouse has his/her own trust with its own assets. In contrast, see "Common Trust."
Settle an Estate
The process of handling the final affairs (valuation of assets, payment of debts and taxes, distribution of assets to Beneficiaries) after someone dies.
Settlor
See "Grantor."
Special Gifts
A separate listing of special assets that will go to specific individuals or organizations after your incapacity or death. Also called special bequests.
Special Needs Trust
Allows you to provide for a disabled loved one without interfering with government benefits.
Spendthrift Clause
Protects assets in a trust from a beneficiary’s creditors.
Spouse
Husband or wife.
Stepped-up Basis
Assets are given a new basis when transferred by inheritance (through a will or trust) and are re-valued as of the date of the owner’s death. If an asset has appreciated above its basis (what the owner paid for it), the new basis is called a stepped-up basis. A stepped-up basis can save a considerable amount in capital gains tax when an asset is later sold by the new owner. Also see "Basis."
Subchapter S Corporation Stock
Stock in a corporation which has chosen to be subject to the rules of subchapter S of the Internal Revenue Code.
Successor Trustee
Person or institution named in the trust document who will take over should the first trustee die, resign, or otherwise become unable to act.
Surviving Spouse
The spouse who is living after one spouse has died.
Survivor’s Trust
See "A Trust."
Tax Incentives
Taxpayers who itemize can qualify for the federal income tax charitable deduction by making gifts to Pepperdine University for the benefit of Pepperdine University. Maximum limits for such deductions may apply, depending on the type and size of the gift and the total of a donor's gifts to charitable organizations during any one year. There may also be certain state tax incentives for the support of higher education. For example, California offers a direct credit against California Gross Income Tax within specified limits for contributions to institutions of higher education within the state. Gifts to Pepperdine University may also qualify for favorable treatment in connection with capital gains, estate, and inheritance taxes. These advantages will depend on the circumstances of each gift.
Taxable Gift
Generally, a gift of more than $11,000 in one year to someone other than your spouse. The value of the gift is applied to your federal gift and estate tax exemption, and no gift tax is required to be paid until the exemption has been exhausted. (This amount is tied to inflation and may increase from year to year.)
Tax-Deferred Plan
A retirement savings plan (like an IRA, 401(k), pension, profit sharing, or Keogh) that qualifies for special income tax treatment. The contributions made to the plan and subsequent appreciation of the assets are not taxed until they are withdrawn at a later time -- ideally, at retirement, when your income and tax rate are lower.
Tenants-by-the Entirety
A form of joint ownership in some states between husband and wife. When one spouse dies, his/her share of the asset automatically transfers to the surviving spouse.
Tenants-in-Common
A form of joint ownership in which two or more persons own the same property. At the death of a tenant-in-common, his/her share transfers to his/her heirs.
Testamentary Trust
A trust in a will. Can only go into effect at death. Does not avoid probate.
Testate
One who dies with a valid will.
Title
Document proving ownership of an asset.
Totten Trust
A "pay-on-death" account. A bank account that will transfer to the beneficiary who was named when the account was established. The terms "transfer on death" ("TOD"), "in trust for" ("ITF"), "as trustee for" ("ATF"), and "pay on death" ("POD") often appear in the title.
Transfer Tax
Tax on assets when they are transferred to another. The estate tax, gift tax and generation skipping transfer tax are all transfer taxes.
Trust
An entity that holds assets for the benefit of certain other persons or entities.
Trust Company
An institution that specializes in managing trusts. Also called a corporate trustee.
Trustee
Person or institution who manages and distributes another’s assets according to the instructions in the trust document.
Trustor
See "Grantor."
Unfunded
Your living trust is unfunded if you have not transferred assets into it.
Unified Credit
The amount each person is allowed to deduct from any federal estate taxes owed after death. In 2002 and 2003, the credit is $345,800, which is the amount of estate taxes owed on the first $1 million in assets.
Uniform Transfer to Minors Act (UTMA)
Law enacted in many states that lets you leave assets to a minor by appointing a custodian. In most states, the minor receives the assets at legal age.
Unristricted Gift
Unrestricted gifts give the University the latitude to direct this money where it is most useful. Programs that might encounter limitations can flourish with the help of unrestricted funding. This money allows the University to take advantage of unexpected opportunities that occur after state budgets are set.
Warranty Deed
Document that allows you to transfer title to real estate. With a warranty deed, the person guarantees that the title being transferred is clear (free of any encumbrances). If the title is defective, the person making the transfer is liable. Compare to quitclaim deed.
Will
A carefully planned and drafted will can preserve a maximum amount of an estate for the surviving members of one's family and others, such as Pepperdine University, whom one wishes to benefit.
Will (Planning)
A written document with instructions for disposing of assets after death. A will can only be enforced through the probate court.
