• Estate Planning:  A process by which a person designs a strategy and prepares documents to conserve, protect, and distribute estate assets before and after death for the benefit of loved ones, taking into consideration the effect of state and federal tax and administrative laws and regulations.  It can also involve planning for the use of your assets for your care if you become unable to manage your affairs during your lifetime.
• Assignment:  Transfer of title of an asset from one owner to another, such as from a person to a trust.
• Capacity:  The legal competence to effectively perform a given act (e.g. to write a Will or Trust, to enter into a binding contract).
• Conservatorships:  Court proceeding initiated to supervise management of the property and affairs of an incapacitated or incompetent person.
• Designated Beneficiary:  An individual beneficiary of a retirement account (IRA, 401(k), 403(b), etc.) who qualifies as a person whose life expectancy may be used, either jointly or singly, for determining minimum annual distributions.
• Durable Power of Attorney:  A legal instrument whereby one appoints and empowers another person as agent to deal with one’s property and personal affairs.  It remains effective even after the maker becomes incapacitated.
• Equitable Title:  Beneficial ownership of an asset; the right to use, spend, consume and/or enjoy an asset or its income.
• Fiduciary:  A person or corporation who occupies a position of trust and accountability (e.g. Trustee, Administrator, Executor, Guardian, Conservator).
• Joint Ownership:  Any arrangement through which title to an asset is shared by more than one owner. (See “Joint Tenancy,” “Tenancy-by-the-Entirety,” “Tenancy-in-Common.”)
• Joint Tenancy:  A form of joint ownership of property that carries an automatic right of survivorship, such that title to the property automatically vests in the surviving joint tenant(s) by operation of law upon the death of one joint tenant. (Contrast with “Tenants-in-Common”.)
• Life Estate Deed:  A real estate transfer document which an owner signs and records during his or her lifetime, but which transfer title of the real estate to the beneficiary at the owner’s death.  This is an instrument used in small estates to avoid probate of the homestead instead of creating a trust.
• Pour-Over Will:  A Will used in conjunction with a Revocable Living Trust to dispose of any property owned by the decedent at time of death which was not transferred to the Trust.  The Pour-Over Will also revokes all prior wills, but unlike traditional wills it does not contain detailed dispositive provisions; rather it directs distribution of all individually owned property of the Testator to the Trustee of his/her Trust.  The Trust instrument contains detailed instructions relating to the distribution of the property.  Like all Wills, a Pour-Over Will must be admitted to probate to be effective.
• Power-of-Attorney:  A legal instrument whereby one appoints and empowers another person as agent to deal with one’s property and affairs. (See Attorney-in-Fact above). A General Power-of-Attorney is one which gives the Attorney-in-Fact broad, plenary powers; a Special Power-of-Attorney limits the attorney-in-fact’s authority to a particular property or transaction.  Also see Durable Power of Attorney above.
• Present Interest:  To be eligible for the annual $11,000 exclusion from the Federal Gift Tax, the gift must be of a “present interest.” In other words, the gift must belong to the done with “no strings attached.”

PROBATE TERMS:

• Probate: The Court supervised process of distributing property left in a will or in accordance with the law if no valid will exists.  Since there is court oversight for the entire process, the Testator/Testatrix and his or her heirs can count on a full and fair administration and distribution of the estate.  Probate is necessary whenever a deceased person leaves titled assets in the decedent’s alone.
• 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 person or corporate fiduciary appointed by the Probate Court to manage the probate estate where no executor (personal representative) has been appointed to do this job, or where the appointed executor is unable or unwilling to serve.
• Attorney-In-Fact:  The person named as an agent under a Power of Attorney to conduct the affairs and deal with the property of another.
• Beneficiary:  The person named in a will or trust to receive property from the maker of the will or trust.
• Decedent:  A deceased person, especially one who has lately died.
• Equitable Title:  Beneficial ownership of an asset; the right to use, spend, consume and/or enjoy an asset or its income.
• Estate:  The total collection of a decedent’s assets whether or not they pass through probate.
• Estate Tax:  Tax imposed by U.S. government and most states on the transfer of property from a decedent to his or her heirs or beneficiaries.  The estate tax is levied on and measured by the size of the decedent’s estate, rather than on the amount received by any particular beneficiary.
• Exclusion Amount:  The new term –“applicable exclusion amount”- used by the Taxpayer’s Relief Act of 1997 to identify the amount of property owned by a decedent effectively exempt from the federal estate and gift tax.
