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Administrator/Administratix:
Person appointed by the Probate Court to administer the estate of a person who dies intestate (without a Will). If a Will is effective, the Court will appoint the person nominated in the Will, unless an objecting party is able to show that the person would not be able to act in that capacity. The person appointed is referred to as Executor (male), Executrix (female), or as Personal Representative (gender generic).
Affidavit:
A written declaration or statement of fact, confirmed to be true by oath or affirmation (signed by a Notary Public).
Ancillary Probate:
Administration of an estate in the state where assets owned by decedent are located, but which is not the state of decedent’s (the deceased person’s) primary residence (domicile).
Attorney-in-Fact:
The person authorized to act for another in a Power of Attorney document. The attorney-in-fact should not be confused with an attorney licensed to practice law. Anyone may be nominated as attorney-in-fact in the power of attorney.
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“B” Trust:
Abbreviated name for Bypass Trust, also known as Credit Shelter Trust, which makes use of the unified credit equivalent for purposes of reducing or eliminating federal estate tax.
Beneficiary:
The recipient of a decedent’s will, estate, trust, insurance policy or other asset.
Bill of Sale:
A contract which transfers assets from one party to another. A bill of sale is used to transfer assets which do not have a name, title, or deed from the grantor(s) into the trust, thereby insuring that all personal property is classified as being owned by the trust and therefore avoids probate.
Billfold Card:
A wallet-size card which states the title in which trust assets should be held, for the client’s convenience in titling newly acquired assets in the name of the trust.
Bond:
Certificate issued by a third party (often an insurance company) certifying that the personal representative(s), trustee(s), guardian(s), or other fiduciaries will faithfully perform the duties of the office. Bonds do not indemnify against poor management, however.
Buy-Sell Agreement:
A contract between shareholders of a corporation, partners of a partnership, or a sole proprietor and a key employee or other potential purchaser, whereby, on the occurrence of a specified event, one party agrees to sell his/her business interest and the other party(ies) agree to purchase at specified price, terms and conditions.
Bypass Trust:
Also Known as a “B” Trust or Credit Shelter Trust. This trust makes use of the unified credit equivalent for purposes of reducing or eliminating federal estate tax.
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Capital Gains Tax:
Income tax on the gain from the sale or exchange of a capital asset. Amount taxed is calculated by subtracting tax basis from the sale price.
Community Property States:
States in which husband and wife own an undivided one-half interest in community assets. Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.
Comprehensive Transfer Document:
A contract between grantor(s) and trustee(s) of their trust stating that it is the grantor(s) intention that all assets are trust assets. This document should not be depended upon. Title to assets should be changed to show ownership by the trustee(s) of the trust.
Contract for Deed:
An agreement by a seller to deliver the deed to a buyer when purchase price has been paid.
Corpus:
Principal sum or capital of a trust, as distinguished from income.
Credit Shelter Trust:
Also known as a “B” or Bypass Trust. This trust makes us of the unified credit equivalent for purposes of reducing reducing or eliminating federal estate tax.
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Decedent:
Deceased person.
Deed:
Document used to transfer real property (real estate).
Disclaimer:
Renunciation of a claim, power, or property, usually effected for purposes of estate or gift tax planning pursuant to Internal Revenue Code Section 2518.
Divestiture:
Irrevocable transfer of assets, in estate planning generally completed for the purpose of beginning waiting periods for Medicaid eligibility to cover nursing home expenses.
Donee:
The recipient of a gift.
Donor:
One who makes the gift.
“Due on Sale” Clause:
A clause in a mortgage which authorizes the mortgage-holder to require full payment of the mortgage if the secured real estate is transferred.
Durable Power of Attorney:
Document by which one individual gives power to another to act, and which specifically states that the document will not be affected by a future disability.
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Estate Tax:
The federal tax assessed against the property left by the decedent.
Executor/Executrix:
Person named by will and appointed by the probate court to administer the estate. Some states use the gender neutral term ‘personal representative’.
Fiduciary Duty:
Special duty imposed when one party places confidence, trust, and reliance on another party. The duty requires that neither party exert pressure on the other or in any way act in a self-serving manner.
Fractional Share:
Method of determining the amount to be distributed to a designated party or trust, based upon a fraction of the total assets rather than on a specific pecuniary (dollar) amount.
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Generation Skipping Tax:
Tax imposed on transfers into a trust or to an individual which bypass a generation younger than the transferor, thereby avoiding imposition of tax on one generation (e.g.- Grandparent to Grandchild). Substantial exemptions eliminate generation skipping tax on most transfers.
Grantor:
One who places assets in a trust. Grantor is also referred to as settlor or trustor.
