Estate Planning Glossary

The following set of definitions would be make it possible for the typical layperson to really have a broad working understanding of some conditions usually used in estate planning. A number of these conditions are legal terms with legal value. Because every province might have different statutory or court derived definitions of a few of these terms, the following definitions vary somewhat from state to state and may are perhaps not state specific. According to, many of these conditions can change by the way in which they have been used. Always ask your lawyer for assistance in understanding these terms as well as your particular records.

A statement in front of an individual who is qualified to administer oaths (a Notary) that a file bearing the person’s signature was really signed by the individual.

AB Trust:
A kind planning using irrevocable trusts employed by married people. In this kind of trust organization, two trusts (trust B) are made trust A and at the time the very first spouse dies. By splitting the decedent’s estate in to two trusts at the very first passing, each partner can pass the maximum quantity of property permitted in order to avoid national estate taxes. Bypass trust or one trust, usually trust A, is often referred to as the other trust and the marital deduction trust, usually trust B, is often referred to as the credit shelter trust.

Abstract of Trust:
A condensed version of a trust which contains only essential parts such as for example that are the trustees and successor trustees. An Abstract of Trust can be used to establish a valid trust has been established without revealing details either the trustee or beneficiaries need to help keep private.

Accumulation Trust:
A trust where trust income is kept and never paid out for longer when compared to a year to beneficiaries until certain conditions have been fulfilled. These kind of trusts will also be referred to as complex trusts.

Under a will ademption is the failure of a particular gift of property to take effect because the property is not any longer possessed by the individual at the time of his departure.

Management of an estate:
The distribution of the probate estate of a deceased person. When there is a will the individual who manages the distribution is known as the executor or personal representative. When there is no will, this individual is known as the administrator. In several states the degree of supervision can vary greatly based on whether the probate process is proper (a high level of court supervision) or informal (a low level of court supervision).

Management of a Trust:
The procedure of handling the affairs of a trust. Often the management of a trust is not under the supervision of a court.

Ancillary probate
: A probate proceeding conducted in a state apart from the state the probate does occur and where in fact the decedent lived.

The sum is increased periodically. There was no limit to the amount of people gifts can be given by you to which be eligible for the annual exclusion. To be eligible for the annual exclusion, the present should be one which a receiver can have complete get a grip on over and appreciate straight away. Annuity: Payment of a fixed amount of cash to a given individual, by contract, at regular intervals (generally monthly).

Ante – nuptial Agreement : A contract between two possible marriage partners specifying the way the property owned separately or collectively all through marriage and owned by each previous to marriage is going to be split if the couple divorce. This kind of contract can also be often referred to as a pre-nuptial agreement.

Ascertainable Standard: An IRS recognized standard which governs the employment of trust property and prevents the property from being considered part of the trustee’s property for estate tax functions. The standard is understood to be “wellness, instruction, care and support” of the beneficiaries under the trust. Basis: This can be a tax term associated with the valuation of property for determining gain or loss on sale. Your tax basis is $ 150, 000, in the event that you purchase a house for $ 150, 000. If it is later sold by you for $ 250, 000, your taxable gain is $ 100, 000. Tax is permitted by certain tax provisions such as Internal Revenue Code section 1031 to be deferred under certain condition.

Beneficiary: An individual, association, trustee or estate which receives, or may possibly become eligible for, benefits under a will, insurance plan, retirement plan, annuity, trust, other contract, or by some other means such as the intestacy laws of a situation in which case the beneficiary is well known being an “heir”. A primary beneficiary is really a man who will gain from the will or trust if living at the decedent’s departure. A contingent beneficiary is really a man who may or may not receive property, based on the terms of the will or trust and what goes on to the main beneficiaries. For instance, nothing may be received by a contingent beneficiary unless and until the primary beneficiary dies.

