Glossary of Estate Planning Terms

 

 

The following terms are commonly used in estate planning and asset protection, and may assist you in understanding and interpreting the provisions of your estate planning documents.

A/B Trust:  A type of living revocable trust used by married couples.  Two trusts (trust A and trust B) are created at the time the first spouse dies.  By dividing the couple’s estate into two trusts at the first death, each spouse can pass the maximum amount of property allowed to avoid federal estate taxes.  One trust, usually trust A, is often referred to as the marital deduction trust and the other trust usually trust B, is often referred to as the shelter trust.

 

Accumulation Trust:  A type of trust, also known as a complex trust, which retains and accumulates income for longer than a year, instead of paying all of the income out to the beneficiaries at least annually. 

 

Administrator:  The person designated by the court to manage and distribute a probate estate when there isn’t a will.  If there is a will, the person so designated is called the executor (male), executrix (female), or personal representative.

 

Adult:  Any person over the age of majority, usually 18 or 21 years, depending upon state law. 

Affidavit:  A sworn, written statement executed under oath in front of a witness or witnesses.  

Affidavit of Domicile:  A sworn, written statement verifying city, county and state of residence.

Affidavit of Survivorship:  A sworn, written statement verifying the identity of the survivor in a joint tenancy or other property ownership relationship.

Allowance:  The amount of money the surviving spouse is allowed to take from the deceased person’s estate for living expenses.  The amount is usually set by law, but the court will allow an increased amount if the person requests an increase from the court, and the court agrees the increase is reasonable and necessary.

Amendment: A change or revision to a trust or other legal document.

Ancillary Probate:  A probate proceeding conducted in a state other than the state where the decedent lived and the primary probate occurs.

Annual Exclusion:  The amount of property the IRS allows a person to gift to another person during a calendar year before a gift tax is assessed and/or a gift tax return must be filed.  The current amount is $14,000 per year.  There is no limit to the number of people to whom such $14,000 gifts can be made.  To qualify for the annual exclusion, the gift must be one that a recipient can enjoy immediately and have full control over.

Ascertainable Standard:  The IRS defined standard which governs the use of trust B property and prevents the property from being considered part of the trustee’s property for estate tax purposes.  The standard is defined as “health, education, maintenance and support” of the surviving spouse and children.

Asset Protection:  Protecting your property from legal problems and taxes during your life and after your death.

Basis:  A tax term, which refers to the original or acquisition value of a property, used to determine the amount of tax that will be assessed.  The basis is deducted from the sales price of the property when it is sold to determine the profit or loss.

Beneficiary:  The person named in a will, trust, or insurance policy to receive assets when a specific event occurs, usually death of the person setting up the will, trust, or insurance policy.

Bequest:  An old legal term meaning to give a gift or leave property under the terms of a will.

Bond:  An insurance policy used to ensure a legal representative will do his job and not misuse or misappropriate funds he is controlling.  The bond guarantees that a certain amount of money will be paid if a party is injured due to acts of legal representative.

By Right of Representation:  Common terminology for the Latin term “per stirpes”.  This is the most common way of distributing an estate such that if one of the children is dead, his children share equally in his share of the estate distribution.  This term is often summarized by the phrase, “if the parent is dead his children stand in his shoes.”

Charitable Remainder Trust:  A trust used to make large donations of property or money to a charity so the person making the gift or donation can obtain a tax advantage.  In a charitable remainder trust, the donor reserves the right to use the trust property during his life or some other specified time period, and when the agreed period is over the property goes to the charity.

Child or Children: These terms are used in a trust or will to refer to children born to, or legally adopted by, the creators of the trust or will.

Codicil:  A written amendment or addition to a will, which may explain, change, qualify, supplement, or revoke provisions in the will.

Community Property:  Some state laws require that all assets acquired during a marriage from the earnings or efforts of either or both spouses belong equally to both spouses, except for gifts and inheritances given specifically to one spouse.  The eight states with such laws are known as community property states.  Each spouse is considered to own an undivided one-half interest in all community property.  The eight states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas and Washington.  Puerto Rico also uses the community property system, and Wisconsin has a modified community property system.

