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Glossary

BENEFICIARY - The person(s) or organization(s) who receive(s) the benefits of trust property held under the terms of a trust.

CODICIL - A written change or amendment to a will.

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 and the conservator will just work with the guardian.

CONSERVATORSHIP - A court controlled program where a conservator is appointed by the court to manage the monetary affairs of a person(s) who is unable to manage his/her own affairs.

CREDITOR - A person or institution to whom money is owed.

DECENDENT - The person who has died.

ESTATE - The aggregate of all assets and debts held (owned) by an individual during his or her life or at the time of his or her death.

ESTATE TAXES - 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. In 2008, the federal estate tax affects families with assets over $2M. In 2009, the level is raised to $3.5M.

EXECUTOR / EXECUTRIX - Same as a personal representative. Named in a will to manage a decedent's estate.

FIDUCIARY - A person with the legal duty to act primarily for another's benefit in a position of trust, good faith, candor and responsibility. "Fiduciary" is often used as an alternative term for "trustee".

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.

GRANTOR - Also known as "Settlor" and "Trustor". A person who establishes a trust. Married couples are often Co-Trustors. While living and competent, the Trustor(s) is/are the only individual(s) who may alter, amend or revoke their trust. After all Trustors have passed the language may no longer be amended and assets are distributed by the Successor Trustees according to the rules of the trust.

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

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

INTESTATE / INTESTACY - To die without a will or other valid estate transfer devise. The order of persons entitled to received property distributed by a state court when the deceased failed to write a will or trust, or the will or trust has failed to legally distribute the deceased person's property.

  • If there is a surviving spouse and no lineal descendants (children or grandchildren), then the surviving spouse takes all of the estate.
  • If there is a surviving spouse and lineal descendants of both the surviving spouse and the decedent, then the surviving spouse receives the first $20,000 of the estate, plus one-half of the rest of the estate and the lineal descendants share the remaining half.
  • If there is a surviving spouse and lineal descendants (one or more of which are not lineal descendants of the surviving spouse), then the surviving spouse receives one-half of the estate and the lineal descendants share the remaining half.
  • If there is no surviving spouse, but lineal descendants, then the lineal descendants share the estate.
  • If there is no surviving spouse and no lineal descendants, then the estate goes to the decedent's surviving parents, and if none, then to the decedent's brothers or sisters or descendants of the decedent's brothers or sisters.
ISSUE - A legal term used in wills and trusts meaning one's children, grandchildren, etc., either through birth or adoption.

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 survivor(s).

LAST WILL AND TESTAMENT - A legal document stating the intentions of a deceased person concerning the distribution of his or her property, and management of his or her affairs following his or her death. State law dictates the legality of a will.

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, and when he or she dies, the property is not included in his or her estate.

LIVING WILL - A document defining your "right to die." It usually states that you do not want to have your life artificially prolonged by modern medical technologies. You can specifically define the means which you do not want used or do want used.

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.

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.

PER CAPITA - A method of distributing an estate such that all of the surviving descendants share equally in the property. Also know as Pro Rata.

PER STIRPESE - 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 know as By Right of Representation.

PERSONAL REPRESENTATIVE - Same as a executor / executrix. Named in a will to manage a decedent's estate.

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 WILL - A will which contains a clause that transfers some or all of the assets that pass through the will into a trust for final distribution from the trust. The will's assets are said to "pour over" into the trust.

POWER OF ATTORNEY - Power of Attorneys make medical and financial decisions in case of incapacitation.

HIPAA forms are often now needed with the Power of Attorney documents to allow an incapacitated personís medical records to be released to the Power of Attorney. If a living trust is properly funded, there are little or no financial assets to be managed by the Power of Attorney - instead assets are managed by the Successor Trustee.

    Durable Power of Attorney - A document established by an individual (the principal) granting another person (the agent) the right and authority to handle the financial and other affairs of the principal. The Durable Power of Attorney survives through the period of incompetency of the principal.

    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 the health care of the principal.

    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 as broad or narrow as you desire as defined in the document. A general power of attorney becomes invalid when the principal dies or becomes incompetent.

