A glossary of commonly used legal terms
A /B Trust: A type of Revocable Living Trust used by married couples. In this type of living trust, two trusts (trust A and trust B) are created at the time the first spouse dies. By dividing the couple’s estate into two trusts at the first death, each spouse can pass the maximum amount of property allowed to avoid federal estate taxes. One trust, usually trust A, is often referred to as the marital deduction trust and the other trust, usually trust B, is often referred to as the shelter trust or family trust.
Administration: The process of probate, when the personal representative collects assets of the decedent, pays claims, and distributes the remainder of the estate according to the will, or according to the Law of Descent and Distribution.
Administrator: The personal representative of a deceased person who died intestate (i.e.without a Will) and who had property that he/she owned solely thus necessitating the opening of a probate estate.
Adult: Any person over the age of 18 or 21 years. The age of an adult depends on specific state laws. In Michigan, and adult is over 18 years of age.
Affidavit: A sworn, written statement executed under oath in front of a witness or witnesses.
Ancillary probate: A probate proceeding conducted in a state other than the state where the decedent lived and the primary probate occurs.
Annual Exclusion: The amount of property the IRS allows a person to gift to another person during a calendar year before a gift tax is assessed and/ or a gift tax return must be filed. The amount is increased periodically. There is no limit to the number of people you can give gifts to which qualify for the annual exclusion. To qualify for the annual exclusion, the gift must be one that a recipient can enjoy immediately and have full control over.
Ante-nuptial Agreement: A contract between two potential marriage partners specifying how the property owned by each prior to marriage and owned individually or jointly during marriage will be divided should the couple divorce.
Ascertainable Standard: The IRS defined standard which governs the use of trust B property and prevents the property from being considered part of the trustee’s property for estate tax purposes. The standard is defined as “health, education, maintenance and support” of the surviving spouse and children.
Asset Protection: Protecting your property from legal problems and taxes during your life and after your death.
Assignment: Transfer of title of an asset from one owner to another, such as from a person to a trust estate.
Attorney-in-fact: A person named as an agent in a power of attorney document.
Basis: A tax term, which refers to the original or acquisition value of a property, used to determine the amount of tax that will be assessed. The basis is deducted from the sales price of the property when it is sold to determine the profit or loss.
Beneficiary: The person(s) or organization(s) who receive(s) the benefits of trust property held under the terms of a trust. In a will, a person designated to receive a legacy (money) or bequest (property).
Bequest: An old legal term meaning to give a gift or leave property under the terms of a will.
Bond: An insurance policy used to ensure a legal representative will do his job and not misuse or steal funds he is controlling. The bond guarantees that a certain amount of money will be paid if a party is injured due to acts of the legal representative. In probate, the principal on the bond is the personal representative, the surety is the insurance company, and the insured is the estate.
By Right of Representation: This is a way of distributing an estate such that if one of the children is dead, his children share equally in his share of the estate distribution. This term is sometimes summarized by the phrase, “if the parent is dead his children stand in his shoes.”
Charitable Remainder Trust: A trust used to make large donations of property or money to a charity so the person making the gift or donation can obtain a tax advantage. In a charitable remainder trust, the donor reserves the right to use the trust property during his life or some other specified time period, and when the agreed period is over the property goes to the charity.
Codicil: A written change or amendment to a will.
Community Property: Some state laws require that all assets acquired during a marriage belong equally to both spouses, except for gifts and inheritances given specifically to one spouse. The eight states with such laws are known as community property states. The eight states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas and Washington. Puerto Rico also uses the community property system, and Wisconsin has a modified community property system.
Conservator: A person appointed to be legally responsible for the management of property and money belonging to a minor or incompetent person. The conservator may act as the guardian or the guardian may be a separate person and the conservator will just work with the guardian.
Conservatorship: A probate court proceeding in which the judge considers whether a person has become so disabled that he/she needs someone to handle his/her money or business decisions. Generally the Court appoints a relative or an attorney as Conservator, with a bond.