Conservator:  A person appointed to be legally responsible for the management of property and money belonging to a minor or incompetent person.  The conservator may act as the guardian or the guardian may be a separate person.

Conservatorship:  A court controlled program where a conservator is appointed by the court to manage the monetary affairs of a person who is unable to manage his or her own affairs.

Creator:  A person who establishes a trust, also called a “grantor”, “settlor”, or “trustor”.

Creditor:  A person or institution to whom money is owed.

Custodial Parent:   The parent given custody and responsibility by the divorce court for the children of a divorced couple.

Death Taxes:  Taxes levied on the property of a deceased person.  Federal death taxes are usually referred to as estate taxes, while local and state death taxes are often referred to as inheritance taxes, or simply death taxes.

Debtor:   A person who owes money.

Decedent:     A person who has died.

Deed:   A written document used to evidence ownership and/or transfer title to real estate.

Descendant: A child or that child’s issue.

Disclaimer:   The refusal of a beneficiary to accept property willed to him or her.  When a disclaimer is made, the property is generally transferred to the person next in line under the will or trust.  A disclaimer is also called a renunciation.

Disinherit:   Cutting the person off from his or her inheritance in an estate where he or she would have been a natural heir.

Dispositive Provision:   A clause in a will or trust that gives away property.

Domicile:   The state or county where a person’s primary residence is located.

Donee:   A person who receives a gift.

Donor:   A person who makes a gift.

Durable Power of Attorney For Health Care:  A document established by an individual (the principal) granting another person (the agent) the right and authority to handle matters related to health care of the principal.

Escheat:   A legal word that describes the situation where property transfers to the ownership of the state government because there are no legal inheritors to claim it.

Estate:   The aggregate of all assets and debts held or owned by an individual during his or her life or at the time of his or her death.

Estate Planning:   The process of planning and organizing a person’s affairs to protect assets, reduce taxes, and avoid probate.  Common estate planning tools include wills and trusts.

Estate Planning Attorney:  An attorney who helps clients plan estates, reduce taxes, and settle estates. 

Estate Taxes:   Taxes imposed on the “privilege” of transferring property by reason of death.  Estate tax is most commonly used in reference to the tax imposed by the Federal Government rather than the state government.  Estate taxes are intended to raise revenue for the government and break up a family’s wealth, so that the nation’s wealth doesn’t concentrate in the hands of a few families.

Executor or Executrix:   The person (male or female) named in a will to manage a decedent’s estate.  The more modern term is “personal representative”. 

Family Trust:   Another name for a living trust.

Fiduciary:  A person, such as a trustee, having a legal duty to act primarily for another person’s benefit.  A fiduciary is required to act with a high degree of confidence and trust to carry out his duties.  Fiduciary relationships exist for attorneys at law, guardians, personal representatives, and brokers.  In a trust, the trustee is often referred to as a fiduciary.

Fiduciary Duty:  The duty of a fiduciary to act in a position of trust, good faith, candor and responsibility, on behalf of another.  The duty is one of the best defined responsibilities under the law and is very strictly enforced by the courts.

First Death: The death of the first spouse.  

Fraud:   The use of deception for unlawful gain.

Funding The Trust:  The process of transferring assets into a trust.  This is usually accomplished by using a trust schedule and/or retitling assets.  For example, stocks, bonds and other investments are re-registered in the name of the trustees of the trust, new deeds are recorded transferring ownership of real estate to the trustees of the trust, bank accounts are retitled in the name of the trust, etc.

General Power of Attorney:   A legal document that, when properly executed, gives one person (the agent) full legal authority to act on behalf of another (the principal).  The scope of the document can be broad or narrow.  A general power of attorney becomes invalid when the principal dies or becomes incompetent.

Gift:   A transfer of property without receiving some benefit in return.  The person making the transfer cannot be obligated in any way to make the transfer.

