Glossary of Terms

Alphabetical Listing of Estate Planning Terms:

A & B

actuarial - calculations based on statistics, especially of life expectancy.

adjusted basis - the original cost of property in the hands of the owner, plus additions and minus deductions required by law.

administrator - an individual appointed by a court to settle the financial and legal affairs of a person who dies without a will.

ancillary - a person who is appointed to take charge of that portion of an estate which exists in a state or country other than that of the deceased person's residence.
temporary - a person or agency appointed to initiate the management of an estate until a regular appointee is named.
of undistributed assets (de bonis non) - the person or agency named by the court to replace a personal representative or administrator who has not completed the settlement of an estate due to incapacitation, death or removal by court.
with the will annexed (cum testamento annexo) - one who is appointed to settle an estate when the original personal representative failed to qualify, or when the court refused to approve the one nominated in the will.

administratrix - a female administrator.

affidavit - a statement in writing sworn to or affirmed before an official (usually a notary public) who has authority to administer an oath or affirmation.

after-born children - children born after a will or trust has been executed.

alternate valuation date - the date six months after death, which may be used for determining the value of an estate's assets.

ancillary administration - administration of a deceased person's estate in a state where he had property other than the state he resided in at his death.

annuity - the right to receive a series of payments on a yearly basis or at other regular intervals for a specific period of years, or for the lifetime of the income recipient.

annuity trust - donor transfers cash or securities to a charitable remainder trust naming one or more charitable organizations as the eventual beneficiary. This qualifies for a charitable contribution deduction and provides income at a fixed percentage of the fair market value of the assets originally transferred.

appreciated property - assets which have increased in value during the time a person has owned them.

assessed valuation - the value placed upon land for purpose of taxation. This valuation does not necessarily correspond to the market value.

attestation clause - that clause in a will in which the witnesses certify that the will has been signed before them and describes how all parties signed the will.

beneficiary - a person named in a will to receive something from a deceased person's estate.

bequest - a transfer of personal property by will. Distinguished from a devise which is a transfer of real property by will.

bond - an insurance agreement under which one party becomes surety to pay, within stated limits, the financial loss caused to another by specified acts of defaults of a third party. An interest bearing security evidencing a long term debt, issued by a government or corporation, and sometimes secured by lien on property.

capital gain - a gain from the sale of an investment, the increase in value of property over its original acquisition price plus improvements and minus depreciation.

charitable annuity - a transfer of property to a charitable institution, part of which is payment for an annuity and the balance of which is a charitable gift, also known as a gift annuity.

charitable deduction - deduction allowed for gifts made to charitable organizations.

charitable remainder - the trust property given to a charity upon the termination of the trust or annuity.

co-administrators - two or more persons named in a will to settle an estate.

codicil - the only legal document which can change a will. It is a supplement to a will, which adds, takes from, or alters the will's provisions. It must be executed with the same formalities as a will.

common disaster - when two or more persons (usually husband and wife) die as a result of the same accident, or when the death of each follows within a relatively short period of time.

common disaster clause - a clause under the will which prescribes the order of death as between two or more people who die at the same time.

common trust fund - a group of securities managed by the same trustee on behalf of a number of trusts, usually for the purpose of diversifying the investments of a trust.

community property - in some states property which is acquired by the efforts of either husband or wife constitutes a common fund in which each has an equal interest.

competency - legally qualified, mentally and physically, to execute a document, such as a will.

conservator - a person who is appointed by the court to protect the interests of an incompetent person, such as a minor, insane person, convict, or the like.

corporate fiduciary - a bank or trust company exercising the powers of a fiduciary under statutory authorization.

corpus (principal) - a capital fund from which income is derived.

corpus of the trust - property held by a trustee.

cost basis - the acquisition price of a security or property plus expenses for improvement and less depreciation.

co-trustee - a joint trustee to whom specific duties are assigned. He is not to delegate such duties to another person.

curtesy - a husband's life estate in the property of his deceased wife. By statute in most states, it is a life estate in one-third of the land she owned during their marriage. Curtesy has been abolished by statute in most states (see life estate).

custodian - a person who manages, invests and reinvests a donor's gift to a minor without court approval. The custodian is empowered to pay or apply income and principal for the support, benefit, maintenance and education of the minor. Unpaid and unapplied income is accumulative.

