Glossary of Common Terms and Phrases for:

Estate Planning

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Administration          The process during which the executor or personal representative collects the decedent’s assets, pays all debts and claims, and distributes the residue of the estate according to the will or the state law intestacy rules.

Administrator           The fiduciary appointed by the court to manage an estate if no executor or personal representative has been appointed.

Attorney-in-Fact        The person named as agent under a power of attorney to handle the financial affairs of another.

Beneficiary                 A person who will receive the benefit of property from an estate or trust through the right to receive income or trust principal over a period of time.

Community property            A form of ownership in certain states, known as community property states, under which property acquired during a marriage is presumed to be owned jointly. California is a community property state.

Conservator               An individual or a corporate fiduciary appointed by a court to care for and manage the property of an incapacitated person, in the same way as a guardian care for and manages the property of a minor.

Decedent                    An individual who has died.

Descendants               An individual’s children, grandchildren, and more remote persons who are related by blood or because of legal adoption. An individual’s spouse, stepchildren, parents, grandparents, brothers, or sisters are not included. The term “descendants” and “issue” have the same meaning.

Disclaimer                  The renunciation or refusal to accept a gift or bequest or the receipt of insurance proceeds, retirement benefits, and the like under a beneficiary designation in order to allow the property to pass to alternate takers.

Durable power of attorney   A power of attorney that does not terminate upon the incapacity of the person making the power of attorney. Also known as a “DPOA.”

Estate planning         A process by which an individual designs a strategy and executes a will, trust agreement, or other documents to provide for the administration of his or her assets upon his or her incapacity or death.

Executor                     A person named in a will and appointed by the court to carry out the terms of the will and to administer the decedent’s estate. May also be called a personal representative. If a female, may be referred to as the executrix.

Fiduciary                    An individual or a bank or trust company designated to manage money or property for beneficiaries and required to exercise the standard of care set forth in the governing document under which the fiduciary acts and state law. Fiduciaries include executors and trustees.

Grantor                      A person, including a testator, who creates, or contributes property to, a trust. If more than one person creates or contributes property to a trust, each person is a grantor with respect to the portion of the trust property attributable to that person’s contribution except to the extent another person has the power to revoke or withdraw that portion. Also known as “settlor” or “trustor” or “testator” or “donor”.

Grantor trust             A trust over which the grantor retains certain control such that the trust is disregarded for federal (and frequently state) income tax purposes, and the grantor is taxed individually on the trust’s income and pays the income taxes that otherwise would be payable by the trust or its beneficiaries.

Gross estate                A federal estate tax concept that includes all property owned by an individual at death and certain property previously transferred by him or her that is subject to federal estate tax.

Guardian                   An individual or bank or trust company appointed by a court to act for a minor or incapacitated person (the “ward”).

Health care power of attorney         A document that appoints an individual (an “agent”) to make health care decisions when the grantor of the power is incapacitated.

Heir                            An individual entitled to a distribution of an asset or property interest under applicable state law in the absence of a will. “Heir” and “beneficiary” are not synonymous, although they may refer to the same individual in a particular case.

Income                        The earnings from principal, such as interest, rent, and cash dividends. This is a fiduciary trust accounting concept and is not the same as taxable income for income tax purposes.

Interest of a beneficiary       The right to receive income or principal provided in the terms of a trust or will.

Intestate                     When one dies without a valid will, such that the decedent’s estate is distributed in accordance with a state’s intestacy law.

Irrevocable trust       A trust that, in general, cannot be terminated or revoked or otherwise modified or amended by the grantor.

Issue                           An individual’s children, grandchildren, and more remote persons who are related by blood or because of legal adoption. An individual’s spouse, stepchildren, parents, grandparents, brothers, or sisters are not included.

Life beneficiary         An individual who receives income or principal from a trust or similar arrangement for the duration of his or her lifetime. 

Life estate                  The interest in property owned by a life beneficiary (also called life tenant) with the legal right under state law to use the property for his or her lifetime, after which title fully vests in the remainderman (the person named in the deed, trust agreement, or other legal document as being the ultimate owner when the life estate ends).

Living trust                A trust created by an individual during his or her lifetime, typically as a revocable trust. Also referred to as an “inter vivos” trust, or “revocable living trust.”

Marital deduction     An unlimited federal estate and gift tax deduction for property passing to a spouse in a qualified manner. In other words, property transfers between spouses generally are not taxable transfers because of the marital deduction.

Non-Resident Alien   An individual who is neither a resident nor a citizen of the United States.  A non-resident alien nonetheless may be subject to federal estate tax or probate with regard to certain assets situated in the United States. An estate tax treaty between that individual’s home country and the United States may affect this result.

No-Contest Clause    A provision in a will or trust agreement that provides that someone who sues to receive more from the estate or trust or overturn the governing document will lose any inheritance rights he or she has.