Gift Taxes:   Taxes levied by the Federal Government on gifts.  Gift taxes and estate taxes have been “merged” into a single tax called the “unified tax”.

Grantor:  The person who establishes a trust and transfers assets into it, also known as a “creator”, “settlor”, and “trustor”.

Grantor Trust:   A trust in which the person establishing 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 sufficient to make the trust a grantor trust.

Gross Estate:   The total value of an estate at the date of the decedent’s death.  The value is determined before debts and other deductions are subtracted from the estate value.

Guardian:   A person designated by court appointment and given the responsibility of managing the personal affairs of a minor child upon the death of the parents or a person that is legally incompetent to manage his or her own affairs.

Heir:   A person who, by law, inherits property from a deceased relative who didn’t leave any type of will or trust which distributes his or her property after death.  The term is more loosely used to refer to a person who receives property from a decedent through any means.

Heirloom:   A personal possession that has a sentimental value which exceeds its momentary value.

Holographic Will:   A do-it-yourself handwritten will.  To be valid this will must be totally in the person’s own handwriting, signed, and dated.  About 20 states allow holographic wills, but it is best to have a more formal will.

Homestead Laws:   State laws which protect a person’s  house, clothing, and personal property, up to a specific dollar amount, from being taken away by most types of lawsuits or bankruptcies.

Household Items:   Everything which may by used for the convenience of the house such as tables, chairs, bedding, etc.  Apparel, books, tools, and the like are usually not included.

Incapacitated:   Either physically or mentally unable to act or discharge responsibilities or manage one’s affairs.  A person may be temporarily or permanently incapacitated.  A probate court usually decides if a person is legally incapacitated or not.  “Incapacitated” is often used interchangeably with “incompetent”.

Incidents of Ownership:   All or any management control over a trust or an insurance policy.  In relation to an insurance policy, incidents of ownership include the right to change the beneficiaries, borrow cash value, and change the ownership, among other rights.

Income: The return on investment as calculated by generally accepted accounting procedures.

Income Beneficiary: A person who receives income from trust assets until some event which terminates the right to receive income.  He or she may or may not thereafter be entitled to additional principal amounts. 

Income Tax:   A tax assessed on gain made by an individual or entity.

Incompetent:   A person who is legally incapable of managing his or her own business affairs.  A person may be temporarily or permanently incompetent.  A probate court usually decides if a person is legally incompetent or not.  “Incompetent” is often used interchangeably with “incapacitated”.

Independent Trustee:   A trustee who is unrelated to the person who establishes a trust and the beneficiaries of the trust.  Unrelated attorneys, banks, corporations, etc., are often chosen to act as independent trustees.  The IRS requires a trust to have an independent trustee if the trust is to achieve certain estate tax and income tax benefits available to irrevocable trusts.

Inherit:   To take or receive property by legal right from a deceased person.

Inheritance Tax:   A tax imposed upon the transfer of property from a deceased person’s estate. The term usually applies to the taxes charged by a state, whereas the taxes imposed by the Federal Government are usually referred to as estate taxes.

Initial Trustee: The first individual or entity appointed to control the assets of a trust.

Insurance Trust:   An irrevocable trust used to hold insurance and pass it on to a person’s heirs without any estate taxes on the death benefits of the policy.

Inter-Vivos Trust:  A trust established during a person’s lifetime.  “Inter-vivos” is Latin for “between the living”).  Also known as a living trust, it is often used to avoid probate, retain privacy, reduce estate settlement costs, eliminate or minimize estate taxes, and provide protection in the event of incapacity.

Intestate:   To die without a will or other valid estate transfer device.

Intestate Succession:   The order of persons entitled to received property distributed by a state court when the deceased failed to prepare a will or trust, or the will or trust has failed to legally distribute the deceased person’s property.

Irrevocable Trust:   A trust that cannot be changed, canceled, or revoked once it is established.  Insurance Trusts, “Children’s Trusts”, and “2503 Trusts” are examples of irrevocable trusts.  Irrevocable trusts are treated by the IRS very differently than revocable trusts.

