Philanthropic Dictionary

As your partner in giving, our goal is to make it easier for you to achieve your philanthropic goals. This dictionary defines many of the terms you’ll encounter in your charitable giving.



Section of the Internal Revenue Code that designates an organization as charitable and tax-exempt. Organizations qualifying under this section include religious, educational, charitable, amateur athletic, scientific or literary groups, organizations testing for public safety, or organizations involved in prevention of cruelty to children or animals. All organizations with this designation are eligible to receive grants from a DAF. For a chart of all types of 501(c)(3) organizations, click here.

509(a)(1), (2), and (3)

Sections of the Internal Revenue Code that define public charities (as opposed to private foundations). A nonprofit 501(c)(3) organization must have a 509(a), (2), or (3) in order to be defined and designated a public charity. For a chart of all types of 501(c)(3) organizations, click here. (Also: See Public Support Test)

Adjusted Gross Income

The adjusted gross income is the level of income on which you pay federal income tax before any deductions and personal exemptions are made. This amount may be used for computing limitations on certain deductions.


An individual authorized to recommend grants from a DAF. The donor names an advisor to a fund. An advisor can also serve as a successor to the fund.


A written statement made under oath.


Cash, stocks, bonds, real estate, or other holdings of an individual or institution. Generally, assets are invested and the income is used to make grants.

Articles of Incorporation

A document filed with the secretary of state or other appropriate state office by persons establishing a corporation. This is the first legal step in forming a nonprofit corporation.


Increase in the value (from date of purchase) of an asset such as a stock, a bond, a commodity, or real estate.


Payment of a fixed sum of money to a specified person at regular intervals.

Annual Report

A voluntary report published by a foundation or nonprofit organization describing their activities and financial conditions. These reports are important tools for assessing the organization’s effectiveness.

Annual Gift

A gift that is made every year.


Altruism, like passion, is the key intent that philanthropy expresses; a concern for the welfare of others; selflessness.


The amount paid for an asset. The value is used to determine gain or loss for income tax purposes.

Bypass Trust

Any trust that creates a life estate for a life beneficiary, with the trust principal going to the final beneficiary when the life beneficiary dies.


Rules governing the operation of a nonprofit corporation. Bylaws often provide the methods for the selection of directors, the creation of committees, and the conduct of meetings.

Building Campaign

A fundraising drive that seeks funds for construction or renovation of buildings and facilities.

Brick and Mortar

An informal term indicating grants for buildings or construction projects.

Board of Directors (Board of Trustees)

An organized and/or elected body of advisors with fiduciary and oversight responsibility.


A sum of money or other property directed by a will to a specified person or organization. (See Will)


A person or organization who is legally entitled to receive gifts made under a legal document such as a will or trust.

Basis Point

One one-hundredth of a percent (0.01 percent); 2 percent is equal to 200 basis points. A term commonly used to measure returns, earnings, and fees paid to investment managers.

Capital Campaign

A capital campaign is an organized drive to raise substantial funds to finance major needs of an organization, including construction, renovations, or endowments.

Capital Gains

Profit realized from the sale of appreciated securities, real estate, and other capital assets. A capital gain is the difference between the net sales price of securities and their net cost, or original basis.

Capital Grant

A capital grant is a grant to provide funding for buildings, construction, or equipment, rather than program expenses.

Cash Gift

Cash gifts are outright gifts of checks, drafts, and wire transfers. Cash gifts mailed before the end of the year enable those who itemize to take an income tax deduction for that year. These gifts are deductible for up to 60% of the donor’s adjusted gross income, and those in excess of the deduction limitations may be carried over and deducted in the five tax years following the gift.

Challenge Grant

A grant that is paid only if the grantee organization is able to raise additional funds from other sources, usually within a specified period of time. Challenge grants are often used to stimulate giving from other donors.

Charitable Gift Annuity

An agreement between a donor and a public charity whereby the donor irrevocably makes a gift of cash or stock and, in turn, the public charity agrees to pay a fixed annuity to one or two beneficiaries for life. Upon the donor’s death, the remainder is the public charity’s to utilize for charitable purposes.

