| A | B | C | D | E | F | G | H | I | J | L | M | N | P | Q | R | S | T | U | V | W |
A  |
| A Trust |
The surviving spouse's portion of an A-B Trust. See "A-B Trust". Also called Marital Trust or QTIP Trust. Generally, the A Trust is funded when the first spouse dies with assets that exceed the first spouse to die's unified credit. |
| A-B Trust |
A Living Trust with a provision that lets you provide for your surviving spouse, keep control over who will receive your assets after your souse dies, and leave up $2 million (in 2003) to your Beneficiaries, estate-tax free. (This amount will increase over the next several years as the federal estate tax exemption increases. By the year 2009, an A-B Living Trust will let you and your spouse leave your Beneficiaries up to $7 million estate tax free, and with no probate). |
| Administration |
The court-supervised distribution of an estate during probate. Also used to describe the same process for a Trust after the Grantor dies. |
| Administrator |
Person named by the court to represent a probate estate when where is no Will or the Will did not name an Executor. Female is Administratix. Also called Personal Representative. |
| Alternate |
Person or organization named to receive your assets if the primary beneficiary dies before you do. |
| Ancillary Administration |
An additional probate in another state. Typically required when you own real estate in another state that is not titled in the name of your Trust. |
| Annual Exclusion |
Amount you can give someone each year without having to file a gift tax return or pay a gift tax. Currently $11,000 per recipient ($22,000 if married). The amount of this exclusion is tied to inflation. |
| Assets |
Basically anything you own, including your home and other real estate, bank accounts, life insurance, investments, furniture, jewelry, clothing and individual or other retirement accounts. |
| Assignment |
A short document that transfers your interest in assets from your name to another. Often used when transferring assets to a Trust. |
| B |
| B Trust |
The deceased spouse's portion of an A-B Trust. See "A-B Trust". Also called Credit Shelter, Exemption Equivalent or Bypass Trust. Generally, the B Trust is funded when the first spouse dies with assets not exceeding the first spouse to die's unified credit. |
| Basis |
What you paid for an asset. The value that is used to determine gain or loss for income tax purposes. |
| Beneficiaries |
In a Living Trust, the persons and/or organizations who receive the Trust assets (or benefit from Trust assets) after the death of the Grantor of the Trust. |
| Bypass Trust |
See "B Trust". |
| C |
| Codicil |
A written change or amendment to a Will. |
| Co-Grantors |
Two or more persons who establish one Living Trust together. |
| Co-Trustees |
Two or more individuals who have been named to act together in managing a Trust's assets. A Corporate Trustee can also be a Co-Trustee. |
| Community Property |
Assets a husband and wife acquire by joint effort during marriage if they live in one of eight community property states, including Texas. (Wisconsin also has a similar law, but does not use the term "community property). Each spouse is deemed to own half the assets in the event of divorce or death. |
| Conservator |
One who is legally responsible for the care and well-being of another person. If appointed by a court, the Conservator is under the court's supervision. May also be called a Guardian. (Duties and titles can vary by state). |
| Conservatorship |
A court-controlled program for persons who are unable to manage their own affairs due to mental or physical incapacity. May also be called a Guardianship. |
| Contest |
To dispute or challenge the terms of a Will or Trust. |
| Corporate Trustee |
An institution, like a bank or trust company, that specializes in managing Trusts. |
| Credit Shelter Trust |
See "B Trust". |
| Creditor |
Person or institution to whom money is owed. |
| Custodian |
Person named to manage assets left to a minor under the Uniform Transfer to Minors Act. In most states, the minor receives the assets upon obtaining the legal age of majority. |
| D |
| Desceased |
One who has died. |
| Deed |
A document that lets you transfer title of your real estate to another person(s). Also see Warranty Deed and Quitclaim Deed. |
| Disclaim |
To refuse to accept a gift or inheritance so it can go to the next recipient who is next in line. |
| Discretion |
The full or partial power to make a decision or judgment. |
| Disinherit |
To prevent someone from inheriting from you. |
| Distribution |
|
| Durable Power of Attorney for Financial Matters |
A legal document that gives another person full or limited legal authority to sign your name on your behalf in your absence. Valid through incapacity. Ends at death. |
| Durable Power of Attorney for Health Care |
A legal document that gives another person full or limited legal authority to make health care decisions for you in the event you are unable to make them for yourself. Also called a Health Care Proxy or Medical Power of Attorney. |