Issue:   A legal term used in wills and trusts meaning one’s children, grandchildren, etc., either through birth or adoption.

 

Joint Ownership:   When two or more people own the same piece of property together as joint tenants, tenants in common, tenants by the entirety, or some other legally defined relationship.

Joint Tenancy:   When two or more people take title to the same property and simultaneously each owns 100% of the property, or has full rights to the property.  At the death of one joint tenant, his or her share immediately transfers to the ownership of the surviving joint tenant(s).

 

Joint Tenancy With Right of Survivorship:  When two or more people own and hold title to property with a right survivorship.  Upon the death of one person, title immediately passes to the surviving owner(s) without going through probate or any other legal proceeding.  This type of ownership avoids probate upon a first death, but upon the death of the other joint tenant(s) the property must go through probate.  Joint ownership also means joint liability and loss of flexibility in making future transfers of ownership.

 

Jurisdiction:   The location where a person has access to the court system.  The place where a person lives usually determines which court has the legal right to adjudicate his or her claims, probate proceedings, or other matters.  The location of real property can also determine the “jurisdiction” of legal matters related to that property.

 

Letters Testamentary:   A formal document issued by a probate judge giving the personal representative authority to conduct business, contract, pay bills, distribute estate property, sell estate property, and otherwise act on behalf of the estate.

 

Life Estate:   The right to have all of the benefit from a property during one’s lifetime.  The person with the right doesn’t own the property, sell estate property, and when he or she dies, the property is not included in his or her estate.

 

Life Insurance Trust:   A type of irrevocable trust used to hold life insurance.  When a life insurance policy is held in an insurance trust, it is protected from estate taxes when the insured dies provided the trust is established properly, managed properly, and the insured does not retain any “incidents of ownership”.

 

Living Trust:   A type of revocable trust used in estate planning to avoid probate, help in situations of incompetency, and allow smooth management of assets after the death of the person who established the trust.  The trust can be effective in eliminating or reducing estate taxes for married couples.  Living revocable trusts are established during the life of the grantor, who retains the right to the income and principal and the right to amend or revoke the trust.  When the grantor dies, the trust becomes irrevocable and acts as a substitute for a traditional will.

 

Living Will:   A document defining a person’s “right to die”.  It usually states that he or she does not  want to have his or her life artificially prolonged by modern medical technologies. 

 

Loving Trust:   Another name for a living trust. 

 

Marital Deduction:   The unlimited deduction allowed under federal estate tax law for all qualifying property passing from the estate of the deceased spouse to the surviving spouse. The value of the property passing to the surviving spouse under the marital deduction is “deducted” from the deceased spouse’s estate before federal estate taxes are calculated on the estate.  Proper planning and use of the deduction allows more property to pass estate tax free to the family.

 

Marital Deduction Trust:   A trust which receives the property passed under the marital deduction laws, from the deceased spouse’s estate to the surviving spouse.  Property in the marital deduction trust will be included as part of the surviving spouse’s estate for estate tax purposes when he or she dies.

 

Minor:   A child who is not old enough to have the legal capacity to govern his or her own affairs.  Depending upon the specific state and the specific laws being applied, a minor is usually under 21 years old or 18 years old.

Net Taxable Estate:   The value of an estate upon which the federal estate tax is levied.  The net taxable estate or “net value” is the total or “gross value” of the estate less liabilities, expenses and other deductions allowed by the tax laws.

 

Notarized:   The affirmation of an agent of the state (a notary) affirming that a signature on a document being “notarized” is in fact the signature of the person who signed the document.

 

Notary:   A person who has state granted authority to certify the validity or authenticity of a signature being made on a document.

 

Notice:   The legally prescribed process of making someone aware of a legal proceeding or matter.

 

Passive Investment: An investment in which the trustee has no initial, on-going, or future management responsibilities, including such things as savings accounts, limited partnership interests, stocks, bonds, etc.