Charitable Giving Plan

A plan that best reflects one’s life experiences, values, goals, and passions that structures giving to a charitable organization(s).

Charitable Lead Trust

A legal device used to set aside money or property of one person for the benefit of one or more persons or organizations. Specifically, this type of trust allows for a regular, fixed amount to go to a charity for a specific number of years. At the end of that time, the remainder of the trust passes to one’s heirs.

Charitable Organization

In its traditional legal meaning, the word “charity” encompasses religion, education, assistance to the government, promotion of health, relief of poverty or distress, and other purposes that benefit the community. Nonprofit organizations that are organized and operated to further one of these purposes generally will be recognized as exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code and will be eligible to receive tax-deductible charitable gifts. (See Charity)

Charitable Remainder Trust

A legal device used to set aside money or property of one person for the benefit of one or more persons or organizations. Specifically, this type of trust allows one to take a deduction for a gift to the trust in the year in which the trust is formed. One receives income from this type of trust for life and after one’s death, the assets pass to the designated charity.

Charitable Trust

Any trust designated to make a substantial gift to a charity and also achieve income and estate tax savings for the grantor.

Charity Codicil

A separate legal document which, after it has been signed and properly witnessed, changes an existing will.

Community Foundation

A community foundation is a tax-exempt, nonprofit, autonomous, publicly supported philanthropic institution composed primarily of permanent funds established by many separate donors that makes grants for charitable purposes in a specific community or region. Typically, a community foundation serves an area no larger than a state. Although a community foundation may be classified by the IRS as a private foundation, most are classified as public charities and are thus eligible for maximum tax-deductible contributions from the general public.

Concurrent Advisor

A concurrent advisor is an individual named by the donor to advise concurrently with the donor in advising a DAF. The concurrent advisor can be named as a successor advisor also. The donor can state that the concurrent advisors share responsibility for the fund.


Someone appointed by a court to manage the affairs of a mentally incompetent person.


An unconditional transfer of cash or other assets to an organization for no consideration. The contribution is irrevocable and immediately tax deductible. In order to open a donor-advised fund (DAF), the donor must make an initial contribution of at least $10,000.

Corporate Foundation

A corporate (company-sponsored) foundation is a private foundation that derives its grantmaking funds primarily from the contributions of a profit-making business. The company-sponsored foundation often maintains close ties with the donor company, but it is a separate legal organization, sometimes with its own endowment, and is subject to the same rules and regulations as other private foundations. (See Corporate Giving Program)

Corporate Giving Program

A corporate giving program is a grantmaking program established and administered within a profit- making company. Gifts or grants go directly to charitable organizations from the corporation. Corporate foundations/ giving programs do not have a separate endowment; their expense is planned as part of the company’s annual budgeting process and usually is funded with pre-tax income. Also referred as a Company-Sponsored Foundation.


A bank or other financial institution that has custody of stock certificates and other assets of a mutual fund, individual, corporation, or institution. All custodians can hold assets in safekeeping, collect income on securities in custody, settle transactions, invest cash overnight, handle corporate accounting, and provide accounting reports.


The legal document by which one person transfers title to real estate to another person or persons.

Demonstration Grant

A grant made to establish an innovative project or program, which if successful, would serve as a model and may be duplicated by others.


A person who is an offspring, however remote, of a certain person or family.

Designated Funds

A type of restricted fund in which the fund beneficiaries are specified by the grantors.

Discretionary Funds

Grant funds distributed at the discretion of one or more trustees, which usually do not require prior approval by the full board of directors. The governing board can delegate discretionary authority to staff.

Disqualified Person (Private Foundation)

Substantial contributors to a private foundation, foundation managers, certain public officials, family members of disqualified persons, and corporations and partnerships in which disqualified persons hold significant interests. The law bars most financial transactions between disqualified persons and foundations. (See Self-Dealing)

Disqualified Person (Public Charity)

As applied to public charities, the term disqualified person includes (1) organization managers, (2) any person who, within the past five years, was in a position to exercise substantial influence over the affairs of the organization, (3) family members of the above, and (4) businesses they control. Paying excessive benefits to a disqualified person will result in the imposition of penalty excise taxes on that person and, under some circumstances, on the charity’s board of directors. (See Intermediate Sanctions)

Distribution Committee

The committee responsible for making final grant decisions.

