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GLOSSARY
APPRECIATED
ASSETS
are
assets that have a higher market value than their
basis or tax purpose value. Such assets would, if
sold by an individual or non-charitable organization
at a price higher than their basis, potentially generate
a taxable capital gain (either long-term or short-term
depending on the holding period).
The
ATTORNEY- or lawyer
- is the person licensed by the state to practice
law and assist the executor, trustee, and guardian.
It is conceivable that each could hire a separate
attorney, but usually one attorney represents all
three.
The
BASIS is the tax
purpose value of the property or asset used in establishing
the potential capital gain amount.
 A
BENEFICIARY is
the person and/or organization that receives the benefits
(usually assets or income) of the trust.
A
BEQUEST is a gift
of property or assets to a beneficiary as defined
in a will.
A
BYPASS TRUST
is set up to avoid or bypass the surviving spouse's
estate, which enables each spouse to use the federal
estate tax exemption.
The
CHARITABLE GIFT ANNUITY
offered through a charity is used by many to provide
income for the annuitant and a second beneficiary,
if any. The annuitant (the person investing funds
through the charity) receives a contract or agreement
from the charity which states that the charity will
pay the annuitant a fixed income for life (lives)
with payments to start immediately or at some set
future time. Probate or court involvement is avoided
on these funds. The income paid under the annuity
is secured by the assets of the charity. See Benefits
of the Gift Annuity for more details.
A
CHARITABLE LEAD TRUST
is almost the opposite of a charitable remainder trust.
During the term or life of the charitable lead trust,
an annuity or unitrust income interest is distributed
each year to the designated charitable beneficiary
and the assets are eventually transferred to the trustor's
or grantor's designated non-charitable beneficiary(ies).
A
CHARITABLE REMAINDER ANNUITY
TRUST is a trust which is set up to pay
a return or fixed annual percentage of 5 percent (or
more) of the net fair market value of the assets placed
in the trust. The trust assets are valued initially,
at the time the property is placed in the trust. The
trust assets are never revalued.
A
CHARITABLE REMAINDER UNITRUST
is a trust which is set up to pay a return or fixed
annual percentage of 5 percent (or more) of the net
fair market value of the assets placed in the trust.
The trust assets are revalued annually.
A
CODICIL is a written
change or amendment made to a will.
The
EXECUTOR is the
person or institution named in a person's will who
carries out the terms of the will. Traditionally,
the word has referred to the male and Executrix to
the female, but this distinction is rapidly disappearing.
The
GUARDIAN is the
person who is appointed by the Court to care for the
person and/or estate of a minor child or incompetent
person. One can nominate a guardian in a will, and
though normally the court will honor that nomination,
the Court has the right to agree or disagree.
JOINT
TENANCY is a type of ownership where any
two or more persons, related or not, may hold (own)
property and the property passes to the survivor or
survivors on the death of one. This passing is not
automatic, as some think, and the procedure for passing
will depend on local law. But, this form of ownership
does have the advantage of allowing property to pass
to the survivor without delays of probate and court
administration costs.
A
LIFE INSURANCE TRUST
is usually set up for the purpose of excluding the
proceeds of life insurance from the insured's and
the spouse of the insured's estate for death tax purposes.
It is an irrevocable trust.
A
LIVING TRUST is
a trust set up to operate during the life (and can
operate after the death) of the one setting up the
trust. It can be revocable, or, in other words, you
can change your mind and have some or all of the trust
property returned to you during your life. An irrevocable
trust cannot be changed except in certain legal circumstances
(fraud, unlawful agreements, merger of interests,
decision of the Court). See Living
Trust - Advantages/Disadvantages.
POOLED
INCOME FUND - also called a Charitable
Remainder Pooled Income Fund is an investment fund
much like a mutual fund. It is made up of transfers
by many persons to the fund who receive life income
interest in exchange for their transfers, based on
the value of the transfer into the fund and based
on the income earned by the fund.
PROBATE
is the legal process of proving a will, appointing
an executor, and settling an estate; but by custom,
it has come to be understood as the legal process
whereby a dead person's estate is administered and
distributed.
A
QUALIFIED TERMINABLE INTEREST
PROPERTY TRUST (QTIP) is a trust often
set up to avoid transfer tax on the first spouse's
death. The deceased spouse establishes the ultimate
disposition of the property, rather than the surviving
spouse including the property in their estate. During
their lifetime, the surviving spouse receives all
income from the principal and, in some cases, has
access to the principal.
A
RETAINED LIFE ESTATE
is a gift plan defined by federal tax law allowing
the donation of a personal residence (to include a
vacation home) or farm with the donor retaining the
right to life enjoyment. A life estate may be retained
for one or more lives or it may be retained for a
term of years. All routine expenses - maintenance
fees, property taxes, repairs, etc. - are the responsibility
of the donor. The donor receives income tax benefits
in the year of the gift (the property is irrevocably
deeded to the charity) and estate tax benefits.
TENANTS
IN COMMON is a property ownership arrangement
in which two or more persons own property jointly.
It is not necessary that the ownership consist of
equal shares or percentages of the property. Generally
there is no right of survivorship when a co-owner
dies. The share of the property belonging to the deceased
co-owner passes to his or her heirs and the shares
of the remaining original co-owners do not change.
TESTAMENTARY
TRUST - A will can have a trust written
into it, called a Testamentary Trust, which is set
into motion by the Court after the will reaches a
certain point of execution, and is used only after
the death of the person whose estate it represents.
A
TRUST is defined
as any arrangement where property is to be held and
administered by a trustee for the benefit of those
for whom the trust was created. Depending on the type
and how it is established, a trust may be revocable
(changeable) or irrevocable (not changeable).
The
TRUSTEE is the
person or institution named by a person making the
trust, or appointed by the court, to carry out the
terms of the trust. Assuming a trust has been set
up through a will, when the executor's job is finished,
the trustee's job begins.
A
TRUSTOR is the
individual who establishes the trust. Also referred
to as the GRANTOR
and/or SETTLOR.
A
WILL is the legal
expression or declaration of a person's mind or wishes
as to the disposition of the person's property, to
be performed or take effect after the person's death.
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