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A

ADMINISTRATION OF ESTATE:  The care and management of an estate by a trustee or a guardian.  This is different than the settlement of an estate by an executor or personal representative.

 

AGENT:  A person who acts for another by the latter’s authority.  The distinguishing characteristics of an agent are (1) that he or she acts on behalf of the principal (2) the agent does not own title to the property of the principal and (3) the agent has a duty to follow the principal’s instructions.

An account in which the title to the prop­erty constituting the agency does not pass to the trust institution but remains in the owner of the property, who is known as the principal, and in which the agent is charged with certain duties with respect to the property.

 

ANNUAL EXCLUSION:

The amount of property (presently $11,000, or $22,000 for a married couple) that may annually be given to a donee, regardless of the donee's relationship to the donor, free of gift tax.  Only gifts of present interests qualify for the annual exclusion.

 

ANNUITY:

The amount payable according to contract or trust annually or at other regular intervals for either a certain or an indefinite period, as for a stated number of years or for life.  An Annuitant is another name for the beneficiary of an annuity.

 

APPLICABLE EXCLUSION AMOUNT:

Sometimes referred to as the credit shelter amount or exemption equivalent.  This is the amount of taxable transfers that would generate federal gift or estate taxes in amount equal to the applicable unified credit.

 

APPLICABLE FEDERAL RATE:

The statutory interest rate that must be charged for most loans and Install­ment agreements to avoid imputation of income under the Internal Revenue Code.   

 

ASSET(S):

(1) The property of a deceased person sub­ject to the payments of his debts and gifts. (2) The property in a trust account.

 

ASSET PROTECTION TRUST:

An asset protection trust is a trust arrangement using the laws of a jurisdiction with favorable asset protection laws for such trusts.  This type of trust is commonly referred to as an “APT”.  APT’s organized under the laws of one of several domestic jurisdictions offering these laws are commonly known as Domestic Asset Protection Trusts.  APT’s organized under the laws of a foreign jurisdiction are frequently referred to as Foreign Asset Protection Trusts or FAPT. 

 

ASSIGNEE:

A person appointed by another or by the court to do some act or enjoy some right, privilege, or property

 

ASSIGNMENT:

The transfer in writing by one person to another of the title to personal property.  The assignment of stocks or registered bonds may be effected by filling in the form printed on the reverse of the certifi­cate or by the execution of a separate assignment form.

 

ASSIGNOR:

A person who makes a transfer of title or interest by writing.

 

ATTORNEY IN FACT:

An agent who is given written authorization by another to transact business for the other.  Usually done with a Power of Attorney.

 

B

 

BENEFICIARY:

(1) The person for whose benefit a trust is created. (2) The person to whom the amount of an insurance policy or annuity is payable.

 

BEQUEATH:

To give personal property by Will.  A Bequest if a gift of personal property by a will.  This is different than a devise.

 

BOOK VALUE:

The price at which assets are carried on a financial statement.  Also, the value of each share of common capital stock based on the values at which the assets of a corporation are carried on a balance sheet.  It is obtained by deducting liabilities from assets and dividing by the number of shares outstanding.

 

BUY-SELL AGREEMENT:

An agreement between owners of a business where they arrange to transfer their shares upon death or the occurrence of another event to the other owners or back to the business.  This is to provide continuous control and certainty of a business.

 

C

 

CAPITAL GAINS and LOSSES:

A computation for tax purposes that usually equals the difference between the purchase price and the sales price.

 

CHARITABLE BEQUEST:

A gift of personal property to a legal char­ity by Will.

CHARITABLE DEVISE:

A gift of real property to a legal charity by Will.

 

CHARITABLE LEAD (or Up-front) TRUST:

A trust for a fixed term of years where a charity is the Income beneficiary (of an annuity of a sum certain for a set term or for the life of a beneficiary or a unitrust payment of a fixed percentage of the trust assets paid annually) and the remainder goes to a non-charitable benefi­ciary.

 

CHARITABLE REMAINDER TRUST:

A trust arrangement where a remainder interest passes to a charity upon the termination or failure of a prior interest. (the remainder interest can be an annuity or unitrust)

 

CHARITABLE ANNUITY TRUST:

A trust which provides a sum of not less than five percent of initial fair market value of the principal, to be paid at least annually to a non-char­itable beneficiary, with the remaining principal paid to a charity.

 

CHARITABLE REMAINDER UNITRUST:

A trust which provides a fixed percentage, not less than five percent of net fair mar­ket value of the principal, valued annually, to be paid at least annually to a non­-charitable beneficiary, with the remaining principal paid to a charity.

