Concise Wills and Estate Legal Glossary
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a
- A-B trust planningA common arrangement used in a will when a married testator has an estate with a value that exceeds his or her remaining estate tax exemption amount. A testator creates at the first death a marital trust or “A Trust” for the sole benefit of the surviving spouse for life (sometimes called a(...) Read More
- AdministrationThe 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 (when there is no will). Read More
- AdministratorThe individual or corporate fiduciary appointed by the court to manage an estate if no executor or personal representative has been appointed or if the named executor or personal representative is unable or unwilling to serve. Read More
- Advance Directive for Health Care ActThis act recognizes the right of a patient to control decisions relating to his or her medical care and to execute a written direction regarding life-sustaining procedures. Under the law, an individual of sound mind who is 18 years of age or older (or who has graduated from high school or(...) Read More
- Annual exclusionThe amount an individual may give annually to each of an unlimited number of recipients free of federal gift or other transfer taxes and without any IRS reporting requirements. In addition, these gifts do not use any of an individual’s federal gift tax exemption amount. The annual exclusion is(...) Read More
- Applicable exclusion amountAnother name for the estate tax exemption amount (formerly called the unified credit), which shelters a certain value of assets from the federal estate and gift tax. This amount is $5 million and is inflation adjusted annually. Read More
- Ascertainable standardA standard, usually relating to an individual’s health, education, support, or maintenance, that defines the permissible reasons for making a distribution from a trust. Use of an ascertainable standard prevents distributions from being included in a trustee/beneficiary’s gross estate for(...) Read More
- Attorney-in-FactThe person named as agent under a power of attorney to handle the financial affairs of another. Read More
b
- BeneficiaryA person who will receive the benefit of property from an estate or trust through the right to receive a bequest or to receive income or trust principal over a period of time. Read More
- Bypass trustThe “B Trust” in A-B trust planning that is sheltered from the federal estate tax by the decedent’s estate tax exemption amount. Because this trust “bypasses” the estate tax in the decedent’s estate and at the surviving spouse’s death, this trust often is called a bypass trust. This type of(...) Read More
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- Charitable lead trustA trust created during lifetime or at death that distributes an annuity or unitrust amount to a named charity for life or a term of years, with any remaining trust assets passing to designated non-charitable beneficiaries upon termination of the trust. Read More
- Charitable remainder trustA tax-exempt trust created during lifetime or at death that distributes an annuity or unitrust amount to one or more designated non-charitable beneficiaries for life or a term of years, with the remaining trust assets passing to charity upon termination of the trust. If appreciated assets are(...) Read More
- CodicilA formally executed document that amends the terms of a will so that a complete rewriting of the will is not necessary. Read More
- Community propertyA form of ownership in certain states, known as community property states, under which property acquired during a marriage is presumed to be owned jointly. Only a small number of states are community property states, and the rules can differ significantly in these states. Pennsylvania is NOT(...) Read More
- ConservatorAn 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 cares for and manages the property of a minor. Read More
- Credit shelter trustAnother name for the bypass or “B Trust” in A-B trust planning. Read More
- Crummey trustAn irrevocable trust that grants a beneficiary of the trust the power to withdraw all or a portion of assets contributed to the trust for a period of time after the contribution. The typical purpose of a Crummey trust is to enable the contributions to the trust to qualify for the annual(...) Read More
d
- DecedentAn individual who has died. Read More
- DescendantsAn 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. Read More
- Disclaimer (Wills & Estate)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. To be a qualified disclaimer and thereby not treated as a gift by the(...) Read More
- Durable power of attorneyA power of attorney that does not terminate upon the incapacity of the person making the power of attorney. Read More
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- EstateAn estate, in common law, is the net worth of a person at any point in time alive or dead. It is the sum of a person's assets – legal rights, interests and entitlements to property of any kind – less all liabilities at that time. Read More
- Estate planningA 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. Tax and liquidity planning are part of this process. Read More
- Estate taxA tax imposed on a decedent’s transfer of property at death. An estate tax is to be contrasted with an inheritance tax imposed by certain states on a beneficiary’s receipt of property. More than 20 states have state estate taxes that differ from the federal system, so your estate could be(...) Read More
- Estate tax exemption amountAnother name for the unified credit amount, applicable exclusion amount, and credit shelter amount. Read More
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- Family officeAn arrangement to coordinate the legal, tax, and other needs of one or more families, either through a true office staffed with employees or through outsourcing to the family’s regular advisors. Frequently, a family’s private trust company serves as the family office. Read More
- Family trustA trust established to benefit an individual’s spouse, children or other family members. A family trust is often the bypass trust or credit shelter trust created under a will. Read More
- Fiduciary (Wills & Estates)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. Read More
