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 gains (either
long-term or short-term depending on
the holding period).
The ATTORNEY
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 gains 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 providing funds to 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 Gift
Annuity Benefits 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.
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.
A 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 an
income tax deduction for a significant
portion of the value of the contributed
property (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.
UNIFIED CREDIT
- A federal tax credit that offsets
gift tax and estate tax liability. For
gift tax purposes, the unified credit
remains at $345,800 through 2009, which
is equivalent to an applicable exclusion
amount of $1 million. For estate tax
purposes, the unified credit is being
gradually increased from $345,800 in
2003 to $1,455,800 in 2009, which is
equivalent to an applicable exclusion
amount of $1 million in 2003 to $3.5
million in 2009.
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.