Grantor Trust:
A trust in which the party placing assets into the trust retains control of the trust. This type of trust creates no change in grantor’s tax situation. Income is taxed on grantor’s 1040, and all trust values are included in grantor’s estate for estate and inheritance tax purposes.
Guardianship:
Court proceeding to authorize one person to act for another.
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Heir:
The recipient who inherits pursuant to the law of intestacy.
Income Tax Basis:
Initial cost of assets, plus improvements, minus depreciation. Basis is used to calculate taxable capital gain upon sale of the asset.
Inheritance Tax:
Tax assessed against values inherited by heirs and beneficiaries. This is a tax imposed by some states, in addition to the Federal Estate Tax.
Intestacy:
State law which controls distribution of probate assets when no valid will exists.
Inter Vivos Trust:
The same as a Living Trust. Inter vivos is Latin for ‘among the living’.
Joint Tenants:
Undivided ownership of property, where the entire asset passes to the surviving joint tenant(s) free of probate upon death of a joint tenant.
Land Contract:
Same as “Contract for Deed”, but terminology varies from state to state. An agreement by a seller to deliver the deed to the buyer when purchase price has been paid.
Living Trust:
A trust created during the grantor’s lifetime. This type of trust is revocable in that it may be modified by the primary trustee(s), if the trustee is competent.
Marital Property:
The same as “community property”, but this terminology is used specifically in Wisconsin.
Payable on Death:
A designation which may be used on bonds, certificates of deposit, and bank accounts which states that, upon the owner’s death, the asset is to be transferred to the named beneficiary, free of probate.
Pecuniary Share:
Method of determining the amount to be distributed to a designated party or trust based upon a specified dollar amount rather than a fractional share of all assets.
Personal Representative:
Person named by will and appointed by the probate court to administer the estate. Some states use the terms executor and executrix. The terms administrator/administratrix are also used.
Pourover Will:
A will which devises assets into a trust.
Power of Attorney:
Document by which one individual gives power to another to act.
Principal:
The source of authority or right, as in a power of attorney, where the principal is the party granting power to another. Also, principal is the corpus of a trust. (See corpus in this glossary).
Probate:
Court procedure by which a will is proved to be valid, and, in current usage, includes all proceedings pertaining to administration of a decedent’s estate.
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Q-TIP:
A trust which utilizes the marital deduction, yet enables the decedent or donor spouse to control ultimate distribution of trust principal.
Settlor:
One who places assets in a trust. Settlor is also referred to as grantor or trustor.
Step-up in Basis:
Increased income tax basis which is received by beneficiaries or heirs upon inheritance of assets.
Successor Trustee:
In a revocable living trust, the party authorized to assume management and control upon resignation, incompetency, or death of the primary trustee(s).
Tax Identification Number:
The number under which tax is reported for income tax purposes. For individuals and revocable living trusts, tax identification number is the individual or grantor(s) social security number(s). An Irrevocable Trust is assigned it’s own tax ID number.
Tenancy in Common:
Parties owning an undivided interest in an entire property, where each tenant’s interest passes by will or intestate succession. When an asset is held by a trust as a tenant in common, the plan of distribution in the trust will apply to the share of the asset held as tenant in common.
Tenancy by the Entirety:
Type of ownership permissible in some states, between spouses, where surviving spouse receives property by survivorship as with joint tenancy, but tenancy by the entirety cannot be terminated or transferred during lifetime without consent of both spouses.
Testamentary Trust:
A trust which becomes effective only after death of the grantor.
Testator/Testatrix:
The maker of a will.
Totten Trust:
Trust which arises from deposit by one party as trustee for another. Totten trusts are revocable during lifetime, and assets pass to named beneficiary upon death of primary trustee. Some states authorize use of totten trusts, and other states authorize payable on death accounts. Both work in much the same way.
Trustee:
Party authorized to manage and control trust assets.
Trustor:
One who places assets in a trust. Trustor is also referred to as grantor or settlor.
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Unified Credit:
The amount of federal estate tax that each individual will be credited. This amount is determined according to the unified rate schedule. The “applicable exclusion amount” is the amount of assets that are excluded from federal estate taxes. Under pre-2001 Act law, the unified credit amount effectively exempted from estate and gift tax a total of $675,000 in 2001 and an increasing amount up to $1 million in 2006. The 2001 Act increases the exemption equivalent of the unified credit such that an estate of $1 million is exempt from estate tax in 2002 and 2003 and an increasing amount up to $3.5 million is exempt in 2009. The 2001 Act may sunset in 2010, unless Congress takes action to enact the law as a permanent change.
Ward:
A person under the protection of the probate court whose affairs are handled by a guardian or conservator.
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