Charitable Gift Types

The exclusion ratio is the portion of the payments made to a gift annuitant that will not be reportable as ordinary income on the annuitant's income tax return.

If the gift annuity was funded with cash, the excluded portion of the annuity will all be tax-free income. If the gift annuity was funded with appreciated property, typically part of the excluded portion will be reportable as tax-free income and part of it as capital gain income.

A step charitable lead annuity trust is a type of charitable lead annuity trust. Sometimes called an escalating payment lead trust, it shares all characteristics of a standard charitable lead annuity trust except that its payments to charity are not the same fixed amount every year. Instead, the payments increase during the term of the trust according to a pre-determined schedule that is included with the lead trust instrument.

The valuation rate is the interest rate used to determine the charitable deduction available for gifts to a pooled income fund in a particular year.

A grantor retained unitrust (GRUT) is a form of irrevocable non-charitable trust. During its term, the trust makes payments to the donor of the trust (the grantor) that are equal to a fixed percentage of the trust's value, as determined on a specified day of the year. When the trust terminates, its remaining principal passes to remainder beneficiaries named by the grantor, typically children or grandchildren.

A grantor retained annuity trust (GRAT) is a form of irrevocable non-charitable trust. During its term, the trust makes fixed payments to the donor of the trust (the grantor). When the trust terminates, its remaining principal passes to remainder beneficiaries named by the grantor, typically children or grandchildren.

A grantor lead trust is a form of charitable lead trust in which the donor of the trust is considered the owner of the trust's assets for tax purposes. The most common reason for a charitable lead trust being treated as a grantor trust is that the donor of the trust will receive the trust principal when the trust terminates.

The American Council on Gift Annuities – ACGA – is a national organization of charities that promotes charitable gift annuities. One of its functions is that it issues tables of suggested maximum annuity rates that member charities should offer to their donors. The rates vary with age: the older the annuitant or annuitants, the higher the suggested maximum annuity rate.

A charitable gift annuity is a simple contract between the donor and the charity.

In exchange for an irrevocable gift of cash, securities, or other assets, the charity agrees to pay one or two annuitants a fixed sum each year for life.

Generation skipping transfer tax is a federal transfer tax that is assessed on an individual who transfers assets to a "skip person" during life or by will. This tax is assessed in addition to gift or estate tax. Its purpose is to prevent donors from avoiding transfer taxation in one generation by giving assets directly to the next generation.

The four tiers of income are IRS tax reporting rules that dictate the order in which a charitable remainder trust must distribute the four types of income when fulfilling payments to its income beneficiaries.