Glossary of Terms

  • Annual Gift Tax Exclusion
    A federal gift tax exclusion of $14,000 for a gift of a present interest to each recipient annually without limit as to the number of recipients. For married couples who consent to split gifts, the exclusion is $28,000 each year.
  • Basis
    Generally the cost of property. Basis can be increased by such items as capital improvements or decreased by items such as depreciation. Basis is used to compute taxable gain on the sale or exchange of property.
  • Beneficiary
    One who receives property pursuant to a will, a trust, an insurance policy, an individual retirement account, or other third-party beneficiary contract.
  • Bypass Trust
    See Family Trust
  • Charitable Lead Trust
    A trust in which a charity has the right to receive distributions of income or an annuity interest from the time the trust is created until it terminates.
  • Community Property
    Property ownership in which property acquired during marriage is deemed to be owned equally by both spouses. Community property states are Wisconsin, New Mexico, Louisiana, Nevada, Arizona, California, Idaho, Washington, and Texas.
  • Credit Shelter Trust
    See Family Trust
  • Crummey Power
    The right of a beneficiary to withdraw property transferred to a trust in order to convert a future-interest gift to a present-interest gift such that the gift will qualify for the annual gift tax exclusion.
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  • Durable Financial Power of Attorney
    This allows the person appointed by you to manage your affairs if you are unable to personally do so should you become mentally incompetent due to illness or injury.
  • Durable Power of Attorney for Health Care
    A power of attorney that enables the power holder to make health care decisions for the principal in the event of the principal’s inability to make health care decisions for himself or herself, usually because of incapacity.
  • Estate Tax
    A tax levied by the state or the federal government on the privilege of transferring wealth at death. The estate has the obligation to pay estate tax.
  • Family Trust
    A trust created at the trustmaker’s death to take advantage of the trustmaker’s Applicable Exemption Amount. It will often provide for income and discretionary distributions of principal to the surviving spouse but be drafted in such a way that when the surviving spouse dies, none of the trust assets are included in the surviving spouse’s estate. Sometimes called a Credit Shelter, Bypass, or B trust.
  • Grantor
    A person who creates a trust; also known as a trustmaker, settlor, trustor, or donor.
  • GSTT (generation-skipping transfer tax)
    A flat federal transfer tax assessed on property transferred from one generation to another generation which is more that one generation removed from the donor of the transferred property (e.g. the transfer of property from a grandparent’s trust to a grandchild with a skip over the generation in between).
  • Health Care Power of Attorney
    A power of attorney that enables the power holder to make health care decisions for the principal in the event of the principal’s inability to make health care decisions for himself or herself, usually because of incapacity.
  • ILIT (irrevocable life insurance trust)
    A trust which holds life insurance as a principal asset, the death proceeds of which are neither taxed in the estate of the insured nor taxed to the beneficiaries of the trust as income; sometimes also referred to as a Wealth Replacement Trust.
  • Inheritance Tax
    A tax levied by certain state governments on the privilege of receiving or inheriting transferred wealth at death. The recipient has the obligation to pay the inheritance tax.
  • Living Trust
    A trust created during the trustmaker’s lifetime. A living trust can be either revocable or irrevocable.
  • Living Will
    Not actually a will, but a set of instructions or an expression of wishes and desires regarding the use or non-use of medical treatments or procedures that would artificially prolong life.
  • Marital Deduction
    An unlimited gift tax deduction or an estate tax deduction which is allowed with respect to transfers made from one spouse to another either during life or after death.
  • Power of Appointment
    A power granted to a person allowing him or her to designate who is to receive the property controlled by the power.
  • Probate
    A court proceeding to determine competency or custodial rights (living probate), or to determine the validity of a will and the oversight of the procedure by which the assets of a decedent are administered under the provisions of a will.
  • Revocable Living Trust
    A trust that can be changed or revoked by the trust maker.
  • Trustee
    An individual or corporation responsible for administering, investing and distributing trust property according to the instructions of the trust.
  • Will
    A will is a legal document that lets you tell the world who should receive which of your assets after your death. It also allows you to name guardians for any dependent children. Without a will, the courts decide what happens to your assets and who is responsible for your kids.

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