Counseling-oriented: A collaborative interaction between clients and their estate planning lawyer that begins with teaching the basics of the process and the options available to clients, and then listening to clients describe the unique dynamic of their family. This exchange defines the clients’ goals and objectives, and the standard of success.
Contract: An agreement between two or more parties. It may be oral, but generally it is written.
Creditor: A person or institution to whom money is owed.
Custodial Parent: The parent given custody and responsibility by the divorce court for the children of the divorced couple.
Decedent: The person who has died.
Death taxes: Taxes levied on the property of a deceased person. Federal death taxes are usually referred to as estate taxes. State death taxes are often referred to as inheritance taxes.
Deed: A written document used to evidence ownership and/or transfer title to real estate.
Debtor: A person who owes money.
Default: The result, whether expected or not, of having done nothing to change a pre-set result. A variation on the old common-law maxim: “You are presumed to intend the natural and probable consequences of your acts.”
Devise: A legal term referring to real estate which passes through a will.
Disability: A condition of helplessness preventing the person from conducting normal business and personal functions, whether caused by mental or physical conditions.
Disclaimer: The refusal of a beneficiary to accept property willed to him. When a disclaimer is made, the property is generally transferred to the person next in line under the will. A disclaimer is also called a renunciation.
Dispositive Provision: A clause in a will or trust that gives away property.
Disposition: The parting with or giving away of property.
Disinherit: Cutting a person off from his or her inheritance in an estate where he or she would have been a natural heir.
Doctrine of Independent Significance: The legal power to make reference in one document to an independent document that stands alone. By making reference to the independent document, the law will allow the independent document to be incorporated into the document making reference to it.
Domicile: The state or county which is the primary residence of a person.
Donee: A person who receives a gift.
Donor: A person who makes a gift.
Durable Power of Attorney: A document established by an individual (the principal) granting another person (the agent) the right and authority to handle the financial and other affairs of the principal. The “durable” power of attorney authorizes these persons to act even if the individual is incapable of acting due to some disability. A power of attorney ceases to be effective upon the death of the individual granting it.
Durable Power of Attorney for Health Care: A document established by an individual (the principal) granting another person (the agent, also called Patient Advocate) the right and authority to handle matters related to the health care of the principal.
Due-on-sale Clause: A clause in a mortgage document which requires that the mortgage be paid in full if the encumbered property is transferred.
Escheat: A legal word that describes the situation where property transfers to the ownership of the state government because there are no legal inheritors to claim it.
Estate: An entity consisting of a person’s property and all the rights and responsibilities relating to it. A trustee, personal representative, or conservator administers an estate. Sometimes referred to as the res or corpus.
Estate Tax: Taxes imposed on the “privilege” of transferring property by reason of death. Estate tax is most commonly used in reference to the tax imposed by the Federal Government rather than the state government. Estate taxes are intended to raise revenue for the government and break up a family’s wealth, so that the nation’s wealth doesn’t concentrate in the hands of a few families.
Executor/ Executrix: The person (male/female) named in a will to manage a decedent’s estate. The more modern term is a “personal representative,” which removes any reference to the sex of the person.
Exemption Equivalent: Same as Estate Tax Exemption Amount. When property is given as a gift or passed to heirs as part of an estate, it is subject to federal estate and gift tax laws. Each person is given a tax credit (the “unified credit”) that can be used to offset the tax assessed against a specific amount of property. The amount of property that results in a tax exactly equal to the unified credit is known as the “exemption equivalent”. Technically, no property is exempt from federal estate and gift taxes, but the term exemption equivalent is commonly used. Stated another way, the unified credit is equal to the amount of tax due on a gift or estate transfer of property that has a value equal to the exemption equivalent amount.
Family Trust: A trust created for the purpose of managing a family’s assets and distributing them upon the death of one or more individuals in accordance with the wishes of the individual(s) who set up the trust. Another name for a living trust.
