Glossary & Terms

Glossary & Terms 2016-12-08T14:56:45+00:00
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ACTION – Intangible assets such as contract rights.

ADMINISTRATOR – An individual or corporation appointed by the probate court to administer the estate of someone who died “intestate” (without a will or trust). If there is a will, the person handling the probate is called an “executor.” If there is a trust, a “trustee” administers the estate outside of probate (no court proceedings).

AMENDABLE – Describing a trust wherein the trustor or some other party is empowered by the Trust Agreement to change the trust’s terms and conditions.

BASIS OF PROPERTY – The value used to detemine gain or loss for income tax purposes. Basis is usually the cost, plus cost of improvements to the property. (See STEPPED UP BASIS.)

BENEFICIARY – The person or persons entitled to receive distributions of money or property under the terms of a trust or will. A revocable living trust will usually name the person creating the trust (the trustor) as both trustee and beneficiary during his or her lifetime. The trust will name who the successor beneficiaries will be at the death of the trustor.

BEQUEST – A gift of property determined by provision in a will. CAPITAL GAIN TAX – An income tax due if appreciated property is sold. The gain (the portion subject to tax) is calculated by subtracting the basis of property from its selling price.

CODICIL – An addition or amendment to a will that may modify or change its provisions.

COMMUNITY PROPERTY – A form of property ownership between husband and wife, wherein each spouse owns equal shares. Community property may be left to persons other than the spouse by will or through a trust. If one spouse dies without leaving a will or trust, the other spouse will automatically inherit the community property.

COMPLEX TRUST – A trust that does not distribute 100% of it ‘s earnings to the beneficiaries each year (as does a “simple trust”). This is basically an income tax classification. See SIMPLE TRUST.

CONSERVATORSHIP – A Superior Court proceeding that takes control of an individual’s assets because that individual is deemed incapable of managing them. Usually, the family must prove to the court that the individual is incompetent. A revocable living trust can avoid a conservatorship by naming a manager in the trust document in the event of incapacity. This manager is usually the successor trustee.

CORPUS – Property held in trust {principal as opposed to earnings). DECLARATION OF TRUST – See TRUST AGREEMENT. DISTRIBUTION – Payment of trust assets {principal or earnings) to a beneficiary. DONOR – One who makes a gift (see GIFT TAX ANNUAL EXEMPTION).

DONEE – One who receives a gift (see GIFT TAX ANNUAL EXEMPTION). EQUIVALENT EXEMPTION – The amount of property which will pass tax free upon death. For 2016 and
thereafter, the amount is $5.45 Million.

EXECUTOR – The individual or corporation appointed in a will to handle the probate of an estate upon the death of the testator. The executor selects an attorney to probate the estate, and pays the ‘attorney from the deceased ‘s estate.

EXPRESS TRUST – A trust agreement created by written document (or indenture). FEDERAL

ESTATE TAXES – Taxes imposed on assets transferred at death. Federal estate taxes are levied according to the size of the estate. This is equivalent to an exemption for a $5.45 Million estate.

FIDUCIARY – A person or entity who accepts the responsibility of administering and caring for the property of another, usually on behalf of a beneficiary. Executors and trustees are fiduciaries.

GIFT TAX ANNUAL EXEMPTION – Gifts may be made, tax free, to any number of recipients each year. Each person may give $ 14,000 tax free to each recipient. A husband and wife may jointly give $28,000 tax free to each recipient.

GRANTOR – One who transfers property to a trust (see Trustor).

GRANTOR TRUST – A trust wherein the ‘’grantor’’ or ‘’trustor’’ retains a reversionary interest of beneficial use of the property in trust. Current income tax regulations treat Grantor Trust property or income as belonging to the grantor for tax purposes. A Revocable Living Trust is classified as a Grantor Trust.

GROSS VALUE – An amount used for calculating probate fees. It is the value of an estate before debts are paid. For example, if a home is worth $150,000 but has a $90,000 mortgage, the gross value is $150,000 and the probate fees will be based on the $150,000.

GUARDIAN – A person (other than a parent) who has the legal responsibility for the welfare of a child while the child is not of legal age (usually age 18 in most states).

HEIR – The person who would inherit property under state or federal law.

IMPLIED TRUST – A trust forrned without a written agreement .

INDENTURE – The trust document (see TRUST AGREEMENT).

INTER VIVOS TRUST – A trust that is in force during the life of the trustor, also called a “living trust,” (as opposed to a testamentary trust which takes effect at the death of the trustor).

INTESTATE SUCCESSION – The law that determines who are the legal heirs when an individual dies without a will or trust.