D, E & F

death tax - tax levied by individual states on property after the owner's death.

decedent - a person who has died.

deduction - a legislatively granted privilege to a taxpayer to subtract from his or her income the value of a gift, loss expense incurred, etc., for certain events or transactions.

devise - a gift of real property through a will (see property).

domicile - a person's home or principle residence although he may also have living quarters in another location.

donor (settlor) - in estates or trusts, the person who creates, grants or donates the trust.

dower - an estate for life to which a married woman is entitled by law at the death of her husband. In most states, it is a life estate of one-third of the value of all land which the husband owned during their marriage. Dower has been abolished by statute in some states. The reason for requiring a wife's joining in the deed of any land by her husband is the release of her dower right.

durable power of attorney - an instrument in writing by which one person authorizes another to act for him in specific actions described in the instrument, with authority covering periods of disability and incompetence.

estate - the property of a deceased person (see property and administration).

estate administration - the management of an estate which includes paying all debts and claims, satisfying specific legacies and then ascertaining individual shares in whatever is left of the estate and distributing those shares.

estate plan - an arrangement for managing and disposing of a person's property during his lifetime and after his death. This can be accomplished by a will, one or more trusts, gifts made during life, or a combination of these.

estate tax - a tax a deceased person's estate pays on his or her property and interest in property.

exclusion, annual - the continuing right of a donor to make a tax-free gift of up to $11,000 (in year 2005) to any number of recipients in any year. This applies only to gifts of present interest.

executor - a person or agency named in a will to administer the estate of a deceased person (synonymous with personal representative).

executrix - a female executor.

exemption, lifetime - the amount a donor is allowed to give tax-free to other people during his or her lifetime or at his or her death.

fair market value - the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.

fiduciary - a person charged with taking certain actions on behalf of another person. In a trust, the fiduciary is the trustee who manages the trust property, distributes income and makes final disposition of the trust property.

G, H & I

general power of appointment - a power given by the owner of the property to another to dispose of it to anyone, including himself, his estate, his creditors, or the creditors of his estate.

gifts - a voluntary transfer of property from one person to another without money or other consideration. There are four essential elements to a gift: (1) the intention to give, (2) renunciation of the right of ownership by the donor, without the power to revoke it, (3) delivery of possession by the donor to the recipient, and (4) the donor must have mental capacity at the time he or she makes the gift.

gift annuity - a transfer of property to a charitable institution, part of which is payment for an annuity and the balance of which is a charitable gift.

gift tax (federal) - a tax paid by a donor on the gift of property, securities, cash or other value given to another person.

gift tax marital deduction - a provision under the Federal Gift Tax law which allows a gift of an unlimited amount to pass gift tax free from one spouse to another.

grantor - a person who owns property placed in a trust, a donor to a trust.

gross estate - all assets which a deceased person owned at his death or made a transfer of before death which the state tax laws required to be included in the donor's taxable estate prior to deductions and exemptions.

guardian - a person who has the legal duty and power to take care of the person and property of another who because of some disability, usually age or incompetence, is considered incapable of administering his or her own affairs.

heirs and next of kin - individuals entitled to the estate of a person who dies without leaving a will under the laws of descent and distribution.

holographic will - one which is written entirely in the maker's own handwriting, not attested by subscribing witnesses.

incident of ownership - pertaining to ownership of life insurance; the retention of an interest by the deceased person of more than five percent of the policy.

income beneficiary - a beneficiary whose interest is limited to income earned from assets in a trust.

incompetent - a person judicially declared to be incapable of managing his affairs. May include a person, who by reason of old age, disease, weakness of mind or other cause, is unable, unassisted, to properly manage his property.