| E |
| Equity |
The current market value of an asset less any loan or liability. |
| Estate |
Assets and debts left by an individual at death. |
| Estate Taxes |
Federal and/or state taxes on the value of assets left at death. Also called inheritance taxes or death taxes. |
| Executor |
Person or institution named in a Will to carry out your instructions. Female is Executrix. Also called Personal Representative. |
| F |
| Federal Estate Tax Exemption |
Amount of an individual's estate that is exempt from federal estate taxes. From 1987 through 1997, it was $600,000. It was increased to $625,000 in 1998, $650,000 in 1999, $675,000 in 2000 and 2001. In 2002 and 2003, it is $1,000,000. It is scheduled to gradually increase to $3,500,000 by the year 2009. In 2010, the exemption amount is unlimited. In 2011, the exemption amount decreases and goes back to $1,000,000. |
| Fiduciary |
Person having the legal duty to act primarily for another's benefit. Implies great confidence and trust, and a high degree of good faith. Usually associated with a Trustee. |
| Funding |
The process of transferring assets to your Living Trust. |
| G |
| Gain |
The difference between what you receive for an asset when it is sold and what you paid for it. Used to determine the amount of capital gains tax due. |
| Generation-Skipping Transfer Tax (GSTT) |
A steep flat tax on assets that "skip" a generation and are left directly to or in trust for grandchildren and even younger generations. The rate of tax is the then applicable maximum estate tax rate which used to be 55% and is gradually decreasing to 35% in 2010. But, in 2011 it springs back to 55%. Everyone has an exemption from this tax. Prior to 1999, the exemption was $1,000,000. It was increased to $1,010,000 in 1999, $1,030,000 in 2000, 1,060,000 in 2001 and $1,100,000 in 2002. It is now $1,200,000 and is also tied to inflation. |
| Gift |
A transfer from one individual to another without fair compensation. |
| Gift Tax |
A federal tax on gifts made while you are living. Currently, $11,000 per person per year is exempt from gift tax. Also see "Annual Exclusion". |
| Grantor |
The person who sets up or creates a Trust. The person whose Trust it is. Also called Creator, Settlor, Trustor or Donor. If more than one person serves, see "Co-Grantors". |
| Gross Estate |
The value of an estate before debts are paid. |
| Guardianship |
See "Conservatorship". |
| H |
| Health Care Proxy |
See "Durable Power of Attorney for Health Care". |
| Holographic Will |
A handwritten Will. Valid in most states. |
| Homestead Exemption |
Portion of your residence (dwelling and surrounding land) that cannot be sold to satisfy a creditor's claim while you are living. |
| I |
| Incapacitated/Incompetent |
Unable to manage one's own affairs, either temporarily or permanently. Lack of legal power. |
| Inheritance |
The assets received from someone who has died. |
| Inter vivos |
Latin term that means "between the living". An inter vivos Trust is created while you are living instead of after you die. See "Testamentary Trust", which is the exact opposite of an Inter vivos Trust. A Living Revocable Trust is an example of an inter vivos Trust. |
| Irrevocable Trust |
A Trust that cannot be changed, revoked or cancelled once it is set up. The opposite of a Revocable Trust. |
| Intestate |
Dying without a Will. |
| J |
| Joint Ownership |
When two or more persons own the same asset. There are different types of joint assets. See "Joint Tenants with Rights of Ownership", "Tenants by the Entirety", "Tenants in Common" and "Community Property". |
| Joint Tenants With Rights Of Survivorship (JTWROS) |
A form of joint ownership in which the deceased owner's share automatically and immediately transfers to the surviving joint tenant(s). |
| Joint Trust |
One Living Trust established by two or more individuals (usually a married couple). |
| L |
| Living Trust |
A written legal document that creates an entity to which you transfer ownership of your assets. Contains your instructions for managing your assets during your lifetime and for their distribution upon your incapacity or death. Avoids probate at death and court control of assets at incapacity. Also called a revocable inter vivos Trust. A Trust created during one's lifetime. |
| Living Will |
A written document stating that you not wish to be kept alive by artificial means when the illness or injury is terminal. |
| M |
| Marital Deduction |
A deduction on the Federal Estate Tax Return that lets the first spouse to die leave an unlimited amount of assets to the surviving spouse free of estate taxes. However, if no other tax planning is used, and the surviving spouse's estate is more than the amount of the federal estate tax exemption in effect at the time of his or her death, estate taxes will be due at that time. |
| Marital Trust |
See "A Trust". |
| Medicaid |
A federally-funded health care program for the poor and for minor children. |