Bequest: A legal term for a will provision leaving personal property to a given individual. (see also Demonstrative Bequest, General Bequest, Specific Bequest) Bond: An insurance policy used to make sure a man having a situation of trust (often called a fiduciary) is going to do their job and never misuse or steal funds they have been controlling. The bond guarantees in case a party is injured due to improper acts of the individual having the position of trust that a particular amount of money is going to be paid. Hence, if an executor, personal representative, trustee, or protector, who is bonded, wrongfully deprives a beneficiary of his or her property, the bonding company will replace it, as much as the limits of the bond. Bonding companies issue bonds in exchange for premiums averaging a large number of the face amount of the bond. The prerequisite for a bond is frequently waived by the manufacturer of a will or grantor of a full time income trust as a result of the high price and generally low risk. In addition, most states have very strict fiduciary laws.

Bypass Trust : a life estate that was created by Any trust for a life beneficiary, with the trust principal going to the ultimate beneficiary once the life beneficiary dies. See AB Trust, marital life estate trust, spousal bypass trust, or perhaps a marital exemption trust.

By Right of Representation: Common language for the Latin term, Per Stirpes. That is the most common way of distributing an estate so that if one of the beneficiaries is dead, his children share equally in his share of the estate distribution. This term is usually summarized by the phrase, “if the parent is dead, his children stand in his shoes.”

Charitable Trust: Any trust made to create a considerable present to a charity. Most charitable trusts can provide estate tax savings and substantial income for the grantor.

Charitable Remainder Trust : A trust used to make substantial contributions of property or cash to a charity so a tax advantage can be obtained by the person making the gift or donation. In a non-profit remainder trust, the donor reserves the right to make use of the trust property all through his life or some other given time period, and would go to the charity when the period is over the property.

Children: By law in many states, one’s children are: (1) biological offspring, (2) children who have been legally adopted, (3) children born out of wedlock and (4) children born to the manufacturer of a will after the will is created, but before his / her departure. Step-children are not children of the step-parent unless they will have been legally adopted. Codicil : A different legal document which, after it has been properly seen and signed, alters a current will. An amendment to a will. Common Law Marriage : In a minority of states, couples might be considered married when they live together for a particular amount of time and mean to be wife and husband. In a few states all that is needed can be an intention to be married and the holding out to the others that they have been married.

Community Property: A few states follow a method of marital property ownership called “community property.” The details of how property in a community property state is identified can vary based on that one state. In general, all property acquired after marriage and before permanent separation is recognized as to fit in with both partners equally, with the exception of presents to and inheritances with a partner. Also, income from community property is community property income. The eight states with such laws are referred to as community property states. These eight states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas and Washington. The community property system is also used by puerto Rico. In addition, Wisconsin includes a modified community property system.

Conservator: Somebody appointed by a court to handle the affairs of a mentally incompetent or a minor. A conservator is a person at least twenty – one years of age, resident or non – resident, who is appointed by a court to handle the estate of a person.

Death Taxes: Taxes levied on the home of a man who died. National death taxes are called “Estate Taxes.” State death taxes (if any) pass by various names, including “inheritance tax.” These taxes are usually referred to as “transfer taxes.” Other closely connected transfer taxes are the federal Generation Skipping Transfer Tax and the federal Gift Tax.

Decedent: A man who has died. Deed: A written document used to evidence ownership and/or transfer title to real estate Demonstrative Bequest: A bequest of a specific amount of cash or property to be distributed first from one source in the estate and from other sources to the extent that the first is inadequate.

Descendant: A man who is definitely an offspring, yet distant. The kids, grandchildren, great-grandchildren, and on are all descendants of each one of the first parents. Devise: A legal term referring to property which passes by way of a will.

Dispositive Provision: A clause in a will or trust that gives away property. Disposition: The parting with or giving out of property. Disinherit: Cutting a man away from his or her bequest in a estate where he or she might have been an all natural heir. Doctrine of Independent Value: The legal capacity to make reference in a single document to an independent document that stands alone. By making reference to the document, the independent document will be allowed by the law to be incorporated into the document making reference to it. This really is also referred to as incorporation by reference.

Domicile: Their state or county that is the main residence of a man. Disclaimer: The refusal of a beneficiary to accept property willed or passing for them under a trust. Each time a disclaimer is made, the property is usually used in the man next in line under the will or trust. Sometimes there is certainly a tax advantage each time a present is disclaimed. A disclaimer can also be called a renunciation. Donee : a gift is received by Someone who.

