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“A”
AND “B” TRUST OR “A/B” TRUST: See “Credit Shelter Trust”. ACCOUNTING PERIOD: Most
individuals or trusts must use a standard calendar year.
However, some corporations and estates may elect a fiscal year not ending
in December. ADMINISTRATOR/ADMINISTRATRIX:
The person appointed by a court to administer and settle the estate of a
person dying without a will (“intestate”), or the estate of a person whose
will appoints an executor who cannot serve; also called a personal
representative. The administrator
is the fiduciary for the estate. ADVANCEMENT: An amount of
funds or other type of assets is given to a potential heir during the lifetime
of that person, intended as an advance against future heir’s share of the
estate. ANNUAL EXCLUSION: Up to $10,000
per year that a person is allowed to give to another person without being
subject to a gift tax. Tuition and
health care expenses may also be excluded if paid directly to the provider.
Married couples can give up to $20,000 per year.
Amount allowed indexed to inflation, but is still $10,000 as of 2001. ATTORNEY in FACT: The
agent you appoint to represent you and to take certain actions on your behalf.
This should be in writing, and ideally signed before two witnesses and a
notary. If the agent is to handle
real estate, the power of attorney should be recorded.
See “Durable Power of Attorney”. BASIS
OF PROPERTY:
The value used to determine gain or loss on sale or disposition of an
asset such as securities or real estate, for income tax purposes.
The basis is usually the cost of the property.
It may be increased by capital improvement expenditures, or for real
estate, decreased by depreciation. See
also “Stepped-Up Basis”. BENEFICIARY:
Any person or organization receiving a gift through will, trust, or by
beneficiary designation in a life insurance, annuity, retirement plan or other
contract. BEQUEST:
Technically, this term refers to leaving personal property by will.
However, in ordinary usage, this also refers to leaving any type of property by
will. BOND:
A guaranty by insurance or similar company agreeing to make up for any
loss, negligently or criminally caused by an executor, administrator, trustee or
other fiduciary. Usually a
Probate Court will require this of an individual unless the will waives this
requirement. BYPASS TRUST: See “Credit
Shelter Trust”. CASE LAW: Laws
established by court decisions, rather than specific laws or statutes. CHARITABLE
REMAINDER UNITRUST:
The donation of assets to a Trust in which you receive a lifetime income.
Sometimes a spouse or a child is also named as a lifetime recipient.
The charity or charities receive the remaining assets when the lifetime
recipients pass away. CODICIL:
An amendment to a will. The
requirements for execution of a codicil are the same as those for a will, two
witnesses are required. If you wish
to make extensive changes, it is better to execute a new will rather than amend
an old will with codicils. COMMUNITY
PROPERTY: Property
acquired by a husband and wife during the course of their marriage from the
earnings or efforts of either spouse while living in a community property
jurisdiction, except property received by inheritance or gift.
Some Community Property states are: Arizona, California, Idaho,
Louisiana, Nevada, New Mexico, Texas and Washington, and Wisconsin. CONSERVATOR:
A person appointed by a court to administer the estate of a minor or
adult individual. CONSERVATORSHIP:
A proceeding in the probate court that appoints a person to assume
control over an individual's assets because that individual is unable to deal
with his or her own property. It is
usually based upon legal incompetence. A
court appointed conservator must usually post a bond.
The use of a revocable living trust can avoid a conservatorship by
providing for the management of assets in the event of legal incompetence or
incapacity. CONTINGENT
BENEFICIARY:
Usually meant to refer to a beneficiary who has the right to receive
assets only upon the occurrence of a certain event (usually the death of the
primary beneficiary). For example,
children may be the beneficiaries in a trust contingent upon the death of the
second parent to die. CORPORATE
TRUSTEE:
A bank or trust company that acts as trustee. CORPUS
(OR PRINCIPAL) OF A TRUST:
The assets of a trust, as distinguished from the trust income which is
the return earned by the assets held in the trust. CO-TENANCY:
When two or more parties own the same property without survivorship
rights. Thus if A and B own the
property, and A dies, A’s one-half share goes to A’s heirs through probate,
not to B. In Ohio, any recent deed
with more than one owner is a tenancy in common by default, unless there is
language indicating a right of survivorship. CO-TRUSTEE:
Two or more individuals serving as trustee. The trust can require either one or two signatures for a
trustee to act. CREDIT SHELTER TRUST:
A Trust
established to retain your federal-estate tax exemption for your heirs, $675,000
in 2001 and increasing to $1,000,000 in 2002.
