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Definitions - General Gift Planning

Easement

An easement is an agreement by an owner of real estate that restricts the use of the property. In the context of charitable giving, a property owner may donate a conservation easement to charity or the government that guarantees the preservation of the property in its natural state in perpetuity. The property must qualify as conservation property as defined in the tax code. Similarly, the owner of a historic building may donate an easement that guarantees the preservation of the building in its historic state.

Skip Person

A skip person is an individual, transfers to whom are subject to the generation skipping transfer tax.

Future Value

Future value is the predicted value of an asset at a specific time in the future, given its present value today. The equation for computing future value is:

FV = PV x (1 + R)^n

Where,

FV = future value

PV = present value

R = assumed interest rate

n = number of years into future

FASB Liability

The FASB liability is the amount needed to finance the future payment obligations of a planned gift, such as a gift annuity or a charitable remainder trust.

FASB

FASB is the acronym for the Financial Accounting Standards Board. FASB publishes national accounting standards for public institutions, both profit-making and non-profit. In the context of planned giving, FASB requires charities to report their planned gift liabilities as part of their annual financial statement.

Family Limited Partnership

The family limited partnership is a popular estate planning tool for transferring assets from one generation to the next within a family. The partnership divides a family's assets among family members.

Typically, children are given limited partnership interests in assets owned by their parents. As a result, control of the assets remains with the parents. The retention of control allows the parents to discount the value of the gift to their children, reducing gift taxes.

Fair Market Value

Fair market value is the price that a well-informed and willing buyer is willing to pay a well-informed and willing seller for an asset. For example, the fair market value of a publicly-traded security is its current trading price as set by the stock exchange on which it is listed. The fair market value of cash is its face value

Remainderman

The remainderman is the recipient of a trust's proceeds when the trust terminates.

In the context of planned giving, remainderman usually refers to the charity that will receive the final distribution from a charitable remainder trust or pooled income fund. Technically speaking, gift annuity and retained life estate gifts do not have a remainderman because the charity takes possession of the gift assets immediately.

Remainder Interest

A charity's remainder interest in a planned gift equals the present value of the promise to distribute the remaining principal of the planned gift when it terminates.

In the case of life income gifts, such as a gift annuity or a charitable remainder unitrust, the charity owns the remainder interest in the gift.  In the case of a lead trust, individuals named by the donor own the remainder interest in the gift.

Remainder Factor

The remainder factor is the fraction of the funding amount of a planned gift that is considered a charitable contribution, expressed as a decimal. The remainder factor multiplied by the funding amount equals the value of the charitable contribution.

For example, if the remainder factor for a charitable remainder unitrust is .24561 and the unitrust is funded with $100,000, the value of the charitable contribution is .24561 x $100,000 or $24,561.

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