IRREVOCABLE TRUST – A trust where the trustor retains no right to revoke or amend the trust, and gives up legal control of trust assets. In contrast, see REVOCABLE TRUST.

ISSUE – Lineal descendants (i.e.:children, grandchildren, etc.).

JOINT TENANCY – A form of property ownership by two or more persons, which includes the ‘’right of survivorship.’’ This means the surviving joint tenant(s) gets title to the property owned by a deceased joint tenant, regardless of a will or trust provision.

MULTIPLE PROBATE – If an individual dies while owning real property in more than one state, there usually is a separate probate proceeding in each such state. If title to all real property is held in a revocable living trust, multiple probates are avoided.

NET VALUE – The value of an estate after all debts are paid. Federal estate taxes are based on the net value of the estate.

PERPETUITIES (RULE AGAINST) – A rule that prevents a trust from having a perpetual life. The perpetuities clause in a trust allows the trust to continue for a term of years, and causes the trust to terminate automatically at the required time.

PERSONAL PROPERTY – Movable property as contrasted with real property (land). Personal property includes furniture, automobiles, equipment, cash , stocks, bonds, jewelry, precious metals, collectibles, etc.

PROBATE – A procedure in which the Superior Court assumes jurisdiction over the estate of someone who has died. The court oversees the payment of debts, taxes, and probate fees, then supervises the distribution of the remainder to the heirs or, if there is a will to the persons named in such will. Probate is time consuming and expensive, and can be avoided with a revocable trust.

PRUDENT MAN RULE – An unwritten rule that requires a trustee to view trust investments and management with the same care as if he was investing or managing his own funds.

QUALIFIED TERMINABLE INTEREST PROPERTY (Q-TIP) TRUST – A trust frequently used by a married person whose estate exceeds $5.45 Million and who wants to restrict the surviving spouse’s use of the trust estate after the death of the first spouse. The trust allows the surviving spouse to enjoy lifetime income from the trust , but preserves the capital for the trustor’s family or other heirs.

QUITCLAIM DEED – A deed used to release or convey a person’s right, title, and interest in real property. REAL PROPERTY – Land and property permanently affixed to the land. REVERSION – The return of property to the former title holder.

REVOCABLE TRUST – A trust used as an alternative to a will and as a vehicle to avoid probate. The trustor creates the trust and remains in complete control as trustee. The trustor has use of all trust assets during his or her lifetime, and also retains the power to amend or revoke the trust , and change the successor beneficiaries.

TRUSTOR – The person who creates and funds a trust (also called granter or settlor). SIMPLE TRUST – An income tax classification describing a trust wherein 100% of earnings is distributed each year, but without any allowable distribution to charity. SITUS – The legal location or domicile.

STATUTORY WILL – A will on a preprinted form approved by the State. A statutory will must go through probate.

STEPPED UP BASIS – When property is inherited , the person who inherits that property receives a new basis in the property (See BASIS OF PROPERTY). The new basis is the value of the property at the date of the owner’s death.

SUCCESSOR TRUSTEE – A person or institution appointed, usually by the trustor, to assume the responsibilities of trustee if the previous trustee ceases to serve in that capacity.

TESTAMENTARY TRUST – A trust , created by the will of the trustor, that comes into being at the death of the trustor.

TESTATOR – A person who leaves property to heirs by will.

TRUST – A legal entity that is created by contract between a trustor (creator) and a trustee, wherein the trustee is directed to hold and manage property in trust for the benefit of one or more beneficiaries. A trust (acting through its trustee) can do anything a person can do. In the case of a revocable living trust, the trustor, the trustee and the beneficiary are usually the same person during the trustor’s lifetime. Successor trustees and successor beneficiaries are named in the trust instrument. Holding title in trust gives the successor trustee the power to distribute assets to the successor beneficiaries after the trustor’s death without a probate proceeding.

TRUST AGREEMENT – A written document setting forth the terms and conditions of a trust (also called a Declaration of Trust, Deed of Trust, or Indenture).

TRUSTEE – The person who manages and controls the assets in a trust. Often the trustor and trustee of a revocable living trust are the same person.

TRUSTOR – The person who creates a trust (also called a grantor or trustor).

UNLIMITED MARITAL DEDUCTION – an unlimited amount of property can be left to a non-alien spouse tax free so long as the marriage is legally recognized in the state, and so long as title can be totally and unconditionally vested in the spouse.

WILL – A written document wherein a person determines the disposition of his or her property at death. Wills can be changed during the person’s lifetime. All wills go through probate. A gift of property determined by provision in a will. CAPITAL GAIN TAX – An income tax due if appreciated property is sold. The gain (the portion subject to tax) is calculated by subtracting the basis of property from its selling price.