ESTATE PLANNING TERMINOLOGY

Administrator: Person named by the court to represent the estate when there is no will or when the will does not name an executor, Also called personal representative.

Ascertainable Standards: Limited trustee powers to provide health, education, maintenance and support for surviving spouse or others, This avoids trust assets being included in a beneficiary's estate.

Beneficiary: The person(s) and/or institution who receive the benefits of the trust.

Charitable Remainder Trust: One of the most commonly used forms of charitable tax planning.  Offers a way to convert highly appreciated assets (e.g. real estate or stock) into lifetime income without having to pay capital gains tax on the sale of the property or estate taxes at death. The assets are placed into an irrevocable trust, naming one or more charities as beneficiary, The trust pays the grantor a fix amount ( calculated annually) during his or her life, Upon death, the remainder goes to the charity).

Codicil: A written change or amendment to a will.

Community Property: A form of title for husband and wife that is recognized in nine states. One of the primary. benefits of community property is the step-up to the fair- market value that occurs upon the death of either spouse, Community property. states are: AZ, CA, IS, LA, NM, NV'. TX, WA, and WI.

Conservator:  An individual appointed by the court to administer the financial affairs of an incapacitated adult or minor.

Creator:  See Grantor.

Credit Shelter Trust: A trust that uses an individual's $650,000, in 1998, unified credit for federal estate and gift tax purpose. (The amount allowed in 1998 will be $625,000, and will increase gradually to $ 1,000,000 in 2006).

Disclaimer: The refusal or rejection of any rights, interest, or property that was offered to a person, Taxpayers have up to nine months to disclaim assets from the time the gift was made (in an estate, it would be nine months from the date of death).

Durable Power of Attorney: See Power of Attorney.

Estate Taxes: Federal taxes paid on the net value of property left at death. The Federal estate tax rates currently range from 37 to 55 percent, California no longer taxes inheritances.

Family Partnership: A voluntary contract between family members (i.e., spouse, ancestors and lineal descendents) for tax purpose. If children are made partners, they should be given complete control over their interests. If not, that portion of profits will be considered income for the adult member .

Fiduciary: One who has 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).

Gift Tax: A tax imposed on transfer of property during the donor's lifetime.

Grantor: The person who sets up or creates the trust; also called settlor, trustor or creator.

Grantor Retained Trust: An irrevocable trust where the grantor assigns trust assets, but retains either income or the use of the property for a special number of years. The trust assets are handed over to the beneficiaries at the prearranged date. There are three different types of grantor retained trusts.

Gross Value: The value of an estate before any deduction (i.e. debts, charitable, contributions, etc.). Probate fees are usually calculated on the gross value of the estate.

Guardian: One who is legally responsible for the care and well being of another person. Appointed by a court, the guardian is under the court's supervision.

Incapacitated/Incompetent: Describes one who is unable to manage his/her own affairs, either temporarily or permanently.

Inter Vivos Trust: Another name for a living trust.

Intestate: Describes one who dies without a will. Typically states statutes will then dictate the distribution of assets.

Irrevocable Trust: A trust the grantor does not have the power to revoke, amend or make withdrawals or principal.

Joint Tenancy (WROS): Occurs when two or more persons own the same property. Death of a joint owner immediately transfers ownership to the surviving joint owner(s); different from tenancy-in-common. (see Tenancy-in-Common).

Life Insurance Trust: This irrevocable trust is established for the purpose of excluding life insurance proceeds from the estate of the insured for estate tax purposes. It is a type of trust, the corpus of which consist in whole or in part of life insurance policies owned by the trustee and payable to the trust on the death of the insured.

Living Trust: A revocable or "grantor" t:rust that is created while one is still living. The grantor has the right to revoke or amend the trust at any time. The trust has instruction for its management and distribution upon disability or death of the owner .

Living Will: A written document stating the desire not to be kept alive by artificial means in the event of a terminal illness or injury.