Donee (See Recipient)


A donor is an individual or company making a contribution to a nonprofit organization, public charity, or fund. In the case of a donor-advised fund (DAF), the donor opens their fund by making a contribution to a public charity like National Philanthropic Trust. The fund can have one donor or two, if the contributed assets are jointly held. (See Grantor)

Donor-Advised Fund (DAF)

A DAF is a charitable investment account administered by a public charity. Donors can open a fund in a donor advised program by making a contribution and receiving an immediate tax deduction. The contribution is irrevocable and becomes controlled by the public charity, which invests the funds in competitive investment vehicles. Although the donor no longer controls the funds once contributed, they can recommend grants to other charitable organizations.

Due Diligence

The degree of prudence that might be properly expected from a reasonable person in the circumstances; applicable to foundation personnel who act in a fiduciary capacity. (See Fiduciary Duty)


The EIN is the Employer Identification Number—a number assigned by the Internal Revenue Service to any organization (nonprofit or for profit) with paid employees. The EIN is requested when a donor recommends a nonprofit as a grant recipient, so that the nonprofit can be identified and verified by the National Philanthropic Trust.

Eligible Charitable Organizations

Eligible charitable organizations are those charities that have proven that they exist for charitable purposes and/or any grant they received would be used for charitable purposes. Typically, eligible organizations are those that have been granted 501(c)(3) status by the Internal Revenue Service, but NPT will consider exceptions in select cases.

Eligible Donors

Individuals, companies, foundations, trusts and estates, as well as certain other qualifying entities, are all eligible to open a donor-advised fund (DAF). Corporations and other businesses may create a DAF rather than start a foundation.


The principal amount of gifts and bequests that are accepted subject to a requirement that the principal be maintained intact and invested to create a source of income for a foundation. Donors may require that the principal remain intact in perpetuity, or for a defined period of time or until sufficient assets have been accumulated to achieve a designated purpose.

Endowment Grant

Some nonprofit organizations set aside money that is invested and earns interest. The charity spends only the interest and keeps the original sum untouched. Such a fund is called an endowment and is commonly found within charities with large physical plants, such as hospitals and colleges. From time to time, charities launch fundraising efforts to start, or add to, an endowment. Funders of an endowment want to be sure that the gift to an endowment will remain in the endowment earning interest and not be drawn out of the endowment to satisfy transitory operating expenses.


The current market value of an asset less any liability or loan.


Generally, all the property a person owns at the time of their death.

Estate Planning

The process of creating an orderly and desirable arrangement for the disposition of a person's estate by working with an advisor (attorney, accountant, trust officer, life insurance agent, etc.). The main objective is to ensure that the individual's wishes regarding the security of their family and others are fulfilled. Advisors also take tax consequences into consideration during estate planning. A well-drafted estate plan can provide significant benefits to the individual and their family and helps ensure that their philanthropic legacy continues.

Estate Taxes

Taxes imposed on property as it passes from the dead to the living

Excise Tax

A tax on the net investment income of private foundations. Normally set at 2% per year, the rate may be reduced to 1% if the foundation meets certain expenditure requirements.


The person named in one's will to manage the estate, deal with the probate court, collect assets, and distribute them as the individual has specified.

Family Foundation

“Family foundation” is not a legal term, but it describes an independent private foundation whose funds are derived from members of a single family. Family members often serve as officers or board members of family foundations and have a significant role in their grantmaking decisions.

Fiduciary Duty

The legal responsibility for investing money or acting wisely on behalf of another. Managers of charitable entities have fiduciary obligations to the charity. (See Due Diligence)

Field of Interest

A field of interest is a charitable cause reflecting an area of the donor’s personal interest. A donor can use their donor-advised fund (DAF) to grant to nonprofit organizations that work in that charitable area. Fields of interest may include, but are not limited to the arts, the environment, women’s services, education, youth services, religion, and health.

