Glossary

"The important thing is not to stop questioning."
- Albert Einstein

Glossary

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

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

AFP
acronym for the Association of Fundraising Professionals, formerly the National Society of Fundraising Executives.

AHP
acronym for the Association of Healthcare Philanthropy.

alternative minimum tax
a federal tax designed to insure that a person cannot avoid paying income tax through the use of various tax shelters. The alternative minimum tax applies when the calculated amount is higher than the regular tax otherwise payable.

annual gift
a donation made each year, usually with few restrictions. Increasingly, the term regular gift is substituted as it better conveys the idea of periodic giving throughout an annual cycle.

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 (FMV) exceeds the purchase price.

at arms' length
At arm's length is a tax concept describing a relationship in which the parties are acting independently of each other. The opposite, not at arm's length, covers people acting in concert without separate interest, including individuals who are related to each other by blood, marriage, adoption, common-law relationships, or close business ties. There are some additional legal restrictions/obligations that apply to the operation of registered charitable organizations that are not at arm's length (e.g., private foundations).

beneficiary
the person or organization that receives a bequest under a will, death benefits from a life insurance policy, or payments 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.

BN
A business number (BN) is a unique number that an organization is given upon registration with the federal government. The business number assigned to a registered charity is also known as the charity's registration number. The BN is requested when a donor recommends a non-profit as a grant recipient, so that the charity can be identified and verified by the CGFCF.

CAGP
acronym for the Canadian Association of Gift Planners, the association of gift planners and professional advisors.

Canada Revenue Agency (CRA)
CRA is the federal agency that collects taxes. It is also responsible for registering charities for income tax purposes. The Charities Directorate of the CRA administers the Income Tax Act as it applies to registered charities.

Canadian-U.S. Income Tax Convention
a protocol approved by the governments of both Canada and the United States that addresses tax issues that confront Americans and Canadians involved in cross-border estate planning. The Tax Convention takes precedence over statutory law. The amended Tax Convention entered into 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 in legal documents.

capital campaign
an intensive effort undertaken by an organization to meet a specific financial goal for specified projects/purposes (such as capital expansion, building endowment, etc.), to be completed within a specified time period.

capital gain or loss
the profit or loss resulting from the sale or other disposition of a capital asset.

carryback
the portion of a donation receipt issued for a testamentary gift, 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.

CASE
acronym for the U.S.-based Council for the Advancement and Support of Education.

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.

CCAA
acronym for the Canadian Charitable Annuities Association.

CCAE
acronym for the Canadian Council for the Advancement of Education.

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.

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 gift fund (CGF)
A charitable gift fund is an “advisor-managed” financial product marketed by wealth management firms. Also known as a donor-advised fund, CGFs enable individuals with philanthropic interests to plan their charitable giving, as well as maximize its impact. Donors can recommend grants to charities and nonprofits of their choice on their timetable. In some cases, donors can also make recommendations on how the gifted contributions might be invested to increase the charitable giving power of the fund. See also donor-advised fund (DAF).

charitable organization (Charity)
an organization registered by the Canada Revenue Agency (CRA) which receives most of its funds from a variety of sources, whose directors deal at arm’s length with each other, and which devotes its resources to charitable activities carried out by itself.

charitable purposes
The Canadian courts have identified four general categories of charitable purposes. For an organization to be registered, its purposes have to be stated in its articles of incorporation and fall within one or more of the following categories: i) the relief of poverty; ii) the advancement of education; iii) the advancement of religion; or; iv) certain other purposes that benefit the community in a way that the courts have said are charitable.

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.

charity (see Charitable Organization)

codicil
an addition or amendment to a will.

Community Foundation
A community foundation is a tax-exempt, non-profit, autonomous, publicly-supported, philanthropic institution composed primarily of permanent funds established by many separate donors that makes grants for charitable purposes typically in a specific community or geographic region.

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 programs preparatory to the solicitation of a gift.

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 the ownership of 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.

depreciation
with reference to property, the process of being worn out or becoming obsolete. Certain types of property qualify for depreciation deductions, also known as capital cost allowances (CCA).

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.

donee
the recipient of a gift.

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

donor-advised fund (DAF)
A Donor-advised Fund enables individuals with philanthropic interests to plan their charitable giving, as well as maximize its impact. Donors can recommend grants to a charity requesting that funds be disbursed to support other charities, not-for-profits and worthwhile projects of their choice, based on their own preferences and timetable. Generally, donors cannot also make recommendations on how gift contributions should be invested to increase the charitable giving power of the fund, as this task is usually the responsibility of an institution’s Investment Committee, as delegated by the Board of Directors. See also charitable gift fund (CGF)

endowed fund agreement
a document describing the name, purpose, funding and administration of an endowment, normally negotiated between and 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
everything that a person owns or has an interest in.

estate trustee
another name for executor/trix.

executor
the person or institution (such as a trust company) named in a will to carry out the terms of the will.

executrix
a term sometimes used for a female executor.

fair market value (FMV)
the price at which a fully-informed seller, who is under no compulsion to sell, would be willing to sell an asset to a fully-informed buyer, who is under no compulsion to buy.

Form T3010-1
Registered charities are required by law to submit this form and a Basic Information sheet to CRA annually. CRA uses this form to assess compliance with the Income Tax Act. The form provides financial information, names of officers, directors, donations received, activities, expenditures, grants and other information pertinent to the operation of non-profit organization.

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.

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

gift-in-kind (GIK)
a gift of property other than cash (e.g., a gift of securities, real estate, or art).

gift plus annuity
another name for a reinsured gift annuity in Canada.

gift to the Crown
a donation to the federal or provincial government and formerly to a particular type of foundation that raises money for the support of entities, such universities and hospitals, that derive most of their financial support from government sources.

heritage society
the generic name given to a recognition program for donors of deferred gifts.

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

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

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.

intestate
to die without having executed a valid will.

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

IT-Bulletins
abbreviation for Interpretation Bulletins, which are interpretations for certain laws periodically issued by Revenue Canada. They are administrative rather than statutory.

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.

LEAVE A LEGACY
a community-based public awareness program of the Canadian Association of Gift Planners (CAGP). The program encourages people from all walks of life to make gifts from their estates to non-profit organizations of their choice.

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

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.

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.

matching gifts
donations or grants made by a corporation that match employees' or directors' gifts made to registered public charities. Specific guidelines are established by individual corporations.

named endowmentan 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 financial records.

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

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.

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 (PV)
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 makes grants to registered charities.

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.

professional advisor
Individuals who assist donors in planning and executing charitable giving through providing information on giving options according to a donor's specific financial situation. Professional advisors include: lawyers, accountants, estate planners, financial planners, investment advisors, investment counsellors, stockbrokers, insurance brokers, and planned giving officers.

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

prospect screening
the process of identifying and evaluating prospects as to their motivation (or inclination) and financial ability (or capacity) to give.

public foundation
a foundation that receives its funds from a variety of sources, whose directors deal at arm’s length with each other, and which makes grants to registered charities.

recognition
the various ways a charity expresses appreciation for a gift.

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 a 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.

self-insured gift annuity
a charitable gift annuity where 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.

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. It also conveys the sense of ongoing “nurturing” of the donor relationship over time.

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

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

tenancy in common
a form of property ownership by two or more people, where the share of an owner who dies passes under his or her will or under intestacy laws, and not to the surviving tenant(s).

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.

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

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
a person who has died with a valid will.

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.

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

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

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

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 by the policy owner. Offers less guarantees than traditional whole life insurance policies.

volunteer
one who works without compensation for a charitable organization.

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, usually with minimum guarantees.

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 (ie. competency of executor, etc.)