Annuitant

An individual who receives payments from an annuity.

Annuity

A regular income payment made for a specified period of time, such as a monthly check for a given number or years or for the remainder of a person's life. Annuity payments consist of both interest earned and return of principal. Only the interest portion is subject to income tax. Such payments are usually guaranteed by the assets of a foundation or by the reserves of an insurance company.

Bequest

Property left to a person, charity or other heir under the terms of a will.

Charitable Gift Annuity

A simpler form of a charitable remainder trust. No trust is used and no trust document is required. A donor and a foundation or charity just agree that part of a gift will flow back to the donor (such payments are called an annuity) and part will be used for charity. The split is often 50/50, but can be modified to meet desired goals. A new Montana law requires that foundations or charities have at least $300,000 in assets and three years of existence before making such agreements.

Charitable Remainder Trust

One of several types of split interest gifts. In this type a gift is held in trust with income going to the donor for a period of years or the donor's lifetime and then the remaining principal goes to charitable purposes.

Charitable Endowment Tax Credit

A tax benefit for Montana income tax payers who make a planned gift to a charitable endowment fund. See related definitions and a separate section or ask for details. In general, this type of gift provides both a federal tax deduction plus a special credit at the state level.

Endowment

Same as a permanent fund. Amounts placed in a endowment / permanent fund are retained forever, while the interest or other earnings thereon are distributed for one or more charitable purposes.

Federal Gift Tax

A federal tax imposed on assets conveyed as gifts to individuals. This is related to estate or death taxes, but is not scheduled for repeal in the same manner. It does not apply to gifts to foundations or charities.

Foundation

A term that in this context usually means an organization formed to accept and manage charitable gifts. Some foundations are created to support one specific purpose such as a hospital or a university. Others, such as a community foundation, support a broad array of charitable purposes.

Individual Retirement Account

A flexible account similar to a 401(k) account, but established by an individual under IRC section 408. In such accounts income tax is postponed, but must eventually be paid when money is withdrawn from the account. An exception is if a foundation or charity is named as beneficiary, in which case income tax is not assessed on money still left in the account after the donor s death. Please consult a CPA for further details and updates.

Income Beneficiary

One who receives income from a trust or similar source.

Planned Gift

This phrase usually refers to a larger gift that includes special stated purposes and has other features that are planned before the gift is made. The Montana Endowment Tax Credit is only available to individuals if they make such a gift; the gift must be in the form of a paid up life insurance policy or some type of split interest gift such as a charitable gift annuity or a charitable remainder trust.

Split Interest Gift

Just a general term to refer to charitable gift annuities and various remainder trusts. A gift is made to a foundation or charity, but the use of the money is split. Part of it goes back to the donor and part goes to charitable purposes. Many variations have been designed to meet the needs of donors.

Tax Credit

A direct dollar-for-dollar reduction in tax allowed for expenses such as child care and for building low-income housing or Montana's credit for planned gifts to a charitable endowment. A tax credit is usually much more valuable than just a deduction. One dollar of credit usually saves one dollar of taxes.

Tax Deduction

An expense that a taxpayer is allowed to deduct from taxable income. This lowers taxes, depending on one's tax bracket. One dollar of deduction saves twenty eight cents of tax for a person at the 28% bracket.

Trust

A fiduciary relationship calling for a trustee to hold the title to assets for the benefit of the beneficiary. The person creating the trust, who may or may not also be the beneficiary, is called the grantor. More information on trusts can be found through links on this website.