Donor : a gift is given by Someone who. Durable Power of Attorney: A power of attorney that remains powerful even when the individual who created it (called the “principal”) becomes incapacitated. The person authorized to do something (called the “attorney-in-fact”) could make choices for the principal as defined in the record. Durable Power of

Attorney for Health Care : A record established by a person (the principal) giving yet another man (the agent) the right and power to related issues handle to the health care of the principal.

Due – on – sale Clause : A clause in a mortgage document which requires that the mortgage be paid in full if the property is transferred. Escheat : A word that describes the specific situation where property transfers to the possession of the state because you will find number legal inheritors to claim it. Estate: Broadly speaking, all of the property you own when you die. You will find different methods to quantify estates: the taxable estate (property subject to estate tax), the probate estate (property that has to go through probate), and the net estate (the net value of the home). Estate Planning : The art of reducing or minimizing estate taxes and property at the mercy of probate while passing your property on to family members in a manner that minimizes legal fees, time, aggravation and other prices. Estate Taxes: Taxes imposed on the “prerogative” of transferring property by reason of death. Estate tax is most generally found in mention of the tax imposed by the Government as opposed to the state. See Death Taxes. Executor/

Executrix: The individual (male/female) named in a will to handle a decedent’s estate. The more contemporary term is really a “personal representative,” which removes any reference to the sex of the individual. If you die with no will, the probate court will name such a man, called the administrator of the estate.

Exemption Equivalent: When property is given as a present or passed to heirs as part of an estate, it really is susceptible to federal estate and gift tax laws. Each individual is given credit to a tax that may be used to cancel the tax assessed against a particular quantity of property. The quantity of property that results in a tax precisely add up to the credit is recognized as the “exemption equivalent”. Technically, no property is exempt from federal estate and gift taxes, but the word exemption equivalent is generally used. Said yet another way, the credit is equal to the level of tax due on a gift or estate transfer of property which has a value equal to the exemption equivalent amount. Closing Beneficiaries: People or institutions designated to receive life estate trust property outright upon the passing of a life beneficiary. Funding a Trust: Transferring ownership of property to a trust in the name of the trust or trustee.

Fiduciary: A man with the legal duty to do something mainly for another’s advantage in a situation of trust, good faith, candor and responsibility. “Fiduciary” is frequently used as a substitute term for “trustee”, even though a trustee is but one kind of fiduciary. Fiduciary Duty: The obligation of a fiduciary to do something in a situation of trust, good faith, candor, and obligation, with respect to yet another. The responsibility is certainly one of the most readily useful defined obligations under the law and is quite rigorously enforced by the courts. General Bequest: A bequest that is usually to be distributed from the general assets of the estate and that is not really a specific asset.

Generation-Skipping Trust: A tax-saving trust, where the principal is left in trust for one’s grandchildren (or any beneficiary a couple of generations removed from the grantor), with the current beneficiaries (often the children) receiving only the trust income.

Gift Tax: Tax on gifts made within a man’s life. Many gifts are exempt from tax: gifts to tax-exempt charities or the giver’s spouse (if the recipient spouse is really a U.S. citizen), and gifts of $11,000 or less to an individual recipient each twelve months.

Grantor: The person or persons who develop a trust. Also known as the trustor, settlor or originator. Grantor Trust: A trust in which the person creating the trust retains enough “ownership rights” or “incidents of ownership” that the person is treated by the IRS as the owner of the trust assets for tax purposes. The right to revoke the trust is enough to make a grantor trust to the trust.

Gross Estate: The whole value of an estate at the date of the decedent’s departure. The value is established before debts along with other “deductions” are subtracted from the estate value.

Guarantor: A party who guarantees repayment of a loan, making use of their very own assets if necessary. Protector of the Estate: An adult appointed by way of a court who assumes responsibility for an incompetent person’s or perhaps a minor’s property. See conservator. Protector of the Individual : if no biological or adoptive parent (legal parent) of the child is actually able to do this. An adult appointed or chosen to take care of a small child. Unless a court decides that the best interest of the child needs different things if one legal parent is living when the other perishes, the child will automatically go to that parent. This term may also connect with an adult appointed or chosen to take care of an incapacitated individual.

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