 

Pay Upon Death Account:  A bank account that is set up so that when the first owner dies, ownership of the account transfers to the named beneficiary without going through probate.

 

Per Capita:   A method of distributing an estate such that all of the surviving descendants share equally in the property.  Also known as “pro rata”.

 

Per Stirpes:   The most common way of distributing an estate such that if one of the children is dead, his or her children share equally in his or her share.  Also known as “by right of representation”.

 

Perpetuities Savings Clause:   A “safety net” clause included in most trusts, which automatically terminates the trust at the last possible moment to prevent any possible violation of trust law  because the general terms of the trust did not properly provide for a termination of the trust as required by law.  Under most state laws a trust must have a finite life and end prior to the time required by law.

 

Personal Letter:   A letter directing the distribution of personal items.  This letter is referenced in a person’s will and is recognized by the courts upon the death of the person making the will and the letter.

 

Personal Property:   Property, other than real estate, of a temporary or moveable nature such as animals, bank accounts, cars, furniture, jewelry, and securities.

 

Personal Representative:  The person designated in a will and appointed by a court to carry out the terms of the will and to dispose of the decedent’s  property after his death.  This person was once called an Executor or Executrix.

 

POD Account:   A bank account that is designed to avoid probate.  It is a contract between the bank and the account holder guaranteeing that, upon the account holder’s death, the bank will pay the balance of the account to whomever is designated to receive the account.

 

Pour-Over Trust:   A trust designed to receive property that is “poured over” into it.  The property is usually poured over from a pour-over will through the probate process.

 

Pour-Over Will:   A will that transfers some or all of the assets that pass through the will into a trust for final distribution from the trust.  Property under the will is “poured-over” into the trust through the probate process.  A pour-over will is also used to name a guardian for minor children.

 

Power of Appointment:   The power given to a person, by appointment in a will or trust, to distribute the property that passes through the will or trust at the discretion of the person appointed.  Other than to give the appointed person the authority to make the distribution, the will or trust doesn’t make distribution of the property.

 

Power of Attorney:   A document established by an individual (the principal) granting another person (the agent) the right and authority to handle the financial affairs for the principal.  A power of attorney becomes invalid at the death or incompetency of the principal, unless the power of attorney is a “durable power of attorney” which remains in effect after the principal becomes incompetent.

 

Prenuptial Agreement:   A contract between two potential marriage partners specifying how the property owned by each prior to marriage and owned individually or jointly during marriage will be divided should the couple divorce.

 

Primary Beneficiary:   The person or persons for whose benefit a trust is originally established.  When conditions change and the primary beneficiaries are no longer in a position to receive the benefit of the trust, the benefit goes to the “secondary beneficiaries”.

 

Principal: All assets of a trust estate.  

 

Probate:   The legal process which facilitates the transfer of a deceased person’s property with or without a will.  The court establishes authenticity of the will (if any), appoints a personal representative or administrator, identifies heirs and creditors, directs payment of debts and taxes, and oversees distributions of the assets according to the will or state law in the absence of a will.  The process of notifying heirs, appraising property in the estate, publishing notice to creditors, paying debts and taxes, and distributing property to the heirs can be expensive and time-consuming.

 

Probate Court:   The part of the judicial system dedicated to handling probate matters which includes settlement of intestate and testate estates, adoptions, appointment of guardians, name changes, and other matters.

 

Probate Estate:   A deceased person’s property which is subject to the probate process.  Property held in a properly funded living trust is usually not considered part of the probate estate.

 

Probate Fees:   The fees, often a percentage of the estate, paid to the attorney and others who handle the probate proceeding.

 

Proving a Will:   The process of establishing the validity of a will before the probate court.  

 

Public Record:  Records or documents open to the public inspection.  A deceased person’s probate file is a matter of public record.  This means anyone can look at any documents in the file, regardless of the reason for review.

 

Quitclaim Deed:   A deed that transfers a person’s interest in real property without the warranties or guarantees that are made in a warranty deed.