Financial Report

An accounting statement detailing financial data, including income from all sources, expenses, assets, and liabilities. Typically included in a charity’s or private foundation’s annual report (see Annual Report). A financial report may also be an itemized accounting that shows how grant funds were used by a charitable organization. Most foundations require a financial report from grantees.

Form 1023

Application for Recognition of Exemption under IRC Section 501(c)(3) that organizations must file in order to receive tax-exempt status.

Form 990

The information return that public charities are required to file annually with the IRS unless the organization is a church or entity association with a church, synagogue, mosque, a certain type of governmental unit affiliate, or falls below certain gross receipts thresholds. The IRS uses this form to assess compliance with the Internal Revenue Code. Form lists organization assets, receipts, expenditures, and compensation of officers. Copies of Form 990 can be viewed online by visiting

Form 990-PF

Form 990 PF must be filed annually with the IRS by all private foundations. The IRS uses this form to assess compliance with the Internal Revenue Code. This form provides financial information, names of officers, trustees or directors, and a list of grant recipients and amounts contributed during the year. Copies of Form 990-PF can be viewed online by visiting

General Purpose or General Operating Support Grant

A grant that is used to support the general expenses of operating an organization, including salaries, materials and supplies, or utility bills. An operating grant supports an organization’s overall mission and entrusts that entity to make the best use of the money. It is often helpful to an organization when making an operating support grant to do so over a multi-year period. This enables the organization to have the kind of basic support that frees them up to focus on their core projects and initiatives.

Generation-Skipping Trust

An estate tax-saving trust, where the principal is left in trust for one’s grandchildren, with one’s children receiving only the trust income.

Gift to a Donor-Advised Fund

A gift to a DAF may be comprised of cash, stocks, or other assets. These assets fund the DAF account, and will eventually be granted to qualifying charitable organizations. All gifts made to a fund may be claimed as a tax deduction.

Giving Pattern

The overall picture of the types of projects and programs that a donor has supported historically. The past record may include areas of interest, geographic locations, dollar amount of funding, or kinds of organizations supported.


An award of funds to a charitable organization. In a donor-advised fund (DAF), a donor can recommend that a grant be awarded to a nonprofit of their choice.

Grant Monitoring

The ongoing assessment of the progress of the activities funded by a donor, with the objective of determining if the terms and conditions of the grant are being met and if the goal of the grant is likely to be achieved.

Grant Recommendation Form

The grant recommendation form is a form that must be completed by an advisor in order to begin the process of grant making. Each recommendation must be for a minimum of $250. Grants may be recommended anonymously.


The individual or organization that receives a grant (see Recipient).


The individual or organization that makes the grant or establishes the trust.

In-Kind Contribution

A donation of goods or services rather than cash or appreciated property

Independent Foundation (Private Foundation)

These private foundations are usually founded by one individual, often by bequest. They are occasionally termed “non-operating” because they do not run their own programs. Sometimes individuals or groups of people, such as family members, form a foundation while the donors are still living. Many large independent foundations are no longer governed by members of the original donor’s family but are run by boards made up of community, business, and academic leaders. Private foundations make grants to other tax-exempt organizations to carry out their charitable purposes. Private foundations must make charitable expenditures of approximately 5% of the market value of their assets each year. Although exempt from federal income tax, private foundations must pay a yearly excise tax of 1% or 2% of their net investment income.

Intermediate Sanctions

Penalty taxes applied to disqualified persons of public charities (see Disqualified Person) that receive an excessive benefit from financial transactions with the charity. An excessive benefit may result from overcompensation for services or from other transactions such as charging excessive rent on property rented to the charity. Unlike private foundations, public charities are not barred from engaging in financial transactions with disqualified persons as long as the transaction is fair to the charity. Penalty taxes also may apply to organization managers, such as the charity’s board, that knowingly approve an excess benefit transaction.

Internal Revenue Service (IRS)

The federal agency with responsibility for regulating both public charities and foundations and their activities.


Lacking a will or other valid estate transfer device at the time of death.


To transfer or use a charity’s assets or income for the benefit of a charity’s insiders. Inurement is a specific form of private benefit and is prohibited for all 501(c)(3) organizations.