| Medicare |
A federally-funded health care program, primarily for Americans over age 65 who are covered by Social Security or Railroad Retirement benefits. |
| Minor |
One who is under the legal age of majority for an adult, which varies by state (usually 18 or 21). |
| N |
| Net Estate |
The value of an estate after all the debts have been paid. (Federal estate taxes are based on the net value of an estate). |
| Net Value |
The current market value of an asset less any loan or debt. |
| P |
| Payable-on-Death Account |
See "Totten Trust". |
| Per Capita |
A way of distributing your estate so that your surviving descendants will share equally, regardless of their generation. A deceased child's share would not pass to the deceased child's children with a per capita distribution. |
| Per Stirpes |
A way of distributing your estate so that your surviving descendants will receive only what their immediate ancestor would have received if he or she had been living at your death. A deceased child's descendants would receive their parent's share. |
| Personal Property |
Movable property. Includes furniture, automobiles, equipment, cash and stocks. Opposite of real property that is permanent (like land). |
| Personal Representative |
Another name for an Executor or Administrator. |
| Pour Over Will |
A short Will often used with a Living Trust. It states that any assets left out of your Living Trust will become part of (pour over into) your Living Trust upon your death. This acts as a safety net to catch assets not transferred to your Trust while alive and places them into your Trust after death. |
| Power of Attorney |
A legal document giving someone legal authority to sign your name on your behalf in your absence. Ends at incapacity (unless it is a durable power of attorney) or at death. |
| Probate |
The legal process of validating a Will, paying debts and distributing assets after death. |
| Probate Estate |
The assets that go through probate after you die. Usually this includes assets you own in your name and those paid to your estate. Usually does not include assets owned as Joint Tenants with Rights of Survivorship (JTWROS), Tenants by the Entirety, payable-on-death accounts, insurance and other assets with beneficiary designations. Assets in a Trust also do not go through Probate. |
| Probate Fees |
Legal, executor and appraisal fees along with court costs when an estate goes through probate. Probate fees are paid from assets in the estate before the assets are fully distributed to the heirs or beneficiaries. |
| Q |
| Qualified Domestic Trust (QDOT) |
Allows a non-citizen spouse to qualify for the marital deduction. |
| Qualified Family-Owned
Business Interest Deduction
(QFOBI) |
An additional federal estate tax exemption for family-owned businesses and farms that qualify. When added to the individual federal estate tax exemption, the maximum amount exempt from federal estate taxes is $1,300,000. |
| Qualified Terminable
Interest Property (QTIP) |
A Trust that delays estate taxes until your surviving spouse dies so that more assets and income from such assets will be available to provide for your spouse during his or her lifetime. You can also keep control over who will receive these assets after the surviving spouse dies. |
| Qualifying Subchapter
S Trust (QSST) |
Trust that meets certain Internal Revenue Service qualifications and is allowed to own Subchapter S Stock. If a Trust becomes the owner of an S Corporation and the Trust is not a QSST Trust, then the S election is automatically terminated. |
| Quitclaim Deed |
Document that allows you to transfer title to real estate. With a Quitclaim Deed, the person transferring the title makes no guarantees, but transfers all of his or her interest in the property. |
| R |
| Real Property |
Land and property that is permanently attached to land (like a building or a house). |
| Recorded Deed |
A deed that has been filed with the county land records. This creates a public record of all changes in ownership of property in the state. |
| Revocable Trust |
A Trust in which the person setting it up retains the power to change, revoke or cancel the Trust during his or her lifetime. Opposite of Irrevocable Trust. |
| Required Beginning Date (RBD) |
The date you must begin taking required minimum distributions from your tax-deferred plans. Usually, it is April 1 of the calender year following the calender year in which you turn age 70½. If your money is in a company sponsored plan, you may be able to delay your RBD beyond this date if you continue working (provided you are not a 5% or greater owner of the company). |
| Required Minimum
Distribution (RMD) |
The amount you are required to withdraw each year from your tax-deferred plan after you reach your Required Beginning Date. It is determined by dividing the value of your tax-deferred accounts by the life expectancy of you and your Beneficiary. The intent is that by the time you and your Beneficiary are both expected to die, your tax-deferred savings will be fully withdrawn. |
