Glossary of Terms beginning with S

Form of a corporation that is not considered a tax paying entity. It is a privately held corporation in which the taxes of the corporation flow to the tax returns of the share holders. 

A government bond that earns interest, issued in face value denominations from $50 to $10,000. Interest on the bond accumulates tax free, until the owner cashes in the bond. Not a great asset to use as a gift as there is no way for owner to pay income tax.

The IRS-required document used to report an individual’s share of the trusts or estate’s income, credits, deductions, etc.

Stocks and bonds.

The costs of settling an estate. Probate can run 2% to 5%.

One who creates a trust (also called a “trustor”).

A shift of interest occurs when the initial beneficiary of a planned gift dies and payments shift to the successor beneficiary.

Capital gain realized on the sale of property that the seller has held for less than one year. Realized short term capital gain is subject to ordinary income tax rates.

See “Revisionary Living Trust” - An irrevocable trust that becomes a revocable trust after a certain number of years. An irrevocable trust is one where the grantor forfeits his/her ability to dissolve the trust and to reclaim the assets placed in it, while a revocable trust is one where the grantor retains these rights. If the grantor dies while the trust is irrevocable, the trust is not considered part of his/her estate for estate tax and inheritance tax purposes. On the other hand, if the grantor is still living when the trust become revocable, the assets can be considered part of the estate, but at the same time the grantor may revoke the trust and use the assets if he/she runs into financial difficulty or for any other reason.

A Charitable Gift Annuity based and paid on the life of one person. See “Charitable Gift Annuity”.

The definition of small cap can vary among brokerages, but generally it is a company with a market capitalization of between $300 million and $2 billion.
Keep in mind that classifications such as "large cap" or "small cap" are only approximations that change over time. Also, the exact definition can vary between brokerage houses.

States a specific amount or specific asset or both be directed to the place or purpose desired. It may be a gift of cash, securities, real estate or tangible personal property.

The amount withdrawn from an investment pool or total endowment and not returned to it.

The dollar amount of spending from the investment pool for a fiscal year as a percentage of the market value of the investment pool.

The guideline an institution uses to determine annual distributions from its endowment (e.g., spends all income, spends 5% of three-year moving average market value, increases spending by 5% each year). For instance, "[INSTITUTION]'s current rate is XX%. We use a YY-month rolling average when determining the rate."

A trust is an arrangement whereby property is held by a trust company or individual for the benefit of others. A spendthrift trust protects the beneficiary from creditors or his own improvidence.

Allows the benefactor to retain a financial interest while making an irrevocable charitable gift. For example: charitable gift annuities and charitable remainder trusts.

Under Code Section 664 (d) (2) and the regulations thereunder, there are three (3) variations of the Unitrust: 1) “Standard” Unitrust – donor irrevocably transfers money, securities or property to a separately invested trust with one or more initial individual beneficiaries and a charitable remainderman. The trust makes payments to the named individual beneficiaries at least annually in the amount equal to a fixed percentage (not less than five percent) of the net fair market value of the trust assets determined once each year. The donor may designate himself and/or other beneficiaries to receive these payments for life so long as the designated beneficiaries are alive at the time the trust is created. Alternatively the trust instrument may provide for unitrust payment to be made for a term of years not to exceed twenty. At the expiration of all income interests the assets are distributed to the charitable organization(s). 2) “Net Income” Unitrust – the same as a “standard” unitrust except the payments to the beneficiary are limited to the lesser of the net income of the trust and the unitrust percentage amount stated in the trust agreement. 3) “Net-Plus-Makeup” Unitrust – Administered as a net income unitrust, except that payments may exceed the state unitrust percentage amount up to, but not exceeding, the amount required to make up any accumulated deficiencies from prior years (years in which the trust’s net income was less than the stated percentage amount).

A state tax on a person’s right to receive property at the death of another person. The tax is paid to the state of residence of the decedent or to the state where any real property transferred is located.

Ownership of a corporation represented by shares that are a claim on the corporation’s earnings and assets. Common stock usually entitles the shareholder to vote in the election of directors and other matters taken up at shareholder meetings or by proxy. Preferred stock generally does not confer voting rights, but it has prior claim on assets and earnings; dividends must be paid on preferred stock before any can be paid on common stock.

Simply an agreement that gives the holder of the option the right to buy a certain number of shares in the granting company at a fixed price for a certain period of time. See “Non-Qualified” and “Incentive” stock options.

Separate from the physical stock or bond, this form is used in transferring ownership of securities from one part to another. The stock certificate does not have to be signed when this form is used.

A Charitable Gift Annuity arranged during the donor’s lifetime. A payment is made to the donor for life, then to the designated survivor for the rest of his/her life. See “Charitable Gift Annuity”.