Fiduciary: A person or corporation who occupies a position of trust and accountability. The word characterizes a relationship such as Trustee-Beneficiary, Attorney-Client, Bank-Depositor, Principal-Agent, Guardian-Ward, Personal Representative-Estate, etc.
Fiduciary Duty: The duty of a fiduciary to act in a position of trust, good faith, candor and responsibility, on behalf of another. The duty is one of the best defined responsibilities under the law and is very strictly enforced by the courts.
Fraud: The use of deception for unlawful gain.
Funding: The process of transferring ownership or title of a trustmaker’s assets into a trust estate by signing a real estate deed, beneficiary designation, personal property assignment, new signature card for the bank account, etc.
General Power of Attorney: A legal document that, when properly executed, gives one person (the agent) full legal authority to act on behalf of another (the principal). The scope of the document can be as broad or narrow as you desire as defined in the document. A general power of attorney becomes invalid when the principal dies or becomes incompetent.
Gift: A transfer of property without receiving some benefit in return. The person making the transfer cannot be obligated in any way to make the transfer.
Gift Tax: Taxes levied by the Federal Government on gifts. Gift taxes and estate taxes have been “merged” into a single tax called the “unified tax.”
Grantor: The person who creates a trust by agreement, and transfers property to the trust estate (“in trust”) under the care of the trustee. Other terms for the “grantor” include “trust maker” and “settlor.”
Grantor Trust: A trust in which the person establishing the trust retains enough “ownership rights” or “incidents of ownership” that the person is treated by the IRS as the owner of the trust assets for tax purposes. The right to revoke the trust is sufficient to make the trust a grantor trust.
Gross Estate: The total value of an estate at the date of the decedent’s death. The value is determined before debts and other “deductions” are subtracted from the estate value.
Guarantor: A party who guarantees repayment of a loan, using their own assets if necessary.
Guardian: A person(s) nominated in a Will and/or appointed by a Probate Court to take the place of the parent(s) of a minor child. The principal duties of a guardian are to provide for the various needs of the minor child including education, nurture and discipline. A guardian may be nominated in a Power of Attorney or appointed by a Probate Court for a person that is legally incompetent to manage his or her own affairs.
Guardianship: A probate court proceeding in which the judge considers whether a person has become so disabled that he/she needs someone else to make decisions about the person’s care. Generally, the Court appoints a relative as guardian, with a bond.
Health Care Directive: A document giving instructions to health care providers about the person’s wishes during the final stages of an illness, generally requesting the withholding of extraordinary medical treatment, sometimes known as a “living will.”
Heir: A person who inherits something from a decedent under the Law of Decent and Distribution, where the decedent had no will. Heirs receive notice of probate court actions even if the decedent had a will.
Heirloom: A personal possession that usually has a sentimental value which exceeds its monetary value.
Holographic Will: A do-it-yourself handwritten will. To be valid this will must be totally in your own handwriting, signed and dated. About 20 states, including Michigan, allow holographic wills, but it is best to have a more formal will.
Household Items: The phrase in a will which indicates everything which may be used for the convenience of the house such as tables, chairs, bedding, etc. Apparel, books, weapons, and the like are not included.
Incapacitated: A person who is legally incapable of managing his or her own business affairs. A person may be permanently or temporarily incapacitated. A probate court usually decides if a person is incapacitated or not. “Incapacitated” is often used interchangeably with “incompetent.”
Incidents of Ownership: All or any management control over a trust or an insurance policy. In relation to an insurance policy, incidents of ownership include the right to change the beneficiaries, borrow cash value, and change the ownership, among other rights.
Income Tax: A tax assessed on gain made by an individual or entity.
Incompetent: A person who is legally incapable of managing his or her own business affairs. A person may be permanently or temporarily incompetent. A probate court usually decides if a person is incompetent or not. “Incompetent” is often used interchangeably with “incapacitated.”