inheritance - the receiving of property from a deceased person's estate, by right of succession rather than devise.

inheritance tax - a tax levied on the right to receive property from a deceased person. This tax should be distinguished from the estate tax which is a tax levied on the right to transmit property, not on the right to receive it.

insurance trust - a living trust of which the property is entirely or partially life insurance contracts of proceeds.

intangible property - that which does not have physical substance.

in terrorem clause - a provision incorporated in some wills whereby a person who contests the will shall forfeit his legacy.

inter vivos - term used in law to describe agreements implemented while living. An inter vivos trust indicates a transaction made by a living person.

intestate - death without leaving a valid will.

invasion of trust - a provision which permits a beneficiary to withdraw a portion of the corpus (principal) of a trust for the support and maintenance of the beneficiary.

irrevocable gifts - a transfer of property that cannot be changed.

irrevocable trust - a trust that is not subject to amendment, change, modification, or revocation.

issue - all persons who have descended from a common ancestor. This may include adopted children, according to intent.

J, L & M:

joint and survivor - in life income gifts, the ownership of income rights by two (or more) people together for the period of their joint lives and then the income owned by the survivor during his life.

joint tenancy - where two or more persons own property, either real or personal, according to a separate agreement entered into between or among the parties, whereby the property does not pass to heirs, cannot be disposed of by will, but can go only to a survivor (or survivors) of the tenancy.

joint will - a single document which is executed by husband and wife making it the will of both. It is probated after the death of each of them.

legacy (bequest) - a gift of personal property by will.

demonstrative - a gift of a definite amount to be paid from a specific fund or source
general - a definite amount paid from general assets
pecuniary - a gift of money
specific - a particular item

letter of administration - a certificate of authority granted by a court having probated jurisdiction to show that the authority of the office of duty of an administrator has been given to the person named in the letter.

life estate - an estate or interest that someone has in property which last only during his lifetime, or the lifetime of some other person or persons. The life tenant has no ownership or rights to transfer the interests after the life estate runs out.

life income agreement - agreements which provide income at regular intervals throughout the life of the income beneficiary (see annuity trust, pooled income fund, or unitrust).

living trust - a trust created and in effect during the lifetime of the maker.

marital deduction - a provision under the Federal Estate Tax law whereby a person's estate of an unlimited amount may be left to his or her spouse, exempt from estate tax.

minor - an infant or person who is under that age which is accorded full legal rights. The age of majority varies from 18 to 21 and may vary within a state, depending on the purpose.

mutual wills (reciprocal) - two documents which have exactly the same provisions but are executed separately by husband and wife.

P,Q & R:

per capita distribution - distribution of property among descendents as individuals and not by right of representation.

per stirpes distribution - where the children of a deceased person receive only that share of property which the parent would have received if living.

personal property - all movable property not fixed to land. Includes money, stocks and bonds, and other types of tangible assets of value.

personal representative - a person or agency named in a will to administer the estate of a deceased person (also known as an executor/executrix).

pooled income fund - a transfer of property to a charitable institution in exchange for a contract stipulating that the donor will receive the average earnings of the institution's investment fund as applied to the amount of his gift each year for the rest of his life and that the institution will be the owner of the property with no obligations after the donor's death.

pour-over will - a will which transfers property to a trust.

power of appointment - the right to designate either by will or by Deed, the persons who are to receive certain property which came from the estate of somebody else who has died. Usually this power is vested in a person who receives the income from the property for his or her lifetime.

prenuptial agreement - a private agreement between two persons contemplating marriage. It generally settles, in advance, financial matters in the event of death or divorce (see ante-nuptial agreement).

principal - a capital fund from which income is derived (see corpus).

probate - the action of proving before a competent judicial authority that a document offered for official recognition and registration as the Last will and Testament of a deceased person is genuine.

property - anything which may be the subject of ownership, real and personal, tangible and intangible. It is that which belongs exclusively to a person, with full rights to enjoy and dispose of it.

