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ESTATE PLANNING GLOSSARY
A
Adjusted Gross Estate
The figure arrived at by deducting estate settlement (administrative) costs from the gross estate. Also known as the taxable estate.
Administration Expenses
Expense incurred by the Executor or Administrator in collection and conservation of estate assets, payment of debts and distribution of property. Includes fees payable to executors, administrators, attorneys, accountants and appraisers, as well as court costs.
Administrator
Either a person or bank appointed by the Court to settle the estate of a person who died without a valid will or if the executor named in the will is unable to act.
Annuity
A payment of income to a person, annually or monthly, for a term of years or for life.
B
Beneficiary
The party named in a will, trust, life insurance policy or employee benefit plan to receive property or the income from property to which some other party holds title.
Bequeath
To transfer personal property by a will.
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C
Codicil
An amendment or supplement to an existing will to effect some revision, change or modification.
Common Disaster Clause
A provision in a will or insurance policy that prescribes the order of death to be assumed between two or more persons who die at the same time or when the actual order of death is unknown.
Community Property
Property (with certain exceptions) acquired after marriage while a resident of a Community Property state that by law is the property of both husband and wife even though title may be in the name of one or the other. (Community property states are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico Texas and Washington.)
Contingency
An event activated only if other events occur, such as the activation of a trust only at the death of both parents.
Corpus
The basic fund, or capital, upon which income is earned.
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D
Decedent
A person who has died.
Descent
The passing of property at the owner’s death by hereditary succession.
Devisee
A person who receives real estate by a will.
Domicile (or Domicil)
A person’s permanent home.
Dower
The statutory provision in state law providing that each spouse has a certain interest in property held by the other.
E
Election of the Surviving Spouse
The right of a surviving spouse to take the share of the deceased spouse’s estate to which he or she is entitled under the law, despite a contrary provision in the will.
Estate Tax
A tax imposed by the federal Government, and by some states, on a decedent’s personal and real property transferred at death.
Exclusion
The annual right of a donor to make a gift free of tax of up to $10,000 (subject to indexing) to each of any number of donees. Gifts must be of a present interest. If the gift is concurred in by the donor’s spouse, the maximum is raised to $20,000.
Executor/Executrix
A person or institution named in a will to settle the estate. Responsible for filing income, gift, estate and inheritance tax returns, after arriving at the fair market value of all assets. If female - executrix.
Executor De Bonis Non
The individual or corporation named in a will to take over and complete the settlement of an estate in which the original named executor, for one reason or another, has failed or been unable to do so. Unless the testator names such a successor executor, the court then appoints an “administrator de bonis non.”
Exemption, Gift
See Unified Credit.
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F
Failure of Issue
Failure by non-existence or death of lineal descendants (children, grandchildren and down the line).
Fair-Market Value
The price for an item at which a willing seller and a willing buyer will trade. Sometimes difficult to arrive at for closely held business interests.
Fee Simple
Indicates absolute ownership in real property.
Fiduciary
One who manages property or transacts business for benefit of someone else, in a relationship of special trust (i.e., trustee, guardian, executor).
Funded Trust
A trust where assets such as cash, securities or real estate have already been placed.
G
Generation Skipping Transfer
An arrangement providing for the beneficial use of property by someone in a younger generation than the decedent (i.e., a child) with the property ultimately to go to someone in a still younger generation (i.e., a grandchild). Subject to special taxes.
Grantor
A person who creates a trust. (Also called a settlor, trustor or donor.)
Gross Estate
The total value, for Federal Estate Tax, of a person’s assets before deducting debts, administration expenses, the marital deduction and charitable bequests.
Guardian
One named to look after the person and/or property of a minor child.
Guardian Ad Litem
A person appointed by the court to represent and defend a minor or incompetent person in connection with court proceedings; sometimes called a special guardian.
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H
Heir
A person who inherits personal and real property from a decedent by law.
Holographic Will
A will entirely in the handwriting of the testator.
I
Income Beneficiary
Recipient of the income only from property or a trust, without access to the principal.
Incompetent
A person judicially declared incapable of managing his or her affairs.
Inheritance Tax
A tax imposed by many states on personal and real property received by a person through inheritance.
Intangible Property
Property without physical substance, such as securities, bank accounts and patents.
Inter-Vivos
“While living” - a trust established prior to death.
In Terrom Clause
A provision of a will or trust intended to frighten a possible beneficiary into doing or refraining from doing something at the peril of forfeiting his or her possible benefits - such as a provision that would disinherit any named or potential beneficiary who contested the will.
Intestate
Means dying without a valid will. The laws of descent and distribution in each state determine how an estate is to be distributed if there is no valid will.
Irrevocable
Describes a document or trust, which may not be amended or terminated by the grantor.
Issue
All persons descended from a common ancestor.
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L
Legacy
Transfer of personal property by will.
Legatee
The designated recipient of a legacy.
Life Estate
The right to use or receive benefits from property for life only, with no rights after death.
Life Insurance Trust
A trust composed partly or wholly of life insurance contracts, or having the right to receive life insurance proceeds.
M
Marital Deduction
An estate tax deduction from the gross estate of a decedent. An unlimited deduction is allowed for property going to a surviving spouse.