Independent Trustee: A trustee who is unrelated to the person who establishes a trust (the grantor) and the beneficiaries of the trust. Unrelated attorneys, banks, corporations, etc., are usually chosen to act as independent trustees. The IRS requires a trust to have an independent trustee if the trust is to achieve certain estate tax and income tax benefits available to irrevocable trusts (not living trusts).
Inherit: To take or receive property by legal right from a deceased person.
Inheritance Tax: A tax imposed upon the transfer of property from a deceased person’s estate. “Inheritance Tax” is a term which is usually applied to the taxes charged by a state, where as the taxes imposed by the Federal Government are usually referred to as estate taxes. Michigan has no inheritance tax.
Inter-vivos: “During lifetime.” A term used to describe a trust created during the lifetime of the grantor, distinguished from a testamentary trust created by a will.
Intestate: The status of having died without leaving a Will but leaving property that was owned solely by the deceased at death. Each state has a statute that governs the distribution of such property. This property must be administered by the Probate Court.
Intestate Succession: The order of persons entitled to received property distributed by a state court when the deceased failed to write a will or trust, or the will or trust has failed to legally distribute the deceased person’s property.
Irrevocable Trust: A trust that cannot be changed, canceled, or “revoked” once it is set up. A “living trust” is not an example of an irrevocable trust. Insurance trusts and “Children’s Trusts,” or “SBO Trusts,” are examples of irrevocable trusts. Irrevocable trusts are treated by the IRS very differently than revocable trusts.
Insurance Trust: An irrevocable trust used to hold insurance and pass it on to your heirs without any estate taxes on the death benefits of the policy.
Issue: A legal term used in wills and trusts meaning one’s children, grandchildren, etc., either through birth or adoption.
Inventory: In a probate court case, a list of the assets of the decedent or disabled person, prepared and signed by the fiduciary (personal representative or conservator).
Joint Ownership: The situation where two or more people own the same piece of property together. The property can be “owned” by the people as joint tenants, tenants in common, tenants by the entirety and other legally defined relationships.
Joint tenancy with right of survivorship: When two or more people take title to the same property and simultaneously each owns 100% of the property, or has full rights to the property. At the death of one joint tenant, his or her share immediately transfers to the ownership of the survivor(s).
Jurisdiction: The location where a person has access to the court system. The place where a person lives usually determines which court has the legal right to adjudicate his or her claims, probate proceedings, or other matters. The location of real property can also determine the “jurisdiction” of legal matters related to that property.
Law of Descent and Distribution: A state statute that prescribes the distribution of the property of a decedent who died without a valid will (intestate) to the decedent’s heirs.
Legacy: A cash bequest in a will.
Life Estate: The right to have all of the benefit from a property during one’s lifetime. The person with the right doesn’t own the property, and when he or she dies, the property is not included in his or her estate.
Life Insurance Trust: A type of irrevocable trust used to hold life insurance. When a life insurance policy is held in an insurance trust, it is protected from estate taxes when the insured dies; provided the trust is established properly, managed properly, and the insured does not retain any “incidents of ownership.” This type of trust is utilized in order to remove the cash value as well as the death benefit of the policy from the estate of an individual owner or insured.
Living Trust: A type of revocable trust used in estate planning to avoid probate, help in situations of incompetency, and allow “smooth” management of assets after the death of the grantor or person who established the trust. The trust can be effective in eliminating or reducing estate taxes for married couples. Revocable Living trusts are established during the life of the grantor, who retains the right to the income and principal and the right to amend or revoke the trust. When the grantor dies, the trust becomes irrevocable and acts as a substitute for a traditional will. This is also called an Inter Vivos Trust.
Living Will: A document executed by an individual specifying a desire not to be kept alive by extraordinary means and technology when one is in a persistent vegetative state and there is no reasonable likelihood of recovery. You can specifically define the means which you do not want used or do want used. Michigan is one of two states in the United States that does not give legal status to living wills by statute.
Marital Deduction: The unlimited deduction allowed under federal estate tax law for all qualifying property passing from the estate of the deceased spouse to the surviving spouse. The value of the property passing to the surviving spouse under the marital deduction is “deducted” from the deceased spouse’s estate before federal estate taxes are calculated on the estate. Proper planning and use of the deduction allows more property to pass estate tax free to the family.