• Fiduciary:  A person or corporation who occupies a position of trust and accountability (e.g. Trustee, Administrator, Executor, Guardian, Conservator).
• Fractional Interest:  The less than 100% share of ownership held by a joint owner of an asset.
• Gross Estate:  The total value, for estate tax purposes, of everything in which one has an ownership interest at the time of death.
• Heir:  The person entitled to a distribution of an asset or property interest under applicable state law, in the absence of a Will.  (Note that “heir” and “beneficiary” are not synonymous, though they may refer to the same individual in a particular case.)  Your heirs are the ones who will inherit your property if you die with no valid Will or Trust in effect.
• Inheritance Tax:  Tax imposed by some states on the amount received by a particular heir or beneficiary.
• Intestate/ Intestacy:  When one dies without a valid will, such that the decedent’s estate is distributed in accordance with state law.  (See “Heir” above.)
• Inventory:  A list of the assets of the decedent or disabled person that is prepared by an attorney and signed by the fiduciary (personal representative or conservator/guardian).  This is required to be filed in Probate court.
• Joint Ownership:  Any arrangement through which title to an asset is shared by more than one owner.  (See “Joint Tenancy,” “Tenancy-by-the-Entirety.” “Tenancy-in-common”.)
• Law of Descent and Distribution:  A state statute that determines the distribution of the property of a decedent who died without a valid will (intestate) to the decedent’s heirs.
• Legal Title: “Registered ownership” of an asset.  Refers to the person(s) whose name is on the deed, signature card, registration certificate, etc.
• Life Estate Deed:  A real estate transfer document which an owner signs and records during his or her lifetime, but which transfers title to the real estate to the beneficiary at the owner’s death.  This is an instrument used in small estates to avoid probate of the homestead instead of creating a trust.
• Marital Deduction: The deduction against gross estate value accorded by the Internal Revenue Code for transfers by gift or upon death to one’s spouse.  Under current law the marital deduction is unlimited, e.g. there is no estate or gift tax on qualifying transfers of any amount to a U.S. citizen spouse. (See QDOT below with respect to non-U.S. citizen spouses.)
• Personal Property:  “Tangible” personal property refers to household furnishings, jewelry, etc. “Intangible” personal property refers to financial assets such as bank accounts, stocks, bonds, insurance, etc.
• Personal Representative:  The one nominated in a Will and thereafter appointed by the Probate Court to manage and distribute a decedent’s estate in accordance with the terms of the Will.  May also be referred to as an Executor (male)/Executrix (female).
• Real Property:  Land and anything permanently attached to it.
• Retirement Accounts:  Any of the various accounts, funds or plans established to provide retirement benefits for an individual, created pursuant to federal laws and regulations and providing for tax-deferred accumulation during the life of the account, including IRAs, 401(k)s, 403(b)s, Pension and Profit Sharing Plans, etc.  These accounts, with the exception of the new “Roth IRAs” and “Education IRAs”, are subject to income tax upon withdrawal.  They are also includable in the estate of the owner for Estate Tax purposes.
• Tangible Personal Property: Personal property which ordinarily has no registered ownership attached to it, e.g. furniture, clothing, jewelry, antiques, collections, etc., but not cash or other financial assets.
• Tenancy-by-the-Entirety:  A form of joint ownership of property available only to married couples.  Very similar to Joint Tenancy in that title to the property automatically vests in the surviving spouse tenant-by-the-entirety.  T-by-E ownership provides some creditor protection in some states.
• Tenancy-in-common:  A form of joint ownership in which a deceased tenant’s share passes to his/her heirs or beneficiaries through his/her estate. (Contrast with Joint Tenancy.)
• Testamentary Trust:  A Trust established in a person’s Will. A Testamentary Trust only comes into operation after the Will has been probated and the assets have been distributed in accordance with the probate court order.  In many states, Testamentary Trusts remain subject to the jurisdiction of the probate court.
• Transfer Tax:  A tax levied when ownership of an asset is given, bequeathed or transferred to another.  Includes the Estate Tax, Inheritance Tax, Gift Tax and Generation Skipping Transfer Tax.
• Will:  A will declares who shall inherit an individual’s assets (the beneficiaries) and who shall be responsible for distributing them to such beneficiaries (the executor/personal representative). For young parents and couples, a will can also be used to appoint a guardian for their minor children and a trustee to manage the children’s money until they are old enough to handle it themselves.