Marital Share or Trust
Property or assets passing to or for the benefit of the spouse, and qualifying for the Marital Deduction.
N
Non-Marital Share or Trust
Property or assets not passing to a spouse, but to other parties or to a trust, possibly for the benefit of the spouse, but not qualifying for the Marital Deduction.
Nuncupative Will
An oral will made by a person on his or her deathbed or by one who is conscious of the possibility of meeting death in the near future, as by a person in active military service. It is declared in the presence of at least two witnesses and later reduced to writing by someone other than the testor and offered for probate in the manner prescribed by statute.
O
Over Qualification
To pass more to a spouse than the minimum amount that is eligible for the marital deduction. (May result in higher taxes later.)
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P
Personal Property
All property other than real estate.
Per Capita
Taking as a survivor and not as a representative of an ancestor.
Per Stirpes
“By representation” - meaning that “issue” receiving property distributed under an estate plan receive equal portions of the share their deceased ancestor would have taken, if living.
Pour Over
A term referring to the transfer of property from an estate or trust to another estate or trust upon the happening of an event as provided in the instrument.
Power of Appointment
A power given to one person to dispose of property legally owned by another person. General Power: exercisable without restriction in favor of the holder or others. Limited (Specific or Non-General) Power: Not exercisable in favor of the holder, his or her estate or his or her creditors.
Power of Attorney
A document legally authorizing another person to act on a signer’s behalf. Usually valid while the signer has the capacity to revoke it. A “durable power of attorney” is one that continues in effect after the incapacity of the signer.
Probate
The process of presenting a will in court and formally establishing its validity.
Protector
A party named in a trust agreement, who has the power to replace the trustee or move the domicile.
Q
Qualifying Terminable Interest Property Trust
A Q-TIP Trust is essentially the only way an individual can take advantage of the marital deduction while simultaneously retaining control of the ultimate disposition of their property. Generally speaking, the Q-TIP Trust is established primarily for non-tax reasons.
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R
Real Property
Property consisting of land and all improvements.
Reciprocal Wills
Wills that provide similar distribution provisions, generally in favor of one another.
Revocable
Describes a document or trust that may be amended or cancelled.
Remainder
Assets that remain for distribution at the end of a list estate.
Remainderman
The person entitled to receive a remainder interest.
Residuary Estate
That portion that remains after all devises and bequests have been distributed, and after all debts, expenses and taxes have been paid.
Rule Against Perpetuities
A rule of common law that makes void any estate or interest in property so limited that it will not take effect or vest within a period measured by a life or lives in being at the time of the creation of the estate plus 21 years and the period of gestation. In many states, the rule has been modified by statute. Sometimes it is known as the rule against remoteness of vesting.
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S
Settlor
See Grantor.
Spendthrift Provision
A provision in a trust or insurance Policy that retains the principal of the fund and pays income to the beneficiary. This protects funds from the beneficiary’s incapacity, poor judgment or creditors.
Sprinkling or Spray Trust Provision
A provision in a trust that permits distribution of funds to the beneficiaries in proportion to their needs. Frequently provides income tax savings, since income may be paid and taxed to children rather than to the surviving spouse, who may be in a much higher tax bracket.
Successor Trustee
A trustee who follows the original or previous trustee.
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T
Tangible Property
Property with physical Characteristics, such as cars, Furniture, jewelry and cash.
Tax Waiver
A written consent of the state tax department permitting the withdrawal of property belonging to the estate of a decedent by the executor or Administration, in order to permit the assembling of assets and to Permit distribution.
Tenancy: Joint & Survivor By The Entirety
Normally husband and wife with the Survivor receiving full title. Similar to joint tenancy but between Spouses only. This type of ownership is prohibited in many states.
Tenancy In Common
Jointly owned, but with each owner free to dispose of his or her interest without approval of co-owners during lifetime or by will.
Testamentary Capacity
Mental capacity to make, or execute, a valid will.
Testamentary Trust
A trust created under a will.
Testator/Testatrix
A person who makes a valid will. If female - testatrix.
Trust
Arrangement provided by a will or trust agreement that puts property in the care of a trustee (individual or bank) for the benefit of beneficiaries.
Trust Agreement
A written agreement between settlor and trustee setting forth the terms of a trust.
Trustee
A bank or individual holding trust property for the benefit of specified beneficiaries.
Trust Advisor
A bank or individual designated to advise a trustee with regard to the investment or distribution of trust proceeds.
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U
Unified Credit
A credit covering gifts and estates that is equivalent to an exemption. This exemption is now subject to indexing for deaths occurring in various years:
- 2001 675,000
- 2002 1,000,000
- 2003 1,000,000
- 2004 1,500,000
- 2005 1,500,000
- 2006 2,000,000
- 2007 2,000,000
- 2008 2,000,000
- 2009 3,500,000
- 2010 Repealed
However, the current estate tax system is scheduled to be reinstated after 2010 unless Congress revises the law.
Unified Estate & Gift Rates
Federal, gift and estate taxes share a common rate, with lifetime transfers and transfer made at death cumulated for estate tax rate purposes.
W
Ward
A person who by reason of minority, mental incompetence or other incapacity is under the protection of the court either directly or through a guardian, committee, curator, conservator or tutor.
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