Common charitable expressions defined
It’s no secret that the modern world is becoming more complex. With that complexity arise new expressions and vocabulary. I can’t even remember, for example, when we began using the term “emoticon.” 🙂
While jargon can be helpful to people who dwell full-time within specialized areas of life, it can also become very commonplace and often overlooked. Unfortunately, certain terminology may act as a barrier to those who simply want to get something done. These vocabulary challenges can often arise when someone is considering a charitable gift.
Here are a few terms defined that can sometimes be confusing to folks who are interested in making a gift. These are not legal definitions, but that’s the point—they simply attempt to explain commonly used terms in everyday language.
Bequest – This is a gift designated through your will upon your death. Although my law school professors would cringe to hear me say this, the term “bequest” is often used colloquially to describe any gift made at death, whether through a will or by way of a trust (described below).
Endowment – In its simplest terms, this is a pot of money that is invested to last forever. A small portion of the account is withdrawn each year to support a specific institution or project. At Duke, for example, donors often make gifts to establish endowment funds in order to provide annual support for scholarships, research, or a special place on campus—while leaving a perpetual legacy at the university. These endowment funds carry the name of the donor or someone whom the donor would like to honor.
Securities – A term broadly used to describe stocks, bonds, and other things that get bought and sold on Wall Street. These assets can often be given to charities as gifts (instead of writing a check), which may provide substantial tax savings to the donor.
Tax deduction – This describes a common tax benefit of making a gift to charity. Most gifts to a charity will entitle the donor to claim a “tax deduction.” This means that, when filling out his or her tax return, the donor will be able to reduce the amount of income that he or she will have to pay tax on at the end of the year. U.S. tax law provides this benefit to encourage people to support charities.
Trust – This is an agreement under which a person or institution (known as a “trustee”) owns property but must use it to benefit someone else or another organization (known as the “beneficiary”). For example, you can make a gift to a trust and ask Duke (in this case the trustee) to hold your gift and invest it over time. Duke will then pay you or a loved one (the beneficiary) an income for life. Once the beneficiary passes away, Duke can then use what’s left in the trust as you have directed. There are more types of trusts than there are stars in the sky, and they can be used in many ways. The trust I’ve described here is called a “charitable remainder trust.”
Disclaimer – This term is used by former attorneys (like me) when they talk about legal matters in a very general sense (like this post). Please be sure to consult with your own legal and tax advisers when making a financial decision specific to your circumstances.
Making a charitable gift is a personal choice and one that should be reviewed carefully. I hope you found this post to be helpful and informative. Please contact me if you would like to learn more about any of these terms or if you have further questions about giving to Duke.