 

QTIP Trust:   A Qualified Terminable Interest Trust (Q-Tip) is a type of trust which provides an unlimited marital deduction for qualified property put into the trust.  However, rather than permitting the surviving spouse to have full power to distribute the property to anyone he or she wishes, the trust restricts the ability of the surviving spouse to distribute the property in the trust to a select group of individuals, such as the children, as agreed when both spouses were alive.  Without the new QTIP laws, any attempt to “tie down” the property and restrict the surviving spouse’s rights to transfer the trust property would have resulted in the property not qualifying for the marital deduction tax benefit.

 

Remainderman:  After the income beneficiary has received his or her income and the event terminating the right to receive income has occurred, the remainderman receives the balance of the assets in the trust.

 

Revocable Trust:  A trust that can be altered, amended or revoked by the grantor at any time.  Upon revocation of a trust, the assets are returned to the persons who owned them before they were transferred to the trustees of the trust.

 

Real Property:   Land and attachments to the land, such as buildings, fences, etc.

 

Right of Representation: The issue of a deceased beneficiary share equally in the share of their deceased parent.  They do not necessarily share equally with the other beneficiaries.

 

Right to Die:   The right to decide to not have life prolonged by extraordinary, artificial means.

Rule Against Perpetuities:   A rule of law limiting the duration of a trust.  Some trusts can go on in perpetuity (forever), but most types of trusts have a maximum duration or life established by law.

 

Schedule: The list of property the grantor or settlor transfers into a living trust.

 

Self-Proving Will:   A will which has been properly witnessed (by either two or three witnesses depending on state laws) and the witnesses have signed an affidavit before a notary public stating that all of the proper formalities of the will’s execution have been complied with.  This usually makes it very easy for the court to “prove” the will.

 

Separate Property:   Property acquired by a person before marriage, or after marriage by gift or bequest, that is owned by one spouse only. In community property states, all property which is not held commonly by a married couple is considered separate property.  To keep its status as separate property, this property must be kept separate from marital, joint, or community property.

Settlor: A person who establishes a trust, also called a “creator”, “grantor”, or “trustor”.

Simple Trust:   Trusts that are established with terms that require the trust to pay all of its income out, so that it does not accumulate income on which income taxes would have to be paid.

 

Spendthrift:   An individual who cannot handle money wisely and spends it wastefully.

 

Spendthrift Provision:  This prohibits using the anticipated trust benefits as a basis for making a loan to the income beneficiaries or remaindermen.  

 

Split Gift:   Each spouse is entitled to give any individual $14,000 in a calendar year and, provided it is given properly, there is no tax consequence to the giver or receiver according to the “annual exclusion” laws.  However, if a married couple tries to give more than $14,000 to an individual, they must file a gift tax form declaring that the gift is split between them.  If the form is not filed, the IRS cannot determine who gave the gift, and one spouse may be allocated the entire gift amount and owe a gift tax because his or her gift was over $14,000.

 

Springing Power:   A power to act on the occurrence of some certain criteria, such as an illness or incompetency.  The power is said to spring into existence upon the occurrence of the event.  The agent’s power to act for the principal under a durable power of attorney is usually a springing power.

 

Sprinkle or Sprinkling Power:   The power given a trustee to decide how, when and why to distribute trust income to the trust’s different beneficiaries.  The sprinkling power allows the trustee to “sprinkle” the trust’s income over the beneficiaries.  It is a valuable power to give the trustee in irrevocable trusts because it allows the trustee to distribute income to the beneficiaries who will pay the smallest amount of income tax on the distribution.

 

Sprinkling Trust:   A trust that grants the trustee a sprinkling power which allows the trustee to decide how, when and why to distribute the trust income among the trust’s beneficiaries.

 

Spouse:   Legal term for husband or wife.

 

Stepped-up Basis:   The new basis established for a property after the property has been evaluated and taxed as part of an estate.  The new basis or “stepped-up basis” is the value of the property used to assess the estate tax.

 

Successor Trustee:  The person who takes over as trustee in the event of the death, disability, legal incapacity, or resignation of the acting trustee.

