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The following terms frequently appear in
discussions of estate planning, as well as
estate planning documents. These definitions
should help you understand discussions of
this topic. However, as with any word, a
particular term may carry different meanings
in different contexts. These definitions do
not cover every conceivable situation. |
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Administrator:
In California, the person who manages an
estate when there is no will or trust. An
administrator performs many of the same
functions as an executor.
Attorney in Fact:
The person holding power to act for another
under a Power of Attorney document.
Basis:
The value subtracted from the net sales
price to calculate gain or loss for capital
gains tax purposes.
Beneficiary:
The person who receives benefits from a will, insurance policy,
or other document.
Charitable Remainder
Trust: A trust naming a
charity as beneficiary.
Community Property:
A system of property law determining the
interests of spouses in property acquired
during marriage. It includes everything
acquired by a married couple during the
marriage except property acquired by gift
or inheritance. Each spouse owns an equal,
undivided, one half interest of the community
property. Community property concepts come
from continental civil law, as opposed to
English common law. Only a few western
states use the community property system.
Conservator:
A person named by a court to act on behalf
of someone who has become physically or
mentally incapacitated.
Durable Power of Attorney: A
legal document appointing another person,
(the attorney in fact,) to act on behalf of
another, even if that person becomes
disabled or incapacitated.
Durable Power of Attorney for Healthcare:
A legal document that gives
another person the power to make certain
decisions regarding healthcare.
Estate:
The condition and circumstance in which a
person stands with regard to those around
him and his property, (his possessions.)
Estate Planning: Strategies
used to direct property to the proper
beneficiaries, to minimize tax liability and
other costs, and to arrange for property
management in the event of physical or
mental disability.
Estate Tax:
A transfer tax on estates exceeding the
personal exemption amount. Currently, the
top rate is 55%.
Executor: The person named in
a will to manage an estate. The executor's
duties include collecting the estate assets,
paying the estate's debts, and distributing
the property according to the will.
Family Limited Partnership: A
form of holding property combining some of
the advantages of holding property as a
corporation with some of the advantages of
owning property in a partnership. A family
limited partnership is sometimes used as a
vehicle for a gift program to reduce or
eliminate estate tax.
Fiduciary:
A person or institution legally responsible for the
management, investment, and distribution of
funds. The law places various
responsibilities on fiduciaries to act in
the interests of the beneficiaries.
Grantor: The person who
transfers assets into the trust; also called
settlor.
Gross Estate: The total
property or assets held by a person as
defined for federal estate tax purposes.
Guardian: A person legally
charged with responsibility for a child.
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Healthcare Power of Attorney: A power of attorney naming a
person to make medical decisions in the event of mental or physical
incapacity.
Heir:
The person who inherits the property.
Incapacitated Person: A person who
is impaired by reason of mental illness, mental deficiency, physical
illness or disability, advanced age, chronic use of drugs, chronic
intoxication, or other cause, (except minority,) to the extent of lacking
sufficient understanding or capacity to make or communicate responsible
decisions.
Inter-Vivos:
Between living persons; usually refers to a trust created during the trustor's lifetime for the benefit of another.
Intestacy,
Intestate: The state of or condition when a person dies
without a valid will. The law has rules determining who gets the estate
property if a person dies intestate.
Irrevocable
Trust: A
trust which cannot be changed or canceled once it is set up without the
consent of the beneficiary.
Joint and Survivor
Insurance: A policy underwritten on the life of two
persons, usually husband and wife or business partners.
Living Trust:
Commonly used instead of a will in order to avoid probate
proceedings, a living trust is a revocable trust in which the grantor
transfers some or all of his property to one or more beneficiaries. It
is also
called an inter-vivos trust.
Marital
Deduction: A deduction allowing for the unlimited transfer
of any or all property from one spouse to the other, generally free from
estate or gift tax.
Minor Child:
A person who has not reached the age of majority. The age
is usually 16-18 years of age, and varies from state to state.
Power of
Appointment: Authority conferred by deed or will to make a
gift or distribute property. A "general" power of appointment places no
limitation on the receivers of the property. A "special" or "limited"
power of appointment limits who can receive the property.
Power of Attorney:
A legal document granting authority for a person to act for another.
Probate: The
process by which assets are gathered, applied to pay debts, taxes and
expenses of administration, and distributed to those designated as
beneficiaries in the will.
Probate Court:
The court with the authority to recognize a document as a
deceased person's will. The court executes the directive of the will. In
California, most counties have a separate probate department.
Representative: Someone who is authorized to
act on one's behalf, such as an executor or trustee.
Separate
Property: Everything owned by an individual that is not
community property, such as property acquired before marriage and kept
separate by the owner, property acquired during marriage by gift or
inheritance, or a joint tenant's interest in joint tenancy property.
Settlor:
A trustor, or one who places assets in trust.
State Death or
Inheritance Taxes: Some states impose a tax on the
transfer of property at a person's death.
Testate:
A person who dies with a valid will.
Trust:
A legal document created by a grantor during his lifetime for the
benefit of another.
Trustee:
The person named in a trust to manage the property and distribute the
property according to the terms of the trust.
Will:
A legal document directing the disposition of property at death.
A will takes force through the probate court.
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