A Credit Shelter Trust is also referred to as a Bypass Trust, Exemption
Trust, Non-Marital Trust, or is part of an “A/B” Trust. DECEDENT:
A person who has died. DEVISE,
LEGACY, BEQUEST: Legal terms used to mean passing property under a will.
Devise is associated with a gift of real estate, legacy with a gift of cash, and
bequest with a gift of other personal property. In modern usage these terms are used interchangeably. DIRECTIVE:
An instruction given by the Grantor as to what is to be done, such as
“I direct my trustee to pay my surviving spouse $35,000 a year indexed for
inflation.” For “Health Care
Directive”, see “Living Will”. DISCLAIMER:
If an heir does not wish to accept all or part of an inheritance, they
may disclaim it. If the disclaimer
is made in writing within nine months (or more for minors), it can be made
without gift tax consequences. DISCRETIONARY
TRUSTS: Generally, a trust which does not mandate any distribution,
but leaves such decisions up to the trustee.
This is the best trust for protection from lawsuits, creditors, and for
ensuring funds will not disqualify a beneficiary from government benefits.
The trustee is given “discretion” as to when, how much,
and for whom the assets are distributed. In
the government benefits area (such as Medicaid), Trusts may pose a risk for the
beneficiaries’ eligibility if the trust contains words like “the trustee
shall pay for the health, support, education, maintenance and welfare” of the
individual. A court could order the
trustee of such a trust to pay support based on this enforceable standard.
However, much less risk is involved if specific language is included in
the trust identifying and defining its use as only supplemental income that the
trustee, in their discretion, determines is necessary for the satisfaction of
the beneficiary’s special needs that are not being provided by a public
agency, office or department of any state or of the United States. DOMICILE:
The place a person permanently resides.
This may be a tricky legal issue with serious tax consequences for those
sharing time between two homes. DURABLE
POWER OF ATTORNEY:
A legal document in which you give a person(s) the authority to handle
your financial matters. If you become disabled, a Durable Power of Attorney will
continue to be valid. DURABLE
POWER OF ATTORNEY FOR HEALTH CARE:
A special type of power of attorney that gives your agent the power to
make health care decisions for you if you are unable to do so yourself.
ESTATE
TAX:
A tax that the states and federal government place on your assets at the
time of your death. Currently the
federal estate tax applies to estates with a value of over $675,000 and this
increases to $1 million in 2002. Tax
Rates are 37%-55% above that amount. Ohio
has a separate estate tax system, charging 2-7% of assets over $200,000.
Most other states are tied to the federal exemption amounts. EXECUTOR/EXECUTRIX:
An individual or institution named in a Will to administer the estate of
the person making the will. The
executor legally steps into the shoes of the decedent and represents the estate
in the probate court. The executor
accounts for all your assets, paying your expenses, just debts and taxes and to
make the distribution of your assets to your beneficiaries and/or trustee
according to the terms of your Will and any other documents.
In Ohio the executor is also called the personal representative.
The executor is the fiduciary of the estate.
EXEMPTION
TRUST:
See “Credit Shelter Trust”. FAMILY
BUSINESS:
May qualify for an additional estate tax exemption, but there are many
requirements to qualify. FEDERAL
ESTATE TAX EXEMPTION:
The amount each individual is allowed to give away exempt from federal
estate and gift taxes. This amount is $675,000 in 2001 and is scheduled to
increase to one million dollars in 2002. A husband and wife can combine their
individual federal estate tax exemption to shelter $1,350,000 in 2001 and two
million dollars in 2002. Properly prepared legal documents are required to
obtain this combined exemption. FEE
SIMPLE:
The entire or whole ownership of property unburdened by any future
interest or any possibility of losing total ownership.
Other forms of property ownership are life estate, joint ownership, or
tenancy in common, for example. FIDUCIARY:
A person having the legal duty to act primarily for the benefit of
another. The fiduciary must act in
the strictest confidence and trust. A
trustee or agent under a power of attorney would be a fiduciary acting in behalf
a grantor or principal. An executor and administrator have a fiduciary
relationship to the estate they administer. GENERATION-SKIPPING
TRANSFER TAX:
A special tax assessed on transfers to anyone two generations or more
below the Grantor such as grandchildren and great grandchildren.
This may apply to younger non-relatives as well.
