Someone who is given authority through a power of attorney to do a particular non-legal act. An “attorney in fact” need not be a member of the legal profession. Also known as an “agent.’
The individual or entity who receives the benefit of a transaction (e.g., beneficiary under a will or living trust, beneficiary of a life insurance policy).
An amendment to a will. The codicil may modify, add to, subtract from, qualify, alter or revoke provisions in the will. The codicil is a separate document that is signed with the same formalities as a will. The codicil can be changed, revoked, canceled or destroyed.
Assets owned in common by a husband and wife, with each having an undivided one-half interest in the assets by reason of their marital status. The following eight states are “community property states”: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas and Washington (and Wisconsin has community property in its legal effect).
Someone appointed by the probate court to manage the financial affairs of a minor or a disabled adult.
A person who may or will receive a benefit, but only if the primary beneficiary becomes disqualified for the benefit (e.g., by death).
A conveyance of real property transferring title from the grantor(s) to the grantee(s).
Any interest in real or personal property; the extent of one’s interest in real or personal property… everything of value that you own in whole or in part. Your “assets.”
(Life &) Estate Planning
The process of planning for future events, so you can keep control over your assets while you are alive, take care of yourself and your loved ones if you should become disabled, and leave what you have to whom you want, the way you want and when you want, all the while saving every last tax dollar, professional fee and court cost possible.
The death taxes imposed by the state and federal governments on the transfer of assets upon the death of the owner. The amount “exempted” from estate taxes is subject to the political process and has fluctuated wildly, especially over the past several decades. Accordingly, keep a close eye on Congress and the White House.
The individual or corporate institution appointed in a will by a willmaker to take care of the willmaker’s assets after his or her death. Also called a “personal representative,” the executor has legal and business responsibilities, and functions under the control of the probate court. An “executrix” is a female “executor.”
The individual or corporate institution under the highest legal duty to act on behalf of another. A trustee is an example of a “fiduciary.”
Gift Tax Annual
The federal government allows a donor to exclude $14,000 (adjusted periodically for inflation) of a gift from gift tax liability if the gift is of a “present interest” to a specific individual donee. A present interest is one where the donee has an immediate, unrestricted right to use and enjoy the gift.
Someone appointed by the probate court to manage the personal and health care decisions of a minor or a disabled adult. Often the guardian and the conservator are the same person(s).
A person who inherits property, according to the state law scheme of distribution, from a person who dies without even so much as a will (i.e., “intestate”).
Inter Vivos Trust
A trust created “between the living.” The trustmaker is a living person. Commonly known as a “living trust.” Compare this to a “testamentary trust” defined below.
The transfer of property to the relatives of a person who died without even a valid will. In most states a statute will specify which relatives receive intestate shares, what they receive, how much they receive and when they receive it. This is the unintended default estate plan for 70% of Americans.
A trust whose terms and provisions cannot be changed, modified, altered, amended or revoked except by a court order under certain limited circumstances.
All persons who have descended from a common ancestor (i.e., children, grandchildren, great grandchildren, etc.).
A form of property ownership by two or more persons designated as “joint tenants with right of survivorship.” When one joint tenant dies, his/her interest in the asset automatically passes to the surviving joint tenant(s) outside of and beyond the control of the decedent’s will. The asset passes outside the grip of probate. However, probate is not avoided if one of the joint tenants is disabled or at the death of the surviving joint tenant. Also called “tenancy by the entirety” in some states (i.e., Missouri) when between husband and wife, joint tenancy can be “legal dynamite” for the unwary. Consult a qualified attorney before taking title to assets in this manner.
A beneficiary whose interest in an asset consists solely of the use of and income flow from the asset during his/her lifetime.
Also known as a “Health Care Treatment Directive,” when properly executed, this document allows you to specify the extent of life support/medical treatment you would want under various conditions, if you did not have the capacity to then communicate your own desires at the time of need. Many people, even attorneys, mistake “Living Trusts” and “Living Wills.”
There is both a federal gift tax and a federal estate tax marital deduction. The deduction pertains only to assets given to one’s spouse, whether during life or at death. The federal tax laws have certain rules to determine whether the asset given to a spouse qualifies for the marital deduction.