IRS Form 1023 (see Form 1023)

Application for Recognition of Exemption under IRC Section 501(c)(3) that organizations must file in order to receive tax-exempt status.

IRS Form 990 (see Form 990)

IRS Form 990-PF (see Form 990-PF)

Jeopardy Investment

An investment that risks the foundation’s ability to carry out its exempt purposes. Although certain types of investments are subject to careful examination, no single type is automatically a jeopardy investment. Generally, a jeopardy investment is found to be made when a private foundation’s managers have failed to exercise ordinary business care and prudence. The result of a jeopardy investment may be penalty taxes imposed upon a private foundation and its managers.


The gift that an individual leaves, both in the details of their will and in the tradition of giving they shared with their descendants. (See Bequest)


A method of grantmaking practiced by some foundations. Leverage occurs when a small amount of money is given with the express purpose of attracting funding from other sources or of providing the organization with the tools it needs to raise other kinds of funds. Sometimes known as the “multiplier effect.”


Claims on assets held, excluding ownership equity. For a foundation, payments outstanding for grants authorized and not yet paid or remaining grants to be paid over multiyear periods, are liabilities.

Life Estate

The right to use trust property, and receive income for it, during one’s lifetime.

Life Insurance Trust

An irrevocable trust designed to own life insurance and reduce the size of the original owner’s taxable estate.

Limited-Purpose Foundation

A type of foundation that restricts its giving to one or very few areas of interest, such as higher education or medical care.

Living Trust

A trust set up while a person is alive and which remains under the control of that person until death.

Living Will

A document stating whether or not its signee wants to be kept on life support in the event that they become terminally ill or otherwise life-threateningly injured. The living will takes effect while the signee is still alive.

Matching Gifts Program

A grant or contributions program that will match employees’ or directors’ gifts made to qualifying public charities. Specific guidelines are established by each employer or foundation. (Some foundations also use this program for their trustees.)

Matching Grant

A matching grant is a way of leveraging additional funds from other funders. A funder agrees to match an amount the grant seeker is raising from other sources. For example, if a grant is made on a 1:1 match, for every dollar raised by the grant seeker, the funder will match that amount, up to a specified amount.


To commemorate; to present a memorial to; to honor the memory of an individual or group by donating resources or establishing a fund that reflects the gifts, values, or concerns of the individual or group.

Multi-Year Grants

A multi-year grant is extremely important to grantees, particularly when they are seeking funding for a project that may be planned over several years, or need funding for general operations. Providing multi-year funding allows grant seekers to focus on the mission of their work rather than seeking funding on an annual basis.

Noncash Contribution

An asset other than cash donated to a tax-exempt organization, e.g. stocks, bonds, vehicles, artwork or real estate.

Nonprofit (a.k.a., Non-profit, not-for-profit)

A nonprofit is an organization whose income is not used for the benefit or private gain of persons with an interest in the organization, as designated by the Internal Revenue Service. Funds received by a nonprofit must be used only in support of its mission and operations.


National Taxonomy of Exempt Entities, a comprehensive coding scheme developed by the National Center for Charitable Statistics. NTEE establishes a unified national standard for classifying nonprofit activities; it also provides a more concise and consistent hierarchical method to classify and index grants.

Operating Foundation

Also called private operating foundations, these are classified by the IRS as a private foundation whose primary purpose is to conduct research, social welfare, or other programs determined by its governing body or establishment charter. Operating foundations use the bulk of their income to provide charitable services or to run charitable programs of their own. They make few, if any, grants to outside organizations. To qualify as an operating foundation, specific rules, in addition to the applicable rules for private foundations, must be followed.

Operating Support

A contribution given to cover an organization’s day-to-day, ongoing expenses, such as salaries, utilities, office supplies, etc.


Equality, as in amount, status or value. Parity in philanthropy is the equal participation by spouses or other family members in the allocation of charitable dollars and in receiving the satisfaction and recognition of their contributions.

Payout Requirement

The minimum amount that private foundations are required to expend for charitable purposes (including grants and, within certain limits, the administrative cost of making grants). In general, a private foundation must meet or exceed an annual payout requirement of five percent (5%) of the average market value of its total assets.