Marital Deduction Trust: The trust which “receives” the property passed under the marital deduction laws, from the deceased spouse’s estate to the surviving spouse. Property in the marital deduction trust will be included as part of the surviving spouse’s estate (for estate tax purposes) when he or she dies.
Minor: A child who is not old enough to have the legal capacity to govern his or her own affairs. Depending upon the specific state and the specific laws being applied, a minor is usually either under 21 years old or 18 years old. In Michigan, a minor is under 18 years old.
Net Taxable Estate: The value of an estate upon which the federal estate tax is levied. The net taxable estate or “net value” is the total or “gross value” of the estate less liabilities, expenses and other deductions allowed by the tax laws.
Non Probate Property: Property which is held either in joint names with the right of survivorship or to which legal title is held in trust at the time a person dies. Non Probate property does not have to be administered by the Probate Court.
Notice: The legally prescribed process of making someone aware of a legal proceeding or matter.
Notarized: The affirmation of an agent (the notary) of the state affirming that the signature on the document being “notarized” is in fact the signature of the person purportedly signing the document.
Notary: A person who has state granted authority to certify the validity or authenticity of the signature being made on a document.
Pay on Death Account: (P.O.D Account) A bank account that is designed to avoid probate. It is a contract between the bank and the account holder guaranteeing that, upon the account holder’s death, the bank will pay the balance of the account to whomever is designated to receive the account.
Personal Property: “Tangible” personal property meaning anything moveable that you can touch. “Intangible” personal property refers to financial assets such as stocks, bonds, bank accounts, insurance, etc.
Personal Representative: A person or institution appointed by the probate court (nominated in a will, if any) to administer the decedent’s estate. Formerly known as Executor or Executrix (for a will), or Administrator or Administratix (without a Will).
Per Capita: A method of distributing an estate such that all of the surviving descendants share equally in the property. Also know as Pro Rata.
Per Stirpes: The way of distributing an estate such that if one of the children is dead, his or her children share equally in his or her share.
Perpetuities Savings Clause: A “safety net” clause included in most trusts, which automatically terminates the trust at the last possible moment to prevent any possible violation of trust law caused because the general terms of the trust did not properly provide for a termination of the trust as required by law. Under most state laws a trust must have a finite “life” and end prior to the time required by law.
Personal Property: Property other than real estate (land and permanent structures on the land). Cars, furniture, securities, bank accounts, and animals are examples of personal property.
Personal Representative: The “modern” term for the executor or executrix, who is the court appointed individual that probates the will and carries out the will’s instructions under court supervision.
Petition: A formal request to a court to make a finding of fact and enter an order or judgment based upon the facts and the law.
Pour-Over Will: A Will designed to transfer any probate assets which must be administered through a Probate Court process to the trustees of a Trust to be administered and distributed in accordance with Trust. The will names an existing trust as the principal beneficiary. Thus, the probate estate “pours over” into the trust estate.
Power of Appointment: The power given to a person, by appointment in a will or a trust, to distribute the property that passes through the will or trust at the discretion of the person appointed. Other than to give the appointed person the authority to make the distribution, the will or trust doesn’t make distribution of the property.
Power of Attorney: A document established by an individual (the principal) granting another person (the agent) the right and authority to handle the financial affairs for the principal. A durable power document continues in effect during the signer’s disability if and only if it contains specific language required by state law. A general power document contains no limitations on the grant of power. A springing power takes effect only upon the happening of an ascertainable event such as the declaration of disability of the signer.
Pre-nuptial Agreement: Same as Ante-nuptial Agreement.
Primary Beneficiary: The person or persons for whose benefit a trust is originally established. When conditions change and the primary beneficiaries are no longer in a position to receive the benefit of the trust, the benefit goes to the “secondary beneficiaries.”