There is a $1,060,000 exemption for 2001, indexed for inflation for
subsequent years. GIFT: Transfer of an asset
without requiring payment of any type. GIFT
TAX ANNUAL EXEMPTION:
Tax-free gifts may be made to any number of persons in a calendar year,
up to $10,000 per donee. Each
tax-free gift made by a husband and wife may not exceed $20,000 per donee, per
year. Payments for donees for
health care expenses or tuition made directly to the provider do not count as
taxable gifts. If a donor gives
more than this to a donee, a gift tax return should be filed.
However, actual tax would only be due after the donor has used their
entire estate and gift tax exemption (currently $675,000).
GRANTOR: The person
who establishes a trust, also called a trustor or settlor. GROSS
ESTATE: The
value of an estate before debts are paid. Probate fees are generally calculated
on the gross value of the estate. For
instance, if your estate consists of your residence with a market value of
$150,000 and a mortgage of $100,000, probate fees would be based on the
$150,000. The requirement to file
an Ohio or Federal estate tax return is based on the value of the gross estate,
even if there would be no tax due. GUARDIAN:
Someone who is legally responsible for the care and well being of another
person. A guardian is generally
nominated in the case of a minor child in need of care or financial support, or
when a person becomes disabled or incompetent to care for himself or herself.
Guardians generally act under the supervision of a probate court and are
responsible for all their actions to the court.
A guardian can be named in a will or power of attorney. HEALTH
CARE POWER OF ATTORNEY:
A legal document in which you give another person the power to make
medical decisions if you are unable to do so.
See “Durable Power of Attorney for Healthcare”. HEIR:
A person who is to receive the assets after your death and/or who would
inherit property under state intestacy law, where a person dies without a will. HOLOGRAPHIC
WILL:
This is a will entirely written, dated and signed by a person in his or
her own handwriting. It is
permitted only in a few states, often under very limited circumstances.
Holographic wills should be avoided, if possible.
The recent disaster of the Estate of Charles Kuralt is an example. INCAPACITATED
OR INCOMPETENT:
Someone who is unable to manage his or her own affairs either due to
physical or mental impairment. An
incompetent person cannot enter into a contract nor can he set up a trust, or
appoint an agent to act in his behalf. In
the absence of any suitable planning for disability, a court will have to be
petitioned for the appointment of a guardian for an incompetent.
Living Trusts and Durable Powers of Attorney are good tools for planning
for legal incompetence to avoid probate court guardianships or conservatorships. INCOME:
This term has a different and specific meaning in trust law.
Includes interest paid on Bonds, CDs and other securities generally
called “Fixed Income Investments” and dividends paid on stock.
Capital gains would be considered “income” for federal income tax
purposes, but not under trust law and accounting. INCOME
BENEFICIARY:
A beneficiary who has a right to receive income of the trust, either
presently or at some future time. This
person may or may not be allowed to receive principal from the trust. INCOMPETENT:
An individual who has been declared by a court to be unable to handle and
manage their own affairs. INSURANCE
TRUST:
See Irrevocable Life Insurance Trust. INTESTATE:
Having died without a valid will. A person who dies with a will but fails to
dispose of all of his property is referred to as having left property by
intestacy. INTER
VIVOS TRUST:
A trust established by an individual during his or her lifetime, also
known as living trust. Such a trust
can be either revocable or irrevocable. As
opposed to testamentary trust, which is established at death under a will.
"Inter Vivos" means during one's lifetime. INVASION
OF PRINCIPAL:
This is an act of taking funds from the principal of the Trust for the
benefit of one or more of the beneficiaries of the Trust. Special instructions are in the Trust that indicate the
conditions upon which the trustee will take funds from the principal of your
trust for the benefit of your spouse or others. IRREVOCABLE:
A Trust a Grantor establishes that cannot be changed by the grantor once
it has been executed. An
irrevocable trust may, however, still be changed by an independent party or
court depending on the terms of the trust. ISSUE:
All descendants of a particular person. The term includes children, grandchildren and other
descendants. May include adopted
children. JOINT
TENANCY WITH RIGHT OF SURVIVORSHIP:
Two or more persons holding title to property jointly with equal rights during
their lifetime with the survivor to receive the entire property.
In other words, death of a joint owner automatically transfers ownership
of the property to the surviving joint tenants. Joint tenancy will supersede any
provisions contained in a will. Joint tenancy is different from tenancy in
common. Joint tenancy has drawbacks
and risks, and should only be used with legal advice.
The consent of all joint tenants is necessary to sell, pledge, or
encumber property owned in this fashion. The
tax consequences of this type of ownership is not properly understood by many
people. LIFE
ESTATE:
The right to use and enjoy property during the life of a person, with the
property thereafter to go to someone else.