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- Generation-skipping transfer (GST) taxA federal tax imposed on outright gifts and transfers in trust, whether during lifetime or at death, to or for beneficiaries two or more generations younger than the donor, such as grandchildren, that exceed the GST tax exemption. The GST tax imposes a tax on transfers that otherwise would(...) Read More
- Gift taxThe tax on completed lifetime transfers from one individual to or for the benefit of another (other than annual exclusion gifts and certain direct payments to providers of education and medical care) that exceed the gift tax exemption amount ($5 million inflation adjusted). Under the concept(...) Read More
- GrantorA 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(...) Read More
- Grantor trustA 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(...) Read More
- Gross estateA 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. Read More
- GST exemptionThe federal tax exclusion that allows a certain value of generation-skipping transfers to be made without the imposition of a generation-skipping tax. The GST exemption amount is $5 million inflation adjusted ($5.25 million in 2013). Read More
- GuardianAn individual or bank or trust company appointed by a court to act for a minor or incapacitated person (the “ward”). A guardian of the person is empowered to make personal decisions for the ward. A guardian of the property (also called a “committee”) manages the property of the ward. Read More
- GuardianshipA legal relationship created when a person or institution named in a will or assigned by the court to take care of minor children or incompetent adults. Sometimes called a conservatorship. Read More
h
- Health care power of attorneyA document that appoints an individual (an “agent”) to make health care decisions when the grantor of the power is incapacitated. Also referred to as a “health care proxy.” Read More
- HeirAn 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. Read More
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- IncomeThe 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 Read More
- Insurance trustAn irrevocable trust created to own life insurance on an individual or couple and designed to exclude the proceeds of the policy from the insured’s gross estate at death. Read More
- Interest of a beneficiaryThe right to receive income or principal provided in the terms of a trust or will. Read More
- IntestateWhen one dies without a valid will, such that the decedent’s estate is distributed in accordance with the state of Pennsylvania's intestacy law. Read More
- Irrevocable trustA trust that cannot be terminated or revoked or otherwise modified or amended by the grantor. As modern trust law continues to evolve, however, it may be possible to effect changes to irrevocable trusts through court actions or a process called decanting, which allows the assets of an existing(...) Read More
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- Joint tenancyAn ownership arrangement in which two or more persons own property, usually with rights of survivorship. Read More
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- Life beneficiaryAn individual who receives income or principal from a trust or similar arrangement for the duration of his or her lifetime. Read More
- Life estateThe 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(...) Read More
- Living trustA trust created by an individual during his or her lifetime, typically as a revocable trust. Also referred to as an “inter vivos” trust, “revocable living trust” or “loving trust.” Read More
- Living Will (Advanced Directive for Health Care)Pennsylvania living will laws are codified under the state's Advanced Directive for Health Care Act, which allows living wills to be revoked at any time without regard to declarant's mental or physical condition. Read More
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- Marital deductionAn 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. Read More
- Marital trustA trust established to hold property for a surviving spouse in A-B trust planning and designed to qualify for the marital deduction. A commonly used marital trust is a qualified terminable interest property trust, or QTIP trust, which requires that all income must be paid to the surviving spouse. Read More
- Medicaid TrustAn irrevocable trust. It holds the assets of the future nursing home patient. It must be properly worded and have an a trustee, which can be your children, other relative, or an independent third party. Read More
n
- No-Contest ClauseA 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. These clauses are not permissible in all instances or in all states. Section 2521 of the(...) Read More
- Non-Resident AlienAn 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 sitused in the United States. An estate tax treaty between that individual’s home country and the United(...) Read More
p
- Per stirpesA 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(...) Read More
- Personal representativeAn executor or administrator of a decedent’s estate. Read More
- Pour over willA will used in conjunction with a revocable trust to pass title at death to property not transferred to the trust during lifetime. Read More
- Power of appointmentA 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(...) Read More
- Power of attorneyAuthorization, 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(...) Read More
- Power of withdrawalA presently exercisable power in favor of the power holder other than a power exercisable in a fiduciary capacity limited by an ascertainable standard, or which is exercisable by another person only upon consent of the trustee or a person holding an adverse interest in the trust. Read More
- PrincipalThe 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. Also referred to as trust corpus. Read More
- Private trust companyAn entity formed by a family to serve as fiduciary for the estates and trusts of extended family members. Often referred to as a family trust company. Read More
- ProbateThe 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. Read More
- Probate taxA tax imposed by many jurisdictions on property passing under an individual’s will or by a state’s intestacy law. Read More
- Prudent Investor ActA law that provides for how fiduciaries must invest trust, estate and other assets they hold in a fiduciary capacity, such as a trustee or executor. Read