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Helpful Definitions for Estate Planning, Trusts, & Wills

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There can be a lot of confusing terms when dealing with estate planning, so we have complied a list of the most confusing words with their definitions:

Ancillary Administration

An additional probate in another state Typically required when you own real estate in another state that is not titled in the name of your trust.

Annual Exclusion

Amount you can give someone each year without having to file a gift tax return or pay a gift tax currently $14,000 per recipient ($28,000 if married). The amount of tax-free gifts is tied to inflation and may increase from time to time.

Beneficiaries

In a living trust, the persons and/or organizations who receive the trust assets (or benefit from the trust assets) after the death of the trust grantor.

Certificate of Trust

A shortened version of a trust that verifies the trust’s existence, explains the powers given to the trustee, and identifies the successor trustee(s).  It does not reveal any information about the trust assets, beneficiaries, or their inheritances.

Children’s Trust

A trust included in your living trust:

If, when you die, a beneficiary is not of legal age, the child’s inheritance will go into this trust. The inheritance will be managed by the trustee you have named until the child reaches the age at which you want him/her to inherit.

Conservatorship

A court-controlled program for persons who are unable to manage their own affairs due to mental or physical incapacity may also be called a guardianship.

Custodian

Person named to manage assets left to a minor under the Uniform Transfer to Minors Act:

In most states, the minor receives the assets at legal age.

Durable Power of Attorney for Asset Management

A legal document that gives another person full or limited legal authority to sign your name on your behalf, in your absence, valid through incapacity. Ends at death.

Durable Power of Attorney for Health Care

A legal document that lets you give someone else the authority to make health care decisions for you in the event you are unable to make them for yourself.

Also called a health care proxy or medical power of attorney.

Estate

Assets and debts left by an individual at death.

Estate Taxes

Federal or state taxes on the value of assets left at death Also called inheritance taxes or death taxes.

Executor

Person or institution named in a will to carry out its instructions.  Female is executrix.  Also called a personal representative.

Federal Estate Tax Exemption

Amount of an individual's estate that is exempt from federal estate taxes in 2017.  The exemption is $5,490,000.

Generation Skipping Transfer Tax (GSTT)

A steep tax on assets that "skip" a generation and are left directly to grandchildren and younger generations.  In 2017, the GST exemption is the same as the federal estate tax exemption (double for a married couple) with a high tax rate.

Heir

One who is entitled by law to receive part of your estate.

Holographic Will

A handwritten will.

Homestead Exemption

Portion of your residence (dwelling and surrounding land) that cannot be sold to satisfy a creditor’s claim while you are living.

Incapacitated/Incompetent

Unable to manage one’s own affairs, either temporarily or permanently Lack of legal power.

Independent Administration

A form of probate available in many states intended to simplify the probate process by requiring fewer court appearances and less court supervision.

Inheritance

The assets received from someone who has died.

Inter vivos

Latin term that means "between the living".  An inter vivos trust is created while you are living instead of after you die.  A revocable living trust is an inter vivos trust.

Irrevocable Trust

A trust that cannot be changed (revoked) or cancelled once it is set up. Opposite of revocable trust.

Intestate

Without a will

Land Trust

Often used for privacy. Title is transferred to a corporate trustee or corporation, but you keep control over how the property is managed, because the title is in the name of the corporate trustee or corporation. No one knows the property belongs to you.  In all financial transactions and dealings, your personal name never comes up. Also called a title holding trust.

"Living Probate"

The court-supervised process of managing the assets of one who is incapacitated.

Living Trust

A written legal document that creates an entity to which you transfer ownership of your assets. Contains your instructions for managing your assets during your lifetime and for their distribution upon your incapacity or death.  Avoids probate at death and court control of assets at incapacity.  Also called a revocable inter vivos trust.  A trust created during one’s lifetime.

Living Will

A written document that states that you do not wish to be kept alive by artificial means when the illness or injury is terminal.

Pour Over Will

A short will often used with a living trust.  It states that any assets left out of your living trust will become part of (pour over into) your living trust upon your death.

Power of Attorney

A legal document giving someone legal authority to sign your name on your behalf in your absence.  Ends at incapacity (unless it is a durable power of attorney) or death.

Probate

The legal process of validating a will, paying debts, and distributing assets after death.

Probate Estate

The assets that go through probate after you die. Usually these include assets you own in your name and those paid to your estate. Usually does not include assets owned jointly, payable-on-death accounts, insurance and other assets with beneficiary designations. Assets in a trust also do not go through probate.

Probate Fees

Legal, executor, and appraisal fees and court costs when an estate goes through probate. Probate fees are paid from assets in the estate before the assets are fully distributed to the heirs.

Qualified Domestic Trust (QDOT)

Allows a non-citizen spouse to qualify for the marital deduction.

Qualified Terminable Interest Property (QTIP)

A trust that delays estate taxes until your surviving spouse dies so more income will be available to provide for your spouse during his/her lifetime. You can also keep control over who will receive these assets after your spouse dies. Qualifying Subchapter S Trust (QSST): Trust that meets certain IRS qualifications and is allowed to own Subchapter S stock.

Revocable Trust

A trust in which the person setting it up retains the power to change (revoke) or cancel the trust during his/her lifetime. Opposite of irrevocable trust.

Successor Trustee Person or instituti

One named in the trust document to take over should the first trustee die, resign, or otherwise become unable to act.

Tax-Deferred Plan

A retirement savings plan (like an IRA, 401(k), pension, profit sharing, or Keogh) that qualifies for special income tax treatment. The contributions made to the plan and subsequent appreciation of the assets are not taxed until they are withdrawn at a later time -- ideally, at retirement, when your income and tax rate are lower.

Taxable Gift

Generally, a gift of more than $14,000 in one year to someone other than your spouse. The value of the taxable gift is applied to your federal gift tax exemption. After you have used up your exemption, additional gifts will be taxed, usually at the highest estate tax rate.

Tenants-in-Common

A form of joint ownership in which two or more persons own the same property. At the death of a tenant-in-common, his/her share transfers to his/her heirs.

Tenants-by-the Entirety

A form of joint ownership in some states between husband and wife When one spouse dies, his/her share of the asset automatically transfers to the surviving spouse.

Totten Trust

A "pay-on-death" account A bank account that will transfer to the beneficiary who was named when the account was established. The terms "transfer on death" ("TOD"), "in trust for" ("ITF"), "as trustee for" ("ATF"), and "pay on death" ("POD") often appear in the title.

Unified Credit

The amount each person is allowed to deduct from federal estate taxes in 2017 is $5,490,000.

Uniform Transfer to Minors Act (UTMA)

Law enacted in many states that lets you leave assets to a minor by appointing a custodian. In most states, the minor receives the assets at legal age.

Warranty Deed

Document that allows you to transfer title to real estate. With a warranty deed, the person guarantees that the title being transferred is clear (free of any encumbrances). If the title is defective, the person making the transfer is liable. Compare to quitclaim deed.

Will

A written document with instructions for disposing of assets after death. A will can only be enforced through the probate court.

The hiring of a lawyer is an important decision that should not be based solely upon advertisements/articles. This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.

 

 

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We represent clients in Southern California communities, including, Los Angeles, Sherman Oaks, Encino, Van Nuys, Thousand Oaks, Westlake Village, Woodland Hills, Santa Monica, Riverside and San Diego; and throughout the San Fernando Valley, Los Angeles County, Orange County, San Bernardino County, Ventura County, Riverside County, San Diego County, San Francisco County, Alameda County, Sacramento County and Contra Costa County.

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