The word is derived from Greek and means “love for mankind.” Modern definitions include the concept of voluntary giving by an individual or group to promote the common good and improve the quality of life.

Planning Grant

If an organization is planning a major new program, a good deal of time and effort may be needed to figure out how it will operate. A planning grant will enable an organization to research the needs of the constituency being served, consult with experts in the field or conduct other planning activities. A common planning assignment is to support initial project development work.


A written or oral agreement to make future contributions of cash or other assets to another entity. A pledge may be either conditional or unconditional.

Pour-Over Will

A will that “pours over” property into a trust.

Private Foundation

A 501(c)(3) organization, further defined in the IRS section 509(a), that does not qualify as a public charity. Generally, a private foundation is a nonprofit organization established and supported primarily by private funds. Private operating foundations conduct their own programs, expending funds directly for charitable activities. A private non-operating foundation supports charitable activities by making grants to other nonprofit organizations. A donor-advised fund (DAF) can make grants to private operating foundations, but not to private non-operating foundations. For a chart of all types of 501(c)(3) organizations, click here.

Private Benefit

The transfer or use of a charity’s assets or income, or the conferment of undue advantage, to private persons who are not necessarily charity insiders. Some private benefit is permitted, but it must not be more than incidental to the charitable purpose being served. Private benefit is a broad term that includes inurement and applies to all 501(c)(3) organizations.


The court proceeding in which the authenticity of a person's will is established, the executor or administrator is appointed, related debts and taxes are paid, heirs are identified, and property is distributed according to the will.

Professional Advisor

Individuals who assist in planning and executing charitable giving through providing information on giving options according to one’s specific financial situation. Types of professional advisors include: attorney, accountant, estate planner, financial planner, stockbroker, insurance broker, planned giving officer, and philanthropy consultant.

Program or Project Support Grant

A project grant is given to a specific, connected set of activities, with a defined beginning and end, explicit objectives and a predetermined cost. When a funder gives a grant for a specific project, it is generally a restricted gift and must be used for that project.

Prohibited Transaction

One of a number of activities in which certain private foundations and/or foundation representatives may not engage (see Disqualified Person).

Public Charity

A nonprofit organization that is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code and that receives its financial support from a broad segment of the general public. Religious, educational, and medical institutions are deemed to be public charities. Other organizations exempt under Section 501(c)(3) must pass a public support test (see Public Support Test) to be considered public charities, or must be formed to benefit an organization that is a public charity (see Supporting Organization). Charitable organizations that are not public charities are private foundations (see Private Foundation) and are subject to more stringent regulatory and reporting requirements.

Public Foundation

Public foundations are nonprofit organizations that receive at least one-third of their income from the general public. Public foundations, along with community foundations, are recognized as public charities by the IRS. Although they may provide direct charitable services to the public as other nonprofits do, their primary focus is on grantmaking.

Public Support Test

There are two public support tests, both of which are designed to ensure that a charitable organization is responsive to the general public rather than a limited number of persons. One test, sometimes referred to as 509(a)(1) or 170(b)(1)(A)(vi) for the sections of the Internal Revenue Code where it is found, is for charities that mainly rely on gifts, grants, and contributions. To be automatically classed as a public charity under this test, organizations must show that they normally receive at least one-third of their support from the general public (including government agencies and foundations). However, an organization that fails the automatic test still may qualify as a public charity if its public support equals at least 10 percent of all support and it also has a variety of other characteristics, such as a broad-based board, that make it sufficiently “public.” The second test, sometimes referred to as the section 509(a)(2) test, applies to charities, such as symphony orchestras or theater groups, that get a substantial part of their income from the sale of services that further their mission, such as the sale of tickets to performances. These charities must pass a one-third/one-third test. That is, they must demonstrate that their sales and contributions normally add up to at least one third of their financial support, but their income from investments and unrelated business activities does not exceed one-third of support.

Recipient (Grantee)

The recipient is a nonprofit organization recommended to receive a grant by a donor from a donor-advised fund (DAF).