Prior to the Economic Recovery Act of 1981 (ERTA), an (Estate Tax) amount up to the greater of one-half of the decedent’s adjusted gross estate for federal estate tax purposes, or $250,000, was permitted as a marital deduction for decedents dying after 1981. There is now an unlimited marital deduction available. However, to obtain the benefits of the new law, your trust or will which transfers your assets to your spouse must have been executed or amended after September 12, 1981. Property must actually pass to your spouse in a “qualified” manner under the Internal Revenue Code. Note: There is also an unlimited gift tax marital deduction that is identical to the estate tax marital deduction for all gifts made after 1981.
A person who is under the age of legal competence. In most states, the age of majority is either 18 or 21.
Divided equally among all individuals, usually in a “class” (such as “my children”)
Proportionally divided between beneficiaries according to their deceased ancestor’s shares.
Movable property as contrasted with “real property,” which is fixed. Can be tangible or intangible.
A document through which the “principal” appoints one or more agents (aka attorneys in fact”) to take care of the principal’s financial business. If the Power of Attorney is “durable,” then the Agent may continue acting should the principal become incapacitated. We prepare a separate power of attorney for financial matters and another for health care matters.
A will that provides for the transfer into a living trust, after the probate court proceeding, of the assets a person neglected to transfer to their living trust while they were alive. The pour-over will names the living trust as its beneficiary and the assets are then managed and distributed under the private terms of the living trust.
Court proceeding in which the probate court has jurisdiction over both the personal representative and the assets of the decedent. The primary purposes of probate are to:
Protect the heirs from fraud & embezzlement;
Protect the government so all taxes are paid by the estate; and
Protect creditors of the decedent so they are paid.
Probate usually begins with the will being admitted to the probate court and the personal representative being granted “Letters Testamentary.” Probate ends after all taxes are paid, creditors are paid, and assets are accounted for and distributed as provided in the will. In certain instances, administering an estate through probate may be appropriate given the orderly nature of probate. Why? The probate process is overseen by a judge who ensures that the willmaker’s wishes are carried out. Probate also can be very efficient and effective when the estate is well-organized prior to death, minor children are involved and/or sensitive issues like family members with special needs, or even substance abuse issues affecting one or more heirs, are at stake.
A deed of conveyance for real estate that simply passes any title, interest, or claim that the grantor may have without any assurance or warranty that the title is valid.
Revocable Living Trust
A trust whose terms and provisions can be changed, modified, altered, amended or revoked. The power to do all this is reserved by the person(s) who created the trust(s) during their lifetime(s). This is the most popular and accepted means of avoiding probate at incapacity and at death. Hence, it is an alternative to probate (i.e., “guardianships & conservatorships”) for disabled adults/orphaned minor children and to probate at death by serving as a substitute for wills, etc. These trusts have been around longer than wills, but previously have been only available to wealthy individuals and families.
Provisions within a trust that allow the trustee to “sprinkle” income and/or principal among the trust beneficiaries. The sprinkling trust provides flexibility to base distributions on actual needs.
Tenancy in Common
A form of ownership by which each tenant (i.e., “owner”) holds an undivided interest in the asset. Each tenant in common has a right to possession of the asset, albeit the shares may not be equal. There is no right of survivorship (see “Joint Tenancy” above). When one tenant dies, he/she may leave their share to a third party to the tenancy.
A trust created under the terms of a living trust or under the terms of a will. For example, a testamentary trust is a preferred method to protect an inheritance for (and even from) beneficiaries.
A person who makes a will . . . a “willmaker.”
A “testatrix” is a female “testator.”
A legal entity created either by a trust agreement signed by a person during life (i.e., “living trust”) or arising only after death from provisions in their will (i.e., “testamentary trust”).
An individual or corporation who is a party to a trust and holds “bare legal title” to assets. The trustee has the power to carry out the wishes of the person(s) (i.e., “trustmaker(s)) who created the trust. The trustee has a “fiduciary” obligation to the trust’s beneficiaries and is subject to the highest legal responsibility under the law. Although the trustee has legal title, the “beneficial” or “equitable” title is in fact held by the beneficiary(ies). When there is more than one trustee, they are called “co-trustees.”
A form of deed in which the grantor promises a good, clear title.
A legal document that allows one to name the back-up parents for minor children left orphaned, as well as give the probate court instructions on your last wishes for family and assets. While it is better than no planning at all, it is an “admission ticket” to probate and has no power to control assets in joint tenancy or with beneficiary designations.