Someone owning a life estate cannot simply sell the entire property with
consent of the remainder beneficiary. LIVING TRUSTS: A type of
Trust established to avoid probate, guardianship, conservatorship, and help
manage assets. LIVING
WILL: This is a written document containing instructions to a
hospital or physician to allow a person to die a natural death without using
artificial life-sustaining means when it is determined that the individual is
terminally ill and there is no likelihood of recovery.
Not to be confused with a living trust. MARITAL
DEDUCTION:
Assets given to a spouse at death are exempt from estate taxes. Thus, if
Bill Gates dies leaving a $10 Billion estate, but leaves $10 Billion to his
wife, the estate receives a deduction for that amount and no tax would be due. MARITAL
TRUST:
To control other assets you pass tax-free to your surviving spouse.
See also “Q-TIP”. MINOR: A
child under the legal age to be considered an adult. Varies by state, usually 18
or 21. A minor cannot enter into a contract. Ohio's "legal age" or "age of majority"
is 18 years. MULTIPLE
PROBATE:
When a person who owned real property in more than one state dies, there
must ordinarily be separate probate court proceedings in each state where the
real estate is located. If the title to the real property is held in a revocable
Living Trust, multiple probate estates in multiple states are avoided. NET
ESTATE VALUE:
The value of an estate after debts and other deductions are taken into
account. Federal and Ohio estate
taxes are based on the net value of the estate. PAYABLE-ON-DEATH
(POD):
An account designation for bank accounts that will transfer the assets
held to the person named as beneficiary.
Brokerage accounts or securities can be held with a “TOD” designation
("Transfer On Death"), which is similar to a POD account.
Assets so designated escape probate but not estate taxes. PER
STIRPES AND PER CAPITA:
These are two methods of distributing property and can be especially
important when children do not survive you.
Per stirpes is a Latin term that technically means “by the roots or by
representation.” When the per
stirpes method of distributing property is used, a group of beneficiaries
inherits the share to which their ancestor would have been entitled had such
ancestor lived. Per capita is
another Latin term that means "by the head," and is a different kind
of distribution. An
example of “Per Stirpes”: Assume
you had three children, named Albert, Bob and Cindy. Albert and Bob are dead but Albert left four children living
and Bob has one child living. Cindy
has no children. Under the per
stirpes method of distribution, Albert’s four children share equally the
one-third share that Albert would have received if he had survived, Cindy
receives one-third; and Bob’s child inherits one-third. An
example of “Per Capita”: Assume
you had left all your property to your "issue surviving per capita, "
the result in the above example would have been different.
At the time of your death there were six persons living in the group,
defined as your issue. These six persons are Albert’s four children, Bob’s one
child and Cindy. (Albert and Bob
are deceased). Your property would
be divided into six equal shares, with one share to each of Albert’s children,
one to Bob’s child, and one to Cindy. PERPETUITIES
(RULE AGAINST PERPETUITIES):
An old and complex legal rule designed to keep property from being frozen
in trust beyond a certain period of time. The
rule against perpetuities causes the trust to terminate automatically at the
required time in order to protect the legality of the trust.
Generally a Trust can last during the entire lifetime of someone who is
alive when the Trust was established and for an additional 21 years. This restriction does not apply to Charitable Trusts.
Ohio, Alaska, Delaware and many other states have abolished this rule or
enable a trust to opt-out of the rule. PERSONAL
PROPERTY:
This is movable property as contrasted with real property, such as land
or a house. It would include
property such as cash, savings accounts, collections, furniture, automobiles,
equipment, and stock. PLANNED
INCOME TRUST:
A trust that considers the income needs of the income beneficiary from
the trust (such as the spouse in a Credit Shelter Trust).
Income needs are determined in today's dollars and entered into the trust
with an annual increase from that date forward for inflation.
And, since official government figures do not adequately provide for
senior citizen's needs, an annual minimum increase is sometimes recommended. POOLED
TRUST: Pooled Trusts are very similar to “Special Needs
Trusts”, however they must be established and managed by nonprofit
corporations. Trust funds for
several beneficiaries are pooled for purposes of investment.
Also, the person creating a Pooled Trust can leave trust assets in the
trust for use by other beneficiaries or to cover overhead expenses of the Pooled
Trust instead of paying back Medicaid. The
Dayton Community Foundation, for instance, has such a pooled trust. POUR-OVER
WILL:
A pour-over will is used to transfer property to a living trust that was
not transferred to the trust during the lifetime of the grantor.
