Glossary of Charitable Giving Terms

(Adapted, revised and updated based on material presented in Planned Giving for Canadians, by Frank Minton and Lorna Somers, 3rd Edition, 2015 update).

Below are definitions of many estate planning and fund-raising terms that professional advisors might typically encounter in the course of their professional work.

A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z

A

abatement
name for the legal process where bequests are reduced when creditors’ claims, taxes, expenses, contests, etc. diminish the estate assets to the extend that not all bequests can be satisfied.

ademption
when a bequeathed asset is not in the estate at death, it may be the result of “Ademption by Extinction” – no longer in the estate (sold, etc.) or “Ademption by Satisfaction” – given to the beneficiary early.

adjusted cost base (or basis)
the amount paid for property, increased by capital improvements and decreased by depreciation.

administrator
the person or entity appointed by the court to settle an estate when a person has died without a valid will.

advantage
generally the total value of all property, services, compensation, or other benefits that a person is entitled to receive in relation to a donation. The advantage may be conditional or receivable in the future, either by the donor or a person or partnership not dealing at arm’s length with the donor. For donations made after February 18, 2003, an advantage also includes any limited-resource debt relating to the donation at the time it was made.

annual gift
a donation made each year, usually with few restrictions.

annuity
a contracted right to receive payments of a specific amount at stated intervals in life, or for a term of years, in consideration of a transfer of cash or other assets.

appreciated property
property, such as securities, real estate, and artworks, whose current fair market value exceeds the purchase price.

arm’s length
a concept describing a relationship in which the parties are acting independently of each other. The opposite, not at arm’s length, includes individuals who are related to each other by blood, marriage, adoption and common-law relationships. Not at arm’s length also covers people acting in concert without separate interests, such as those with close business ties.

attribution rule
tax rule stating that when an individual transfers or loans property to a spouse or minor child, the income from the property and, in the case of transfer to a spouse, also the capital gain and loss is taxed to the individual at his or her marginal rate.

B

bargain sale
the sale of property to a charity for less than its fair market value with the intention of making a gift. A donation receipt may be issued for the difference between the fair market value and the selling price.

beneficiary
the person or organization that receives a bequest under a will, proceeds from a life insurance policy (or from some other financial arrangement, such as a retirement plan), or distributions from a trust.

bequeath
to leave property to a beneficiary by means of a will.

bequest
a gift of property through a will to a particular beneficiary. Also called a legacy.

Business Number (BN) / Registration Number
the BN is used by the federal government to identify organizations and the various program accounts they have. A complete BN has two parts: the registration number (first nine digits) and the account identifier (two letters and four digits). The registered charity account identifier always starts with the letters “RR”.

C

CAGP
Canadian Association of Gift Planners

Canadian-U.S. Income Tax Convention
a protocol approved by the governments of both Canada and the United States that addresses tax issues confronting Americans and Canadians involved in cross-border estate planning. The Tax Convention takes precedence over statutory law. The amended Tax Convention entered in to force November 9, 1995. The Tax Convention is also called the Tax Treaty.

capital
with reference to a trust, the principal upon which income is earned. Also called corpus.

capital campaign
an intensive effort to meet a financial goal for various projects, such as endowments and new buildings, within a specified period.

capital gain 
you have capital gain when you sell, or are considered to have sold or have disposed of, a capital property for more than the total of its adjusted cost base and the outlays and expenses incurred to sell the property.

capital loss
you have a capital loss when you sell, or are considered to have sold or have disposed of, a capital property for less than the total of its adjusted cost base or the outlays and expenses incurred to sell the property.

carryback
the portion of a donation receipt issued for gift made by a donor during the year of his or her death, and not used on the decedent’s terminal tax return, that can be claimed (subject to allowable limitations) on the return for the year preceding the year of the decedent’s death.

carryover
the portion of a donation receipt not used in the current year and carried forward for use in succeeding years.

cash surrender value
the cash paid by an insurance company to the owner of a policy when the policy is terminated prior to the death of the insured.

certified cultural property
an artwork, artifact, or structure that, if approved by the Canadian Cultural Property Export Review Board, qualifies for special tax treatment when donated to a qualified charity authorized to hold such property.