 

CHARITABLE TRUST:

A trust created for the benefit of a legal charity.

 

CLASS GIFT:

A gift to members of the same class, for example, the class consisting of one’s grandchildren.

 

CODICIL:

An amendment of a Will executed with all the formalities of the Will itself.

 

COMMUNITY PROPERTY:

Property in which a husband and wife have each an undivided one-half Interest by reason of their marital status; recog­nized in all civil law countries, and in certain states of the US.

 

COMMUNITY TRUST OR FOUNDATION:

A trust or foundation funded by donations made by many people for educa­tional, charitable, or other benevolent pur­poses in a community.  The property is managed and distributed usually by a board of selected citizens.  There may be one trustee or, as is more often the case, several trustees (sometimes trust institutions of the community).

 

COMPLEX TRUST:

A trust in which the trustee is not required to distribute income currently, or distrib­utes amounts other than income, or makes a charitable contribution.

 

CONSERVATOR OR GUARDIAN:

Generally, an individual or insti­tution appointed by a court to care for property.  Specifically, an individual or institution appointed by a court to care for and manage the property of an incompetent person.  A guardian cares for and manages the prop­erty of a minor.

 

CONTINGENT BENEFICIARY:

A beneficiary whose interest is condi­tioned upon a future occurrence which may or may not take place. Unless or until the condition takes place the interest is only contingent.

 

CONTINGENT REMAINDER:

A future interest in property that is dependent upon the fulfillment of a condition before the termination of a prior interest in the property.

 

CONTINGENT TRUSTEE:

A trustee whose appointment is depend­ent upon the failure to act of the original or a successor trustee.

 

CORPUS:

The principal of an estate, as dis­tinguished from the income.

 

COST BASIS:

The original cost of property usu­ally based on the purchase price or, with few exceptions, in the case of property received from an estate, on the fair market value of the property at the death.

 

CREDIT SHELTER TRUST:

A trust that is usually utilized as part of an estate plan that is funded with the credit equivalent (formerly called unified credit) amount of a first spouse to die.  Such a trust is often used to provide benefits to a decedent's surviving spouse, while avoiding inclusion in that spouse's gross estate.  Property in the credit shelter trust can thus pass through to other beneficiaries with no estate taxes. This type of trust is also referred to as a ByPass Trust.

 

CREDITOR'S NOTICE:

In probate, the notice published stating the decedent's death and the name of the executor or personal representative to who claims should be presented for payment.  In some states a similar process is utilized to publish notice of a decedent who died and owned assets in a trust.

 

CRUMMEY POWER or CRUMMEY TRUST:

A limited power of withdrawal by a beneficiary over trust property that ordinarily lapses within a specified period of time.  Since property transferred to a trust may not otherwise create a present interest in a beneficiary, a Crummey power is used to create a present interest and secure an annual exclusion for the donor of the property, permitting trust management of the property for the ben­efit of the beneficiary as contrasted with an outright gift.

 

CUSTODIAN:

A person who has the duty to safeguard, conserve and account for property in his or her care as a result of circumstances causing property to be within their care or more commonly as a result of an appointment by a court to the duty.

 

D

 

DEATH TAXES:

Taxes imposed on property or on the trans­fer of property at the owner's death; a general term including estate taxes, inher­itance taxes, and all succession or transfer taxes connected with the death of the owner of the property.

 

DECLARATION OF TRUST:

An acknowledgement by one holding or taking title to property, that he holds the property in trust for the benefit of some­one else.

 

DEED OF TRUST:

A deed usually for real property conveying property to a trustee; usually used to secure a mortgage interest in real estate.

 

DEFECTIVE GRANTOR TRUST:

An irrevocable trust that is treated as a grantor trust for tax purposes; usually it is the creator of the trust or the grantor who wishes to have income of the trust taxed to themselves vice the higher trust tax rates.  In a few instances a trust is drafted so that the defective grantor trust rules will cause a beneficiary other than the original grantor to be taxed at their income tax rates.

 

DEFINED BENEFIT PLAN:

A pension plan which guarantees the pay­ment of a specified benefit at retirement age and provides for annual contributions equal to an actuarially determined amount that is sufficient to produce the specified benefit.  Typically these plans are governed by federal laws.  The primary governing federal laws being ERISA and the Internal Revenue Code section 412.

 

DEFINED CONTRIBUTION PLAN:

A pension plan which provides for an indi­vidual account for each participant and for benefits based upon the amount con­tributed to the participant's account including any income, expenses, gains, or losses.  Typically these plans are governed by federal laws.  The primary governing federal laws being ERISA and the Internal Revenue Code section 401.