People often fund their living trust with the major assets that they own.
However, any residual assets transferred to the trust after the grantor's
death will not escape probate. The
assets poured over through the will have to be probated.
The advantage of the pour-over will is that it provides for a uniform
disposition of your property under the provisions of one single instrument, the
living trust. Even people who
transfer all their assets into trust should have a will as a back-up. POWER
OF ATTORNEY:
This is a legal document giving another person, known as agent or
attorney in fact, the full legal authority to act in your behalf in your
absence. A power of attorney loses
its validity in the event the principal becomes disabled or dies.
Most states however, permit a "durable" power of attorney which
remains valid through the disability or incompetence of the principal.
A durable power of attorney can be used in conjunction with a living
trust by allowing the agent to transfer any property that wasn't transferred
prior to the disability or the settlor to the trust. See “Durable Power of Attorney”. PRINCIPAL:
Assets held by the trustee for distribution to the remainder
beneficiaries when the Trust is terminated.
See "Corpus." PROBATE:
This is a judicial proceeding necessary to transfer a decedent's assets
to his legal heirs. It is a process
of administering a deceased person's estate.
A will generally has to be probated.
In the absence of a will the probate court appoints an Administrator to
handle a decedent's estate. All
questions concerning the disposition and the rights of heirs and creditors are
determined through probate. Probate
can be lengthy, costly, and is open to the public. Assets are generally frozen
or restricted during probate. PROBATE
GUARDIANSHIP: A
judicial proceeding during which a guardian may be appointed by a probate court
to manage the financial affairs of a disabled or incompetent person or of a
minor. The guardian appointed by
the court is required to make accounting of these actions to the court.
See “Guardian”. QUALIFIED
DOMESTIC TRUST (QDOT):
A trust used for non-U.S. citizens to enable an estate to get the marital
deduction for assets passing to a non-U.S. citizen spouse.
It must name a U.S. trustee. QUALIFIED
TERMINABLE INTEREST PROPERTY TRUST (Q-TIP Trust): This is a
special type of trust used most frequently by a married couple where one
spouse’s assets exceed $675,000. The
Q-TIP Trust allows the survivor to enjoy the income of the trust, but preserves
assets for the first deceased spouse's family or other heirs. Although it restricts the surviving spouse's use of the trust
estate after the death of the first spouse, it is an effective method of
deferring estate taxation until the death of a second spouse. QUIT
CLAIM DEED:
A legal instrument used to release a person's right, title and interest
in a piece of real property. It
does not give warranties of title to the grantee (person to whom the property is
deeded). REAL
PROPERTY: Land and property permanently affixed to land.
Requires a deed be recorded for transfer. REMAINDERMEN:
Those who receive trust assets or "remainder" after the
accomplishment of another purpose. The
remaindermen have a future interest in the trust assets, not necessarily
associated with a present interest. REVOCABLE
TRUST:
A trust that can be amended or terminated by its creator.
As opposed to an irrevocable trust, a revocable trust generally has no
immediate tax consequences. SETTLOR: The person
setting up a trust. Same as grantor
or trustor. SPECIAL
NEEDS TRUST: The Special Needs Trust is the “regular” Medicaid
Payback Trust that may appear much like a discretionary trust, except it must
comply with federal law that created it and the regulations of the Ohio
Department of Human Services. This
type of trust can be created for anyone with a disability by a parent,
grandparent, legal guardian or a court. The
primary disadvantage of a Special Needs Trust is that it must “pay back”
Medicaid expenditures made on behalf of the beneficiary – even if repayment
claims the entire amount left in the trust.
Note that many people may use “supplemental needs trust” and
“special needs trust” interchangeably with a purely private discretionary
trust with similar provisions. SPENDTHRIFT
PROVISION:
A directive of a trust which restrains both the voluntary and involuntary
transfer of a beneficiary’s interest. Protects trust assets from lawsuits, creditors, divorces.
May not be valid against the IRS or child support payments, or to
self-settled trusts where the grantor is a current beneficiary. SPRINKLE
POWER: A Trust that gives sole authority in its documentation to
the trustee the authority to determine how the income from the Trust and the
principal may be given to different Trust beneficiaries or retained in the
Trust. This gives much flexibility
but may disqualify a trust form a state or federal Q-TIP election. STEPPED-UP
BASIS:
When property is inherited or passed through a trust or will, the person
who inherits that property usually receives a new basis in the property.
The new basis is the value of the property at the date of the owner's
death. Since property generally
appreciates, this is known as stepped-up basis.