CFRE
a person who, based on meeting certain requirements and passing various tests, has qualified for the designation Certified Fundraising Executive

charitable gift annuity
a fixed sum of money paid by a charity, at certain intervals, for the life of the annuitant(s), or for a term of years, in exchange for a donation of cash or other property.

charitable income trust
a trust in Canada that pays a fixed amount to charity for a certain period of time and then distributes the principal to named individual beneficiaries or to the donor.

charitable remainder trust
an irrevocable trust that pays income to one or more individual beneficiaries for life or a term of years, and then distributes the remaining assets to one or more charities.

codicil
an addition or amendment to a will.

contest
a challenge to a will.

contingent bequest
a testamentary gift that takes place only if the testator is not survived by certain individuals or if other stated conditions are not met.

corpus
the principal or capital of a trust.

cultivation
to maintain, and possibly increase, the interest of a prospect in a charity’s programmes preparatory to the solicitation of a gift.

cy pres
the equitable doctrine under which a court interprets a document containing a gift to charity by substituting another charity to reflect as closely as possible the donor’s intention. Courts use cy pres when a donor’s original charitable purpose cannot be exactly fulfilled. When literal compliance is impossible, the general intention of the donor should still be carried out as nearly as possible (cy pres) so that the charitable bequest doesn’t fail.

D

death benefit
the amount payable by an insurance company to the beneficiary(ies) at the death of the insured.

decedent
a person who has recently died and whose estate is in process of being settled.

deed
a document used for transferring real estate.

deed of gift
a document used for transferring personal property.

deferred gift
any charitable gift arrangement where the charity’s use of the asset is delayed to some future time.

deemed deposition
the disposition of property, typically capital property, at death for tax purposes.

depreciation
with reference to property, the process of being worn out or becoming obsolete. Certain types of property qualify for depreciation deductions.

devise
a gift of real property under a will.

disbursement requirement
the required amount of receipted donations that charities must spend each year for charitable purposes.

discount rate
the assumed interest rate when computing present or future value. It is used to determine the donation receipt for establishing a charitable remainder trust, or for giving a residual interest in property.

donation receipt
registered charities can issue official donation receipts (also referred to as “tax  receipts”) to acknowledge gifts. An official donation receipt is subject to particular requirements under the Income Tax Regulations including identification that it is an official receipt for income tax purposes. See the definition eligible amount (below) of gift for further information. Registered charities issue other forms of receipts to acknowledge acceptance of services or items that are not gifts. These are not tax receipts and should be clearly distinguished from the tax receipts issued to acknowledge gifts. Contributions of services, that is, of time, skills, or efforts, are not property. Therefore, they do not qualify as gifts for purposes of issuing official donation receipts. Accordingly, a charity cannot issue an official donation receipt for services rendered free of charge.

donee
the recipient of a gift.

donor
a person, corporation, foundation, or other organization that makes a gift.

E

eligible amount of gift for tax purposes
the amount that a donor can claim on his or her tax return. Generally, this is the amount by which the fair market value of the donated property exceeds the amount of an advantage, if any, in respect of the donation. Under proposed changes, there are situations in which the eligible amount may be deemed to be nil.

endowed fund agreement
a document describing the name, purpose, funding and administration of an endowment, normally signed by the donor and the charity.

endowment
a principal sum, permanently set aside and invested by a charity, with only the income used for charitable purposes.

estate
all of the real (fixed – land, buildings) and personal (movable – art, stocks) property in which a person has right or interest.

estate trustee
another name for the person named in the will to carry out its terms.

executor / executrix (f)
one or more of the person, trust company or bank identified in a will to carry out the wishes of the decedent and settle the estate.

F

fair market value
fair market value generally means the highest price, expressed in dollars, that a property would bring in an open and unrestricted market between a willing buyer and  a willing seller who are both knowledgable, informed, and prudent, and who are willing to act i

flow-through shares
issued by companies in the energy and mining sectors, deductions for expenses passed through shareholders.

future value
the amount that will have been accumulated by a future date if a sum of money is invested at a certain rate of compound interest.