| S |
| Separate Property |
Generally, all assets you acquire prior to marriage and assets acquired by gift or inheritance during marriage. |
| Separate Trust |
A Trust established by one person. A married couple has separate Trusts if each spouse has his or her own Trust with its own assets. In contrast, see "Joint Trust". |
| Settle an Estate |
The process of handling the final affairs - valuation of assets, payment of debts, payment of taxes and distribution of assets to Beneficiaries - after someone dies. |
| Settlor |
See "Grantor". |
| Special Gifts |
A separate listing of special assets that will go to specific individuals or organizations after your incapacity or death. Also called Special Bequests. |
| Special Needs Trust |
Allows you to provide for a disabled loved one without interfering with government benefits. |
| Spendthrift Clause |
Protects assets in a Trust from a Beneficiary's creditors. |
| Spouse |
Husband or wife. |
| Stepped-up Basis |
Assets are given a new basis when transferred by inheritance (through a Will or Trust) and are re-valued as of the date of the owner's death. If an asset has appreciated above its (what the owner paid for it), the new basis is called a stepped-up basis. A stepped-up basis can save a considerable amount in capital gains tax when an asset is later sold by the new owner. Also see "Basis". |
| Subchapter S Corporation Stock |
Stock in a corporation which has chosen to be subject to the rules of Subchapter S of the Internal Revenue Code and the Internal Revenue Service has accepted such election. |
| Surviving Spouse |
The spouse who is living after one spouse has died. |
| Survivor's Trust |
See "A Trust". |
| Successor Trustee |
Person or institution named in the Trust document who will take over should the first Trustee die, resign or otherwise become unable to act. |
| T |
| Tax-Deferred Plan |
A retirement savings plan (like an IRA, 401(k), pension, profit-sharing, SEP, SIMPLE or Keogh) that qualifies for special income tax treatment. The contributions made to the plan and subsequent appreciation of the assets are not taxed until they are withdrawn at a later time - ideally, at retirement, when your income and tax rate are lower. |
| Taxable Gift |
Generally, a gift of more than $11,000.00 in one year to someone other than your spouse. The value of the gift is applied to your federal gift and estate tax exemption, and no gift tax is required to be paid until the exemption has been exhausted. (Beginning in 1999, this amount is tied to inflation. However, in some years it does not increase due to rounding requirements). |
| Tenants in Common |
A form of joint ownership in which two or more persons own the same property. At the death of a tenant-in-common, his or her share is transferred by Will. Probate is generally required. |
| Tenants by the Entirety |
A form of joint ownership in some states, including Arkansas, between husband and wife. When one spouse dies, his or her share of the asset automatically transfers to the surviving spouse. Probate is generally avoided. |
| Testamentary Trust |
A Trust created in a Will or another Trust. Can only go into effect at death. Does not avoid probate if in a will. |
| Testate |
One who dies with a valid Will. |
| Title |
Document providing ownership of an asset. |
| Transfer Tax |
Tax on assets when they are transferred to another. The estate tax, gift tax and generation-skipping transfer tax are all transfer taxes. |
| Trust |
An entity that holds assets for the benefit of certain other persons or entities that are called the beneficiaries of a Trust. |
| Trust Company |
An institution that specializes in managing Trusts. Also called a Corporate Trustee. |
| Trustee |
Person or institution who manages and distributes another's assets according to the instructions in the Trust document. |
| Trustor |
See "Grantor." |
| Totten Trust |
A "pay-on-death" account. A bank account that will transfer to the Beneficiary who was named when the account was established. The terms "transfer on death" ("TOD"), "in Trust for" ("ITF"), "as Trustee for" ("ATF"), and "pay on death" ("POD") often appear in the title. |
| U |
| Unified Credit |
See "Federal Estate Tax Exemption". |
| Uniform Transfer to Minors Act (UTMA) |
Law enacted in many states that lets you leave assets to a minor by appointing a Custodian. In most states, the minor receives the assets upon reaching the legal age of majority. |
| Unfunded |
Your Living Trust is unfunded if you have not transferred assets into it. |
| W |
| Warranty Deed |
Document that allows you to transfer title to real estate. With a warranty deed, the person guarantees that the title being transferred is clear (free of any encumbrances, unless otherwise indicated). If the title is defective, the person making the transfer is liable. Compare to Quitclaim Deed. |
| Will |
A written document with instructions for disposing of assets after death. A Will can only be enforced through the probate court. |