Probate: The legal process which facilitates the transfer of a deceased person’s property whether they leave a will or don’t leave any will. The court establishes the authenticity of the will (if any), appoints a personal representative or administrator, identifies heirs and creditors, directs payment of debts and taxes, and oversees distributions of the assets according to the will or state law in the absence of a will.
Probate Court: The part of the judicial system dedicated to handling probate matters which includes settlement of intestate and testate estates, adoptions, appointment of guardians, name changes, and other matters.
Probate Estate: A deceased person’s property which is subject to the probate process consisting of property the legal title to which is held solely in the name of an individual who has deceased or is held by that person as a tenant in common with others. Probate property must be administered by the Probate Court. Property held in a living trust is usually not considered part of the probate estate.
Probate Fees: The fees (a percentage of the estate or hourly rate) paid to the attorney or fees paid to the court and others who handle the probate proceeding.
Proving a Will: The process of establishing the validity of a will before the probate court. (See Self Proving Will)
Qualified Plan Assets: Property held in an I.R.A., 401(k) plan or other pension plan on which the owner has not yet paid federal income tax; sometimes called “tax-deferred.”
QTIP Trust: A Qualified Terminable Interest Trust (Q-Tip) is a type of trust which provides an unlimited marital deduction for qualified property put into the trust. However, rather than permitting the surviving spouse to have full power to distribute the property to anyone he or she wishes, the trust restricts the ability of the surviving spouse to distribute the property in the trust to a select group of individuals, such as the children, as agreed when both spouses were alive. Without the QTIP laws, any attempt to “tie down” the property and restrict the surviving spouse’s rights to transfer the trust property would have resulted in the property not qualifying for the marital deduction tax benefit.
Quitclaim Deed: A document (a deed) that transfers a person’s interest in a piece of real estate, without the warranties or guarantees that are made in a warranty deed.
Real Property: Land, and anything permanently attached to it, such as buildings, fences, etc.
Residuary: The clause in a will or trust that disposes of all of the decedent’s property not previously mentioned. This clause usually begins, “All of the rest, residue and remainder of my property, of whatsoever kind and nature, and wherever situated, I give….”
Revocable Living Trust: Same as Living Trust
Revocable Trust: A trust which can be amended or revoked by the person(s) who established the trust.
Rule Against Perpetuities: A rule of law limiting the duration of a trust. Some trusts can go on in perpetuity (forever), but most types of trusts have a maximum duration or life established by law.
Self Proving Will: A will which has been properly witnessed and the witnesses have signed an affidavit before a notary public stating that all of the proper formalities of the will’s execution have been complied with. This usually makes it very easy for the court to “prove” the will.
Separate Property: In community property states, all property which is not held commonly by a married couple is considered separate property. In general, it is property owned by one spouse in which the other spouse does not own an interest.
Settlor: Same as grantor.
Spendthrift: An individual who cannot handle money wisely and spends it wastefully.
Split Gift: Each spouse is entitled to give any individual a designated dollar amount in a calendar year and, provided it is given properly, there is no tax consequence to the giver or receiver according to the “annual exclusion” laws. However, if a married couple tries to give more than the current allowable amount to an individual, they must file a gift tax form declaring that the gift is split between them. If the form is not filed, the IRS cannot determine who gave the gift or gifts, and one member of the couple may be allocated the entire gift amount. Thus, he or she would actually owe a gift tax because his or her gift was over the allowable amount of exclusion for that year.
Springing Power: A power to act on the occurrence of some certain criteria, such as an illness or incompetency. The power is said to spring into existence upon the occurrence of the event. The agent’s power to act for the principal under a durable power of attorney is usually a springing power.
Sprinkle or Sprinkling Power: The power given a trustee to decide how, when and why to distribute trust income to the trust’s different beneficiaries. The sprinkling power allows the trustee to “sprinkle” the trust’s income over the beneficiaries. It is a valuable power to give the trustee in irrevocable trusts because is allows the trustee to distribute income to the beneficiaries who will pay the smallest amount of income tax on the distribution.