G

gift acceptance committee
a committee responsible for evaluating proposed gifts and deciding whether it is in the best interest of the charity to accept them.

gift-in-kind 
refers to a gift of property other than cash – in particular capital property, depreciable property and personal-use property. It also includes a residual interest, a right of any kind, a licence, a share, and inventory of a business. It does not include a gift of services.

gift planner
someone who works with donors and their professional advisors and/or their favourite charity to achieve maximum benefit for both the donor and the charity from a planned charitable gift. Also referred to as a Planned Giving Officer.

gift plus annuity
another name for a reinsured gift annuity.

gift to the Crown
a donation to the federal or provincial government or to a foundation that raises the money for the support of entities, such as universities and hospitals, that derive most of their support from the government. Most of these foundations have been wound up and are rarely used now because they no longer serve a purpose.

H

heritage society
the generic name of a recognition club for donors of deferred gifts. Also known as a legacy society.

holographic will
a will drafted entirely in the hand of the testator, dated, signed but unwitnessed.

I

income splitting
loaning or transferring property to a lower-income person, such as a spouse or minor child, so that the income from the property or gain upon its disposition would be taxed at a lower rate. The attribution rules are intended to negate the benefits of income splitting. However, a gift receipt resulting from a charitable donation may be claimed partially by the donor spouse and partially by the non-donor spouse.

insured annuity
a combination of a prescribed annuity and life insurance policy.

intangible property
property with no superficial market value but representative of the value of other property. e.g. securities, bonds, promissory notes.

inter vivos 
latin for “between the living” – an “inter vivos” transfer of property is property transferred during the individual’s life.

inter vivos gift
a gift made during a donor’s lifetime.

inter vivos trust
a trust created by an individual during his or her lifetime.

interest-free loan
a loan (sometimes made to a charity) on which a lender receives no interest.

intestate
to die without having executed a valid will.

irrevocable trust
a trust that cannot be terminated or changed by the person creating it.

J

joint tenancy
a form of property ownership by two or more people with the right of ownership passing to the person or persons who survive. Normally, property owned in joint tenancy passes to survivors outside of a will.

joint tenancy with right of survivorship
property held in a way that, upon the death of one of the joint tenants, the property passes automatically to the other joint tenant or owner without passing through the deceased’s estate.

L

last will and testament
the last legally binding document of an individual directing the disposition of his or her property effective at death.

legacy
a designation of property under a will. Also called a bequest.

legacy society
the generic name of a recognition club for donors of deferred gifts. Also known as a heritage society.

life interest
the right to use property or receive income from a trust for the duration of one’s lifetime.

liquidator
the term used in Quebec for the executor of an estate.

M

major gift
a large donation, often given for a designated purpose in response to a special solicitation. The amount required to qualify as a major gift varies by organization.

N

named endowment
an endowed fund, named for the donor or another person the donor chooses to honour, the income from which is usually used for a designated purpose. Named endowments are normally commingled with the funds of other endowments for investment purposes, but accounted for separately in the charity’s books.

notary
in Quebec, a person with legal authority to draft a will.

O

outright gift
a gift in which the donor retains no interest and which may be used by the charity now. Also called a present gift.

P

power-to-vary clause
language in an endowment or other gift agreement that permits the stated purpose of a gift to be amended if circumstances change.

present gift
a gift which is available for the charity to use now. Also called an outright gift.

present value 
the sum of money which, if invested at a certain rate of compound interest, will accumulate to a certain value by a specified date. In the case of a charitable remainder trust or a gift of residual interest, the amount for which a donation receipt may be issued.

private foundation
a foundation which receives most of its funds from a single source, whose directors do not deal at arm’s length with each other, and which generally makes grants to registered charities. It can also carry on charitable activities.

probate
the court-supervised process of validating a will and administering an estate in accordance with the terms of the will.

probate duty (or fee)
a tax levied in most provinces on the gross estate of decedents.

probated estate
the property that is disposed of under a will.

professional advisor
best defines CAGP-ACPDP™ members who work as professional advisors in providing advice to a donor or a charitable organization. These members commonly work in the fields of accounting, law, insurance, financial planning, etc.

prospect
any person who because of financial capacity and linkages to the charity is a potential donor.

prospect screening
the process of evaluating prospects as to their predisposition and capacity to give.