Marital Deduction: This deduction is available for interspousal transfer either during their lifetimes or at death. Under federal law, there is a complete inteIspOusa1 exemption for qualifying transfer regardless of the amount, In short, everything to your SPouse is received tax free.

Minor Child: A Chlld under the legal adult age: various by state (usually 18 or 21 ).

Net Value: The value of an estate after all debts have been paid. (Federal estate taxes are based on the net value of an estate.)

Personal Property: Movable property' (as opposed to real property, such as land, which is pennanent); includes furniture, automobiles, equipment, cash and stock,

Personal Residence Trust: One type of estate plan in which an individual transfers his home to a trust for a specified number of years with the right to occupy. The benetlciaries own the home, and the grantor pays rent after the trust terminates. The value of the gift is considered the present value of the future gift.

Pour Over Will: A short will often used with a living trust stating that any property left out of t:he living trust will become part of ( or "pour over" into) the living trust upon death.

Power of Attorney: A legal document that gives someone else full authority to sign on your behalf in your absence (different from the fiduciary duty of a trustee). Ends at disabilility or death. Some sates permit a durable power of attorney, which is valid through disability and ends at death. Limited

Private Annuities: An arrangement between two parties (neither being an insurance company) in which an individual transfers property to heirs and has an annuity contract to receive periodic payment for life - Quarterly IRS tables are used to determine payment schedule according to the market value of the property. (May be an option for closely held stock and larger estates).

Probate:  With a will (see testate), the legal process of filing a will with the probate court, The court determines whether the will is valid, hears all claims and orders creditors paid and property distributed according to the terms of the will.

Probate Fees: Cost associated with probate, usually based as a percentage of the gross value of the estate. These costs generally range from 2 to 5 percent for statutory probate fees. Extraordinary probate fees may exceed state limits and are in addition to the statutory fees.

Qualified Terminable Interest Property (Q- Tip Trust): Gives the first-to-die spouse the ability to control where the corpus of this trust will go after the death of the second spouse. This election requires that the surviving spouse receives the income from the Q- Tip trust for life. The balance of the trust is included in the surviving spouse's gross estate upon death and distributed in accordance with instructions of the first spouse to die.

Real Property: Land and/or property that is "permanently" attached to land (such as a building or a house ).

Revocable Trust: The opposite of an irrevocable trust; a trust in which the person established the trust retains the power to change, amend or revoke the trust during his/her lifetime.

Settlor: See Grantor.

Special Bequests: Also know as special gifts. A separate listing of personal property to go to selected person; can be changed or revokcd at any time.

Statutory fees: Maximum probate cost established by each state. In general, the statutory maximum fees generally range from 2 to 5 percent.

Successor Trustee: Person or institution named in the trust agreement, who can take over should the first trustee die, resign, or become unable to act.

Tenancy-by-the-Entirety: Ownership must involve a husband and wife. Termination of the account requires joint action by both spouse (i.e. divorce). This type of ownership is typically, used in separate-property states.

Tenancy-in-Common: A form of joint ownership involving two or more persons. Upon the death of tenant-in-common, ownership transfers to the designated beneficiaries or heirs, not to the remaining joint owner(s).

Testamentary Trust: A trust established through a will. The testamentary trust becomes effective only upon death.

Testate: Describes one who dies with a will.

Testator: One who creates a will.

Trust: A fiduciary relationship in which one person (the grantor) transfers legal title of property for the benefit of another person (the beneficiary).

Trustee: The person or institution who accepts and manages property according to the instruction in the trust agreement.

Trustor: The individual who established a trust; also referred to as grantor or creator.

Unified tax Credit: An estate and gift tax credit of up to $192,000 that permits the transfer of up to $ 600,000, in assets free of federal estate and gift tax.

Unlimited Marital Deduction: The ability of one spouse to transfer the entire estate to the surviving spouse free of any estate or gift taxes. The amount that may be transferred is unlimited.

Wills: A legally binding direction regarding the disposition of one's property not otherwise disposed of. It is not effective until death and can be revoked up to the time of death or until there is a loss of mental capacity to make a valid will.