Estate Planning Glossary
Advance Directive. A witnessed written document in which an individual gives instructions regarding his health care. Two common types of Advance Directives are the Designation of Health Care Surrogate and the Living Will.
Beneficiary. A person entitled to the benefits of an asset. A beneficiary of a trust is a person entitled to receive the income from trust property and/or the distribution of the trust property itself.
Creditor claim. A claim against the decedent's estate by a creditor of the decedent for a debt incurred during the lifetime of the decedent.
Death certificate. Written evidence of a person's death issued by a government authority in the jurisdiction in which the death occurred.
Designation of Health Care Surrogate. A written document designating another person (called a surrogate) to make health care decisions on behalf of the patient.
Disclaimer. An irrevocable waiver of a right to accept an interest in property. If a person exercises his or her right to a disclaimer, the property will be distributed in the same manner as if the person exercising the disclaimer died before his or her right to receive the property occurred.
Durable Power of Attorney. A written instrument by which an individual (the principal) appoints another person (the attorney-in-fact) to act on his behalf to make decisions and act in the place of the principal regarding business, personal, property and financial matters. Unless revoked by the principal, it is valid until the principal’s death or adjudication of incompetency by the court.
Enhanced Life Estate Deed. A deed creating an arrangement in which one person (the life tenant) owns a property for her life, and upon her death it passes to other persons named in the deed (remainder beneficiaries). The life tenant has the right to sell or mortgage the property and keep all of the proceeds without the consent of the remainder beneficiaries.
Estate tax. A tax levied by the federal government and some states against property ownedor controlled by a decedent at the time of his or her death.
Fiduciary. A person who holds property for the benefit of another. A fiduciary is held to a high standard of care in the management and disposition of the property. Examples of fiduciaries are trustees of a trust, executors/personal representatives, or attorneys in fact under a power of attorney.
Form 706. A tax return form created by the Internal Revenue Service which is filed when a person's estate is subject to federal estate tax.
Form 1041. A tax return form created by the Internal Revenue Service to report income tax of an estate or trust.
Form SS –4. A form created by the IRS used to obtain a tax identification number.
Individual retirement account (IRA). A non-qualified retirement plan in which income tax on the income generated by the assets held in the account are deferred to a later date. The earnings in an IRA are not taxed until the owner withdraws the funds.
Inheritance tax. A tax levied by some states against the beneficiary or recipient of property received as a result of the death of another, for example, a devise in a probate estate or a distribution from the trust.
Irrevocable trust. A trust that cannot be amended. Irrevocable trusts are usually used to remove assets from a grantor's estate for the purpose of reducing or eliminating estate taxes or asset protection.
Joint tenancy with right of survivorship. A type of ownership in which two or more persons own an equal undivided interest in property. The main feature of this type of ownership is the quality that when one owner dies all legal and beneficial title to the property is vested in the surviving owner or owners.
Life estate. A type of ownership where the owner of the property only has an ownership interest until his or her death. Upon the death of the owner, title to the property automatically passes to another designated person called a remainderman. An owner of a life estate cannot direct distribution of the property through his or her will.
Payable on death account (POD). A designation placed on a bank or investment account to direct that the funds in the account are to be paid to a specific person or entity at the owner's death.
Personal representative. Also known as executor. A person or entity appointed by the court to administer a probate estate.
Per stirpes. A designation of distribution in which the share of a person who has predeceased the event giving rise to that person's distribution right will be distributed equally among the next generation of his or her lineal descendents. If a member of the next generation has also predeceased the event, that members share will be distributed equally among the next generation of his or her lineal descendents.
Pour-Over-Will. A will, commonly used with a revocable trust, through which any property not titled in the name of the trust at the time of the decedent's death is “poured over” into the trust. Any assets passing through the pour over will must go through probate. The intention is that the pour over will not be used and only serve the purpose of a safety net.
Probate. The court-supervised administration of a person's estate. A person's estate may be probated pursuant to his or her will (a testate estate) or, if there is no will, pursuant to the distribution laws of the state (and intestate estate).
Revocable trust. An arrangement, usually created by a written document, in which one party (the trustee) holds and manages property of another party (the grantor) for the benefit of a third party (the beneficiary). A revocable trust is usually created to avoid probate of the grantor's estate.
Successor trustee. A person who acquires and accepts the powers and duties of a trustee if the original trustee is unable or unwilling to serve as trustee.
Tax identification number. A number issued by the Internal Revenue Service to an individual or entity under which income and expenses are reported.
Tenancy by the entireties. A type of joint ownership between husband and wife available in a limited number of states. Tenancy by the entireties affords the owners with asset protection qualities and also contains a right of survivorship.
Tenancy in common. A type of ownership in which two or more persons or entities owned an undivided interest in property. Unlike joint tenancy, tenants in common do not have to own equal shares of the property, and upon one owner's death, his or her ownership interest will be distributed pursuant to his will or intestate probate proceedings.
Transfer on death account (TOD). A designation placed on a brokerage account for the same purpose as a POD.
Trustee. A person or entity who manages or administers the property of the trust for the benefit of a third party.
Will. A written document in which a person states his or her intention to distribute his or her real and personal property at death.