real property - any land or any estate in land. It is generally construed to include whatever is erected or growing upon the land. It may be defined to include anything which is immovable.
personal property - all property other than real property. It generally refers to property which is movable or personal.

prudent-man rule - an obligation to make all investments as a prudent man would make if it were his own property, keeping primarily in mind the preservation of the estate and the amount and regularity of the income from the investments.

qualified terminable interest property - property which passes to the surviving spouse who is entitled to all the income during life but whose interest terminates at death. This property qualifies for the marital deduction and is taxable in the estate of the surviving spouse. (see marital deduction).

quitclaim - a deed which transfers to another person whatever interest the maker of the deed may have in a particular parcel of land.

real property - land and buildings permanently affixed to land.

remainder interest - an interest or estate in land of a person other than the grantor in which the right to possession and enjoyment of the land is postponed until the termination of some other interest or estate in that land.

remainderman - the beneficiary who is to receive the property upon the termination of the trust.

residuum (residuary estate) - that portion which is left over after the payment of debts, expenses, taxes and the distribution of all other legacies and devises.

revocable trust - one that may be rescinded by the maker during his or her lifetime.

right of elections - the right of a surviving spouse (under applicable state laws) to elect to take a share of the deceased person's estate instead of what was left by will.

rule against perpetuities - the regulation which prevents testators and donor from restricting their gifts in order that the property may be retained in the same ownership for a longer period of time than is regarded as reasonable.

S & T:

settlor of a trust - a person who creates a trust and furnishes the property subject to the trust conditions.

statutes - law enacted by the legislative branch of government.

successor trustee - a trustee who follows the original or prior trustee. Generally, the appointment of a successor trustee is provided for in the trust instruments. If it isn't, and if the trust is still in existence when the original or prior trustee failed to qualify or ceased to act, then a person will be appointed by the court to act.

tangible property - that which has physical substance which can be felt or seen.

taxable estate - the gross estate minus allowable exemptions and deductions. The amount on which estate taxes are to be levied.

tax credit - amounts which the taxpayer may deduct from the tax itself.

tenancy - the holding of or possession of real property.

at sufferance - an estate in land whereby the tenant retains possession beyond the duration of his rightful tenancy.
by the entirety - limited to property procured by husband and wife jointly after marriage. Upon the death of either husband or wife, the survivor receives the property.
in common - an undivided estate, owned by two more persons, the property passing to the heirs rather than to the co-owners.
joint tenancy - property passes to the co-owners, upon the death of a joint tenant, not to the heirs as in tenancies in common.

testamentary - created or ordered by a decedent's will.

testate - having created or executed a will, effective at one's death.

testator - the one who makes a written will.

trust - a legal relationship when one party (the trustee) holds legal title to property for the benefit of another (the beneficiary). To create a valid trust, the grantor must transfer property (the corpus or principal) to the trustee.

charitable - created for the benefit of a legal charitable organization.
corporate - created by a corporation for the purpose of securing its own bonds, notes, etc.
discretionary - a provision which allows the trustee to pay income and principal to a beneficiary, as the trust shall determine. Under this plan, the beneficiary cannot assign his interest in the trust, nor can his creditors collect from it until the beneficiary has actually received the funds.
inter vivos (living) - created and in effect during the lifetime of the creator.
irrevocable - not subject to amendment, change, modification or revocation.
pour-over - existing separately and independently of the will, and designated to serve as a custodian of the property which it receives from the will.
revocable - may be changed or terminated by the maker.
spendthrift - a provision which protects the beneficiaries against claims of creditors and prevents the beneficiaries from selling, assigning or transferring their interest in the trust.
sprinkling - a provision whereby a group of persons may be designated as beneficiaries.
testamentary - a trust created by giving a definite amount of money or other property through a will.

trustee - a person holding a right or power and propriety on behalf of another person (the beneficiary).

two-trust will - the drafting of a trust to give the spouse income for life, then a "family trust" for the benefit of the children, thus saving estate tax upon the spouse's death.

U, V & W:

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