Restricted Funds

Assets or income that are restricted in their use, in the types of organizations that may receive grants from them or in the procedures used to make grants from such funds.


A corrective action that removes a charity’s tax-exempt charter. Revocation is used for violations such as inurement, performing non-exempt activities, operating in a commercial manner, and operating for private use.


A general term that refers primarily to stocks and bonds, as compared to other investments such as real estate, limited partnerships and the like. Publicly traded securities can be contributed to a donor-advised fund (DAF).

Seed Money or Start-up Grant

A grant or contribution to help a new nonprofit organization or a program during its first few years. Such grants are often for more than one year, and frequently decrease in amount each year. For example, a grant might be $25,000 in the first year, $15,000 the second year, and $7,000 the last year. The funder usually assumes that the new organization will begin to raise other funds to replace the decreasing start-up grant.


A private foundation is generally prohibited from entering into any financial transaction with disqualified persons (see Disqualified Person) that involve (1) sale, exchange, or lease of property; (2) lending of money or other extensions of credit; (3) providing goods, services, or facilities; (4) paying compensation to or reimbursing expenses of a disqualified person; (5) transferring foundation income or assets to, or for the use or benefit of, a disqualified person; and (6) certain agreements to make payments of money or property to government officials. The few exceptions to this rule include paying reasonable compensation to a disqualified person for services that are necessary to fulfilling the foundation’s charitable purposes. Violations will result in an initial penalty tax equal to five percent of the amount involved, payable by the self-dealer.


The successor is an individual named by the donor who will take on advising duties for a donor-advised fund (DAF) after the primary donor’s death. A successor has no authority over the fund until the donor’s death, at which time the successor takes on all the responsibilities of the donor, including recommending grants and naming advisors and successors. A donor may name more than one successor and can declare that the successors will share responsibility for the fund or that the fund will be split with each successor becoming responsible for a portion.

Successor Trustee

The person who takes over as trustee of a trust when the original trustee dies or becomes incapacitated.

Supported Organization

A tax-exempt organization that receives funds or services from a supporting organization.

Supporting Organization (Supporting Foundation)

Supporting organizations are among the many charitable vehicles that donors can utilize to achieve their specific philanthropic goals. A supporting organization is a charity that is not required to meet the public support test because it supports a public charity. To be a supporting organization, a charity must meet one of three complex legal tests that assure, at a minimum, that the organization being supported has some influence over the actions of the supporting organization. Although a supporting organization may be formed to benefit any type of public charity, the use of this form is particularly common in connection with public charities like National Philanthropic Trust. Supporting organizations are distinguishable from donor-advised funds (DAFs) because they are distinct legal entities. There are three types of supporting organizations defined by their relationship with their supported organization(s): Type I—operated, supervised, or controlled by a supported organization (parent-subsidiary relationship); Type II—supervised or controlled in connection with the supporting organization (brother-sister relationship); and Type III—operated in connection with the supported organization(s).

Tax-Exempt Organizations

Organizations that do not have to pay state and/or federal income taxes. Organizations other than churches seeking recognition of their status as exempt under Section 501(c)(3) of the Internal Revenue Code must apply to the Internal Revenue Service. Charities may also be exempt from state income, sales, and local property tax.


A practice, rooted in many faiths, of giving 10% of a person's assets back to their place of worship.


A legal arrangement used to set aside money or property of one person or institution (trustee) for the benefit of one or more persons or organizations (beneficiary).


The person(s) or institutions responsible for the administration of a trust.


A person making a will.

Unrestricted Funds

An unrestricted fund is one that is not specifically designated to particular uses by the donor, or for which restrictions have expired or been removed.


Valuation is an assessment of the actual value of an item to the person or organization that possesses it. Value may be determined by any number of methods and may reflect net present value, the future purchasing value, or even a subjective value, such as a qualified appraisal by a qualified appraiser. The Valuation Standards for Charitable Planned Gifts define valuation as a “reflection of the present value of the ultimate purchasing power of the gift.”


Performing an act of kindness, freely giving of talent, time and effort for the simple fulfillment of community benefit.


A legal document in which a person states various binding intentions about what happens to their property after their death.