PROBATE - The legal process which facilitates the transfer of a deceased person's property whether they leave a will or don't leave any will. The court establishes the 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.

    Ancillary Probate - A probate proceeding conducted in a state other than the state where the decedent lived and the primary probate occurs.
QUIT CLAIM DEED - A document (a deed) that transfers a person's interest in a piece of real estate, without the warranties or guarantees that are made in a warranty deed.

REAL PROPERTY - Land and attachments to the land, such as buildings, fences, etc.

SETTLOR - Also known as "Grantor" and "Trustor". A person who establishes a trust. Married couples are often Co-Trustors. While living and competent, the Trustor(s) is/are the only individual(s) who may alter, amend or revoke their trust. After all Trustors have passed the language may no longer be amended and assets are distributed by the Successor Trustees according to the rules of the trust.

TRUST - A legal document in which property is held and managed by a trustee for the benefit of another known as a beneficiary. A trust is a relationship in which property is held by one person for the benefit of another. The trust can be created verbally, but will most often be in writing.

    A/B Trust - Married couples used ths type of living trust in which two trusts (trust A and trust B) are created when the first spouse passes. Dividing the estate allows each spouse to avoid federal estate taxes. Otherwise, the surviving spouse takes ownership of all assets and has only his/her exemption when he/she passes.

    Bypass/Disclaimer Trust - A trust that starts as one trust (an A trust) but within 9 months of the first spouse passing can be split into two trusts (an A/B or Survivor/Disclaimer) so each spouse can claim a federal estate tax exemption.

    Irrevocable Trust - A trust that cannot be changed, canceled, or "revoked" once it is set up. A "living trust" is not an example of an irrevocable trust. Insurance trusts and "Children's Trusts," or "2503 Trusts," are examples of irrevocable trusts. Irrevocable trusts are treated by the IRS very differently than revocable trusts.

    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 trustor(s) or person who established the trust. The trust can be effective in eliminating or reducing estate taxes for married couples. Revocable Living trusts are established during the life of the trustor(s), who retains the right to the income and principal and the right to amend or revoke the trust. When the trustor(s) dies, the trust becomes irrevocable and acts as a substitute for a traditional will.

    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.

    Revocable Trust - A trust which can be amended or revoked by the person(s) who established the trust.

    Testamentary Trust - A trust created after you pass by a Last Will and Testament. Assets in a Testamentary Trust do not avoid probate.

TRUSTEE - Assets placed in the trust are managed by the Trustees. The Trustees manage bank accounts, investments, the buying and selling of homes, automobiles, etc in the trustís name and distribute income as needed to the Trustors.

Most people name themselves as both the Trustors and the Trustees. In some instances, the Trustor may appoint someone else as a Trustee but not a Trustor. A single person who relies on an adult child to help manage bank accounts may opt to list the child as a Co-Trustee. The child cannot change language (such as the distribution of the estate) but can make sure the parentís bills are paid on time.

    Successor Trustee - While the Trustors are living, the Successor Trustees manage the assets of the trust if the initial trustees are no longer able to act, similar to a Financial Power of Attorney.

    The Successor Trustees must follow the instructions of the trust for managing and distributing the estate. Many Trustors set an age which must be attained (such as 30 yrs of age) for a beneficiary to receive his or her portion of the trust. Successor Trustees typically have the power to distribute assets held in the trust for minors prior to the age requirement if the funds are for:

    1. Health
    2. Education
    3. Support
    4. Maintenance

TRUSTOR - Also known as "Grantor" and "Settlor". A person who establishes a trust. Married couples are often Co-Trustors. While living and competent, the Trustor(s) is/are the only individual(s) who may alter, amend or revoke their trust. After all Trustors have passed the language may no longer be amended and assets are distributed by the Successor Trustees according to the rules of the trust.

WARRANTY - A deed which warrants that certain contracts will "run" (continue) with your property.

WILL - A legal document stating the intentions of a deceased person concerning the distribution of his or her property, and management of his or her affairs following his or her death. State law dictates the legality of a will.


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