Definitions - General Gift Planning

Generation Skipping Transfer Tax

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.

Pooled Income Funds - You got to know when to hold 'em, know when to fold 'em

So, you have a pooled income fund (PIF). How’s your fund doing? We hear a variety of stories from our clients. Some clients have PIFs that are doing well, but many others are looking for ways to close their PIF. Once upon a time, when PIFs were in favor, their attraction was in their relative simplicity compared to charitable remainder trusts. No trust document was needed because it was already in place; the documentation was a simple one or two page Instrument of Transfer. A second advantage of the PIF was the relatively low cost of administration. Charitable remainder trusts require the creation the filing of tax and informational returns for each individual trust. In contrast, the charity was required to file only one set of returns for a PIF, regardless of the number of participants. The reporting requirements to the participants involved a relatively simple Schedule K-1. A third advantage of PIFs was that they could accept smaller contributions than charitable remainder trusts. These features made the PIF arguably the most popular form of life income gift in the 1980s and early 1990s. Oh, how times have changed!

Analyzing Your Planned Giving Program

All organizations with a planned giving program make a point of counting how many planned gifts they receive each year and totaling their face value. Most divide up this information by type of gift: realized bequests, gift annuities, charitable remainder unitrusts, etc. You can gain valuable insight into what gifts and what types of donors are driving a planned giving program from even these simple statistics.

Turning Real Estate into a Source of Income

Given the choice, most charities and asset managers would prefer that donors fund life income gifts with cash or publicly traded securities.  These assets are easy to value and easy to sell.  Real estate, on the other hand, can be difficult to value and hard to sell.  It also carries with it financial risk due to environmental problems, hidden structural defects, and a host of other possible issues. 

Return of Principal

Return of principal is a distribution to an individual of property that was used to fund the distributing trust or fund in the first place. Typically, such property was taxed before it was used to fund the trust or fund. Therefore, return of principal typically is not taxed to the recipient.

S Corporation

An S Corporation is a form of corporation in which all taxes of the corporation flow through to the tax returns of the shareholders. Like shareholders of public corporations, the shareholders of an S corporation are not responsible for the liabilities of the corporation.

An S corporation must meet a variety of restrictions in order to qualify. These restrictions include limits on the number of shareholders and the gross revenue of the corporation. Because of these restrictions, S corporations are invariably privately held.


A testamentary action is an action taken through one's will.

A testamentary charitable gift, for example, is a gift to charity that is designated in the donor's will. A testamentary charitable gift earns an estate tax deduction for the donor's estate, rather than an income tax deduction for the donor.

Life Expectancy

A person's life expectancy is the length of time the person is expected to live, given his or her current age. A person with a life expectancy of 10 years has a 50% chance of living less than 10 years and a 50% chance of living more than 10 years.

A person's life expectancy is based on the mortality experience of a large sample of people as summarized in a mortality table.