It usually saves taxation on the gain or profit from a later sale of the
asset. However, if you pass away
with property you were holding at a loss, your heirs cannot claim the loss and
get the disadvantage of a “stepped-down” basis.
Note that this rule may change in 2010 due to the 2001 Tax Act. SUCCESSOR
TRUSTEE:
The person designated in a Trust to replace the original trustee or
another successor trustee when the prior trustee is unable to serve. SUPPLEMENTAL
SERVICES TRUST: Trust designed to benefit people who are being
served or who are eligible to be served by either state or local Mental Health
or Mental Retardation and Developmental Disability (MR/DD) Systems.
To meet requirements of law, the trust must be a Testamentary Trust
created by will and cannot be created with more than $214,000 as of 2001.
The limit on the trust amount increases by $2000 each year.
Expenditures from the trust are limited to those things defined as
“supplemental services,” that is, non-necessities such as recreational
items, vacations or items for which Medicaid or other third-party payers have
denied payment. The primary
disadvantage of the Supplemental Services Trust is that at least 50% of whatever
remains in the trust at the time of the beneficiary’s death goes to the State
of Ohio. TENANCY
IN COMMON:
A form of ownership of property by two or more persons.
Different from joint ownership or joint tenancy.
Upon the death of a tenant in common, ownership transfers by that
person’s will or by intestacy, not to the surviving owners.
Each share can be transferred or encumbered independent of the others. TESTAMENTARY
TRUST:
A trust created in a will that does not come into existence until after
the testator's death. Sometimes a
living trust may use this term to refer to different terms applicable to the
trust after the death of the grantor. TESTATOR/TESTATRIX: The person
who makes a will. TOTAL
RETURN TRUST:
An increasingly used technique that gives the current beneficiary and
remainder beneficiary equal concern and goals over trust investments.
As opposed to income-only trusts, where the income recipient is always at
odds with the remainderman over how to invest trust assets.
The annual income from this type of trust fluctuates with the ups and
downs of investment return. TOTAL RETURN UNITRUST: Another
name for a "Total Return Trust" described above. TRUST:
A legal entity in which a person or institution holds or manages property
for the benefit of someone else. The
Trustee manages these assets according to the terms of the Trust. TRUST
ASSETS:
Can be in any form, cash, securities, property, etc.
This is what is transferred to your trust to be managed by your trustee
for the benefits and objectives stated in your Trust document. TRUST
INVESTMENT ADVISOR: A relatively new concept in trust law, which is used
increasingly after the Uniform Prudent Investor Act. A trust investment advisor is appointed in the trust or hired
by the trustee to handle any trust investments.
Thus, you can have a trustee manage the tax and administration and a
financial advisor handle the investments. TRUST
PROTECTOR: An optional position, not included in most trusts.
The trust protector can have authority such as firing and replacing the
trustee, amending the trust, requiring a bond to be posted or annual accounting,
or adding beneficiaries (although the latter is not usually recommended).
TRUSTEE:
The person, organization or institution that will manage your Trust. Be sure to
name successor trustees in case the person named initially as your trustee is
not able to serve. Otherwise a court will name your trustee and this could be
someone you may not want as your trustee. TRUSTOR:
See “Grantor.” UNIFIED
CREDIT:
A federal exemption from federal estate taxes that every person is
entitled to obtain. Currently the
value of the Unified Credit is $675,000 in 2001 and increases to $1 million in
2002. A Credit Shelter Trust is
designed to make maximum use of this unified credit to shelter up to $2 million
in 2002 of assets of a husband and wife from federal estate taxes and by doing
so, save in estate taxes. The tax
credit can be applied toward gifts and that part of the remaining unified credit
not used during a person's lifetime can be used for estate taxes. UNIFORM
TRANSFER TO MINORS ACT (UTMA):
Assets placed in this type of account pass to person when they reach the
legal age, generally 18. UNLIMITED
MARITAL DEDUCTION:
An unlimited amount can be left to a spouse of a deceased U.S. citizen,
free of federal estate taxes, so long as it is left outright to the spouse, in a
Q-TIP Trust, or in another trust qualifying for the deduction. WARD:
A person for whom a guardian is appointed. WILL
CONTEST:
Litigation to overturn a decedent's will for lack of testamentary
capacity, undue influence or lack or proper execution. WILL:
This document appoints an executor of your estate.
It states how your assets are to be distributed and if there are
beneficiaries who are minors, it names trustee or guardians of the funds you
gave to minors. It may establish a
trust under the will, called a testamentary trust. |
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