Operation of Law      The way some assets will pass at your death, based on state law or the titling (ownership) of the asset, rather than under the terms of your will.

Personal representative        An executor or administrator of a decedent’s estate.

Per stirpes                  A Latin phrase meaning “per branch” and is a method for distributing property according to the family tree whereby descendants take the share their deceased ancestor would have taken if the ancestor were living. Each branch of the named person’s family is to receive an equal share of the estate. If all children are living, each child would receive a share, but if a child is not living, that child’s share would be divided equally among the deceased child’s children.

Pour over will            A will used in conjunction with a revocable trust to pass title at death to property not transferred to the trust during lifetime.

Power of appointment          A power given to an individual (usually a beneficiary) under the terms of a trust to appoint property to certain persons upon termination of that individual’s interest in the trust or other specified circumstances. The individual given the power is usually referred to as a “holder” of the power. The power of appointment may be general, allowing the property to be appointed to anyone, including the holder, or limited, allowing the property to be distributed to a specified group or to anyone other than the holder. Property subject to a general power of appointment is includible in the holder’s gross estate for federal estate tax purposes.

Power of attorney      Authorization, by a written document, that one individual may act in another's place as agent or attorney-in-fact with respect to some or all legal and financial matters. The scope of authority granted is specified in the document and may be limited by statute in some states. A power of attorney terminates on the death of the person granting the power (unless “coupled with an interest”) and may terminate on the subsequent disability of the person granting the power (unless the power is “durable” under the instrument or state law; see entry above for Durable Power of Attorney).

Principal                    The property (such as money, stock, and real estate) contributed to or otherwise acquired by a trust to generate income and to be used for the benefit of trust beneficiaries according to the trust’s terms.

Probate                       The court supervised process of proving the validity of a will and distributing property under the terms of the will or in accordance with a state’s intestacy law in the absence of a will.

Probate tax                A tax imposed by many jurisdictions on property passing under an individual’s will or by a state’s intestacy law.

Property                     Anything that may be the subject of ownership, whether real or personal, legal or equitable, or any interest therein.

Residue                       The property remaining in a decedent’s estate after payment of the estate’s debts, taxes, and expenses and after all specific gifts of property and sums of money have been distributed as directed by the will.

Revocable trust         A trust created during lifetime over which the grantor reserves the right to terminate, revoke, modify, or amend.

Settlor                         Term frequently used for one who establishes or settles a trust. Also called a “trustor” or “grantor.”

Tangible personal property                         Property that is capable of being touched and moved, such as personal effects, furniture, jewelry, and automobiles. Tangible personal property is distinguished from intangible personal property that has no physical substance but represents something of value, such as cash, stock certificates, bonds, and insurance policies. Tangible personal property also is  distinguished from real property, such as land and items permanently affixed to land, such as buildings.

Terms of a trust        The manifestation of the grantor’s intent as expressed in the trust instrument or as may be established by other evidence that would be admissible in a judicial proceeding.

Testamentary            Relating to a will or other document effective at death.

Testamentary trust   A trust established in a person’s will to come into operation after the will has been probated and the assets have been distributed to it in accordance with the terms of the will.

Testator                      A person who signs a will. If a female, may be referred to as the testatrix.

Transfer on death designation         A beneficiary designation for a financial account (and in some states, for real estate) that automatically passes title to the assets at death to a named individual or revocable trust without probate. Frequently referred to as a TOD (transfer on death) or POD (payable on death) designation.

Trust                           An arrangement whereby property is legally owned and managed by an individual or corporate fiduciary as trustee for the benefit of another, called a beneficiary, who is the equitable owner of the property.

Trust instrument       A document, including amendments thereto, executed by a grantor that contains terms under which the trust property must be managed and distributed.  Also referred to as a trust agreement or declaration of trust.

Trustee                       The individual or bank or trust company designated to hold and administer trust property (also generally referred to as a “fiduciary”). The term usually includes original (initial), additional, and successor trustees. A trustee has the duty to act in the best interests of the trust and its beneficiaries and in accordance with the terms of the trust instrument. A trustee must act personally (unless delegation is expressly permitted in the trust instrument), with the exception of certain administrative functions.

Will                             A writing specifying the beneficiaries who are to inherit the testator’s assets and naming a representative to administer the estate and be responsible for distributing the assets to the beneficiaries.

If you wish to get started with an estate plan with ARAG Legal, please contact ARAG directly and ask them to provide you two separate claim numbers, one for a revocable trust, and another one for a will. If you are married, be sure to mention this to the ARAG representative.

With our firm, you can be confident that only licensed attorneys will review and draft each of your estate planning documents personally without reliance on secretaries or paralegals. You will also be communicating with your attorney for the entire duration of your case. Our approach ensures maximum quality control and a personal touch for each case made possible only with committed boutique law firms.

Contact us today and tell us how we can help you and your family.