Sprinkling Trust: A trust that grants the trustee a sprinkling power which allows the trustee to decide how, when and why to distribute the trust income among the trust’s beneficiaries.
Spouse: Legal term for husband or wife.
Stepped-up Basis: The new basis established for a property after the property has been evaluated and taxed as part of an estate. The new basis or “stepped-up basis” is the value of the property used to assess the estate tax.
Successor Trustee: The trustee who takes over when the initial trustee can no longer function.
Surety: The guarantor of the principal’s performance on a surety bond.
Surviving Spouse: The husband or wife that lives after the death of his or her spouse.
T.O.D.: Transfer on death. A memorandum attached to the ownership document of non-cash personal property, such as a car title or stock certificate, signed by the owner, changing title of the property to the beneficiary named in the memorandum at the death of the owner.
Taxable Estate: The portion of an estate that is subject to federal estate taxes. Technically, all of an estate is subject to federal estate taxes, but because of the unified credit, only estates with a value over the exemption equivalent amount actually have to pay any estate taxes. Therefore, it is common to refer to an estate with a value over the exemption equivalent amount as a taxable estate and an estate with a value under the exemption equivalent amount as a nontaxable estate.
Tenants by the Entirety: A way of owning property which, for almost all practical purposes, is the same as joint tenants. Tenancies by the entirety are creations of state law and are used only between husbands and wives, whereas joint tenancies can be used by anyone, not just by husbands and wives, who wants to own property jointly.
Tenants in Common: A way of owning property in which two or more owners all “share” ownership of the property. The owners can own various percentages of the whole property, unlike joint tenants which each own an equal share. When one owner dies, his or her share does not “automatically” go to the other owner(s), because tenancies in common do not have a survivorship provision like joint tenancies.
Testament: Same as a will.
Testate: One who dies leaving a will.
Testator: The person who signs the will or testament.
Testamentary Trust: A trust created by a will.
Title: A document proving ownership of property.
Trust: An entity created to appoint a trustee to hold legal title to property for the benefit of a beneficiary or beneficiaries. A trust can be created by a Will (Testamentary Trust) or during life (inter vivos trust or living trust). A trust can be revocable (the person creating the trust retains the right to amend or cancel the trust) or irrevocable (the person creating the trust gives up the right to amend or cancel the trust). Property transferred to a trust during an individual’s life becomes a non-probate asset. The trust agreement defines the trustee’s powers and duties.
Trust Certificate: A summary of the trust’s terms prepared by an attorney that evidences the trust exists.
Trust Corpus or Res: The property of a trust.
Trustee: A person or corporation appointed by a grantor to take control of trust property and administer it for the benefit of a beneficiary named by the grantor in the trust document. The grantor may also designate himself as the trustee and beneficiary. The trustee has a strict duty of accountability (fiduciary) to the beneficiary. The Trustee also has the duty of properly safeguarding and managing trust property and is held to a very high standard when it comes to protecting and investing trust property.
Trustmaker: Same as grantor.
Unified Credit: A tax credit is given to each person by the IRS to be used during his or her life or after his or her death. The tax credit equals the amount of tax (gift or estate) which is assessed on the exemption equivalent value of property. It is considered the “unified” credit because it applies to both gift taxes and estate taxes and results from the IRS’s effort to unify these two taxes or make them consistent.
Uniform Gift to Minors Act: A series of state statutes that provides a method for transferring property by gift to minors who cannot legally manage the property for themselves. The laws allow an adult to manage the property and yet not have it owned by the adult.
Unlimited Marital Deduction: The tax law that allows a person to give an unlimited value of property as a gift, or leave an estate of unlimited value to his or her spouse without a gift or estate tax being assessed.
Warranty Deed: A deed which warrants that certain contracts will “run” (continue) with your property.
Will: A document (testament) executed by a testator, in the presence of witnesses, which sets out the testator’s instructions for winding up his affairs after death. The will has no effect until death.