 

DEVISE:

A gift of real property by Will; to be distin­guished from bequest.

 

DIRECT HEIR:

A person in the direct line of ascent or descent of the decedent; as, father, moth­er, son, daughter.  

 

DIRECT SKIP:

A generation skipping transfer either by gift or at death to someone (known as a “skip person”) who is two or more generations below the transferor.  Such a transfer may trigger a generation skipping transfer tax.

 

DISCLAIMER:

A refusal of any interest in or claim to the subject of the action, such as, renunciation of any title, claim, interest, estate, or trust.  Often done by an heir or beneficiary of an estate for estate planning or tax avoidance purposes.

 

DISCRETIONARY POWERS:

Powers which are left to the Judgment of the trustee under the terms of the trust.  Discretionary powers give the trustee the right, but not necessarily the duty, to per­form or omit certain actions.  Sometimes the discretionary powers are written with certain ascertainable limitations.

 

DISCRETIONARY TRUST:

A trust which entitles the beneficiary to only so much of the income or principal as the trustee in its controlled discretion shall give him or to apply for his use.

 

DISPOSITIVE PROVISIONS:

The provisions of a Will or trust regarding the disposition and distribution of the property in the estate or trust; to be distinguished from administrative provi­sions which relate to the handling of the property while It is In the hands of the executor or trustee.

 

DISTRIBUTABLE NET INCOME (DNI):

All income generated by a trust, less all deductible expenses paid by a trust whether charged against principal or Income.  This is a term used to determine the amount of income tax due from the trust or the beneficiaries, depending upon who is to be taxed on such income.

 

DISTRIBUTION STANDARD:

Trust provisions that set a standard for discretionary distributions of a trustee to a beneficiary.

 

DONEE:

One who receives a gift.

 

DONOR:

One who makes a gift.

 

DONOR ADVISED FUND:

An account with a community trust, foundation or charity that permits a donor to make gifts to the entity and direct where, when and to whom his or her gifts are distributed.  This avoids the need for a donor to create a private foundation in order to direct his or her gifts.

 

DURABLE POWER OF ATTORNEY:

A Power of Attorney that remains effec­tive after the disability or incompetence of the person granting the power. Typically, a person will give such a Power of Attorney providing that it becomes exercisable only upon his disability or incompetence, commonly referred to as a “springing durable power of attorney”.

 

E

 

ELECTING SMALL BUSINESS TRUST:

A trust that is eligible to own shares of Subchapter S corporations.

 

ELECTION:

The choice of an alternative right or course; for example, the right of a widow to take the share of her deceased husband's estate to which she is entitled under the law, despite a contrary provision in the Will, is known as the widow's election.

 

EMPLOYEE BENEFIT PLAN:

A plan established or maintained by an employer or employee organization, or both, for the purpose of providing employees a benefit, such as a pen­sion, profit-sharing, stock bonus, medical, dental, accident, or disability benefits.

 

EQUITABLE OWNERSHIP:

The interest of a person who has a beneficial right to enjoy property, the legal ownership of which is in another person or entity.  A person who holds this interest has “Equitable Title”.

 

ERISA:

An acronym for the Employee Retirement Income Security Act of 1974, which set up federal minimum standards for employee benefit plans.  The Act also established an insur­ance program designed to guarantee workers receipt of pension benefits if their defined benefit pension plan should termi­nate.

 

ESTATE:

(1) The right title, or interest which a per­son has in any property, to be distin­guished from the property itself which is the subject matter of the interest (2) The property of a decedent.

 

ESTATE FREEZE:

An estate planning strategy designed to prevent the value of an owner’s interest in appreciating property from increasing for federal estate tax purposes.

 

ESTATE PLAN:

A definite plan for the administration and disposition of one's property during one's lifetime and at one's death; usually set forth in a Will and one or more trust agreements.  It is also designed to minimize costs and taxes to one’s estate.

 

ESTATE TRUST:

A trust that is required to pay to a surviv­ing spouse or accumulate all of its income and whose property passes to the surviv­ing spouse's estate at his or her death.  The estate trust will qualify for the marital deduction and will be treated as a sepa­rate taxpayer for income tax purposes.

 

EXECUTOR:

An individual or a trust institution nomi­nated in a Will and appointed by a court to settle the estate of the testator. If a woman, she is an executrix.  Known in some states as a “Personal Representative”

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Call us at 888-674-1400 Tacoma 888-829-5296 Poulsbo or click here to arrange a complimentary initial consultation.

NOTE:  The information provided herein is for general dissemination and not intended as legal advice or for use in a particular situation.  Please contact our office or other qualified attorney.