 

Surviving Spouse:   The husband or wife that lives after the death of his or her spouse.

 

Taxable Estate:   The portion of an estate that is subject to federal estate taxes or state death taxes.  Technically, all of an estate is subject to federal estate taxes, but because of the unified credit, only estates with a value over the amount of the unified credit actually have to pay any estate taxes.  Therefore, it is common to refer to an estate with a value over the unified credit as a taxable estate and an estate with a value under the unified credit as a nontaxable estate.  The taxable estate includes any property in a person’s name or under his control at the time of his death, and includes life insurance proceeds.

 

Tenants by the Entirety:   A way of owning property which, for almost all practical purposes, is the same as joint tenants.  Tenancies by the entirety are creations of state law and are used only between husbands and wives, whereas joint tenancies can be used by anyone, not just husbands and wives, who wants to own property jointly.

 

Tenants in Common:   A way of owning property in which two or more owners all share ownership of the property, unlike joint tenants which each own an equal share.  When one owner dies, his or her share does not automatically go to the other owner(s), because tenancies in common do not have a survivorship provision like joint tenancies.

 

Testamentary Trust:  A trust that is created by and is part of a will.  This trust takes effect only after the death of the person making it.  A testamentary trust is often used by a person who wants to leave property to minors.  Since minors cannot inherit property, their property is placed in a testamentary trust.  After the person dies, the trust holds the property for the minors until they reach the proper age, when they take title to the property.  A testamentary trust is subject to the probate process as well and supervision by a court until final distribution.

 

Testate:   One who dies leaving a will.

 

Testator:  A person who signs a will and under whose direction it was written.

 

Testatrix:  The female gender of testator.

 

Title:   A document proving ownership of property.

 

Totten Trust:   A bank account that is designed to avoid probate.  The account is created by a person in his or her own name as the trustee for another person. It is a type of revocable trust until the creator dies and then it is paid out to the designated beneficiary(ies).

Trust:   A legal document in which property is held and managed by a trustee for the benefit of another known as a beneficiary.

Trust Certificate:   A summary of a trust’s terms that evidences the trust exists.

Trust Corpus or Res:   The property of a trust.

 

Trustee:   The person or institution that manages the trust property under the terms of the trust.  If a person names himself or herself as trustee, he or she will continue to have full use, enjoyment and control over trust assets.  If both the husband and wife manage a trust, they are called co-trustees.

 

Trustor:   A person who establishes a trust, also known as a “creator”, “grantor”, and “settlor”.

 

Unified Credit:   A tax credit given to each person by the IRS to be used during his or her life or after his or her death.  The tax credit equals the amount of tax (gift or estate) which is assessed on a person’s property and which currently varies from year to year.  It is considered the “unified” credit because it applies to both gift taxes and estate taxes and results from the IRS’s effort to unify these two taxes or make them consistent.  A tax is actually assessed on the first dollar of taxable gift or estate property.  Some property that is gifted is not exposed to the unified tax, for example, gifts that qualify for the $14,000 annual exclusion.  Some property transferred in an estate is not exposed to the unified tax, such as property which goes to a spouse and qualifies for the unlimited marital deduction.  Although a tax is assessed, the individual doesn’t actually pay the tax on a significant portion of taxable property because the unified credit is applied against the tax. 

 

Uniform Gift to Minors Act:   A series of state statutes that provides a method for transferring property by gift to minors who cannot legally manage the property for themselves.  The laws allow an adult to manage the property and yet not have it owned by the adult.

 

Uniform Probate Code:  A standardized code designed by the American Law Institute to streamline the probate process.  Many states have not yet adopted the code.

Warranty Deed: A deed which warrants that certain obligations will “run” with real property.

 

Will:   A legal document stating the intentions of a deceased person concerning the distribution of his or her property, and the management of his or her affairs following his or her death.  A will can be revoked by the person making it and has no effect until the person dies.  The transfer of an estate through a will is subject to state probate laws and procedures.