Q

qualified donees
The Income Tax Act permits qualified donees to issue official tax receipts for donations they receive from individuals or corporations. Registered charities are one example of a qualified donee. Others include Canadian municipalities and registered Canadian amateur athletic associations.

R

recognition
the various ways a charity expresses appreciation for a gift. It may include a personal letter, naming an endowment or a building, a listing on a donor wall, etc.

reinsured gift annuity
a charitable gift annuity where the charity uses a portion of the contribution to purchase an annuity from an insurance company that will pay the amount promised to the annuitant(s). The portion of the contribution not used to purchase the annuity can be retained and used by the charity. Also called gift plus annuity.

remainder interest
the right to receive the remaining property when a trust terminates.

residual bequest
a testamentary gift of all or a percentage of what remains of the estate after paying other bequests and expenses.

residual interest
the right to receive property when the rights of one or more persons to use the property have expired.

residuum
the amount of the original contribution retained by the charity after satisfying all gift annuity payment obligations.

revocable trust
a trust that can be terminated or changed by the person creating it.

S

self-insured gift annuity
a charitable gift annuity in which the charity invests the contributed property and assumes the obligation to make payments to annuitant(s).

settlor
the person who creates a trust. Also called trustor, or in the case of a charitable trust, donor.

social enterprise
a company whose primary objective is social benefit rather than profit.

specific bequest
a testamentary gift of a specific amount of money or of particular property.

spousal trust
a trust established by one spouse to provide income for another. Taxation of gain in property transferred to a spousal trust is deferred until the disposition of the property or termination of the trust.

stewardship
the process by which a charitable institution acknowledges gifts, recognizes donors, honours donor intent, and invests and uses gifts prudently.

surtax
an additional tax, which is often a percentage of a basic tax.

T

tangible property 
(also tangible personal property) property other than cash, securities and real estate. Examples are automobiles, paintings, musical instruments and furniture.

target marketing
the act of directing a concerted marketing effort to a group of potential donors who have certain characteristics in common.

tax credit
the amount that may be subtracted from the tax otherwise due.

tax deduction
the amount that may be subtracted from income when calculating income tax, or (in the U.S.) from the adjusted gross estate when calculating estate tax or from the amount of the gift when calculating the gift tax.

tax rate
percentage of tax to be paid on a certain level of income. Tax rates depend on the amount of taxable income.

tenants in common
property held by two or more individuals (or entities) in a manner that if one of the “tenants” dies the share or portion held by that tenant will become part of his or her estate (and then may be disposed of as part of the estate).

term insurance
written for a specific period and pays a death benefit if the insured dies within that time period.

terminal income tax return
the income tax return filed by an executor for the year of a decedent’s death, including income from January 1 to the date of death plus taxable gain recognized at the time of death.

testamentary
after death – property disposed of by a will.

testamentary gift
a gift made under the will of a donor. Also called a bequest.

testamentary trust
a trust created under the will of an individual, which begins at the death of that individual.

testate
to die having executed a valid will.

testator
an individual who dies and leaves a will and/or a settlor of a testamentary trust.

trust
an arrangement under which an individual (the settlor) transfers property to a person or institution (the trustee) to be managed for the benefit of one or more beneficiaries.

trust indenture
a document used for giving a residual interest in property.

trustee
the person or institution that holds legal title to property in a trust and has responsibility for managing it.

trustor
the person who creates a trust. Also called settlor.

U

universal life insurance
a combination of yearly renewable term insurance and a tax-deferred investment account. It pays a death benefit and builds up cash value, but the amount of cash value depends on the performance of investments that have been selected.

W

whole life insurance
a policy that remains in force for the entire life of the insured so long as premiums (usually level) are paid. A whole life insurance policy builds up cash value.

will
a legal declaration of how a person’s property is to be distributed at death.

will contest
a challenge to the validity of a will based on various grounds, such as competency of the testator, accuracy of the beneficiary designation, etc.

Additional giving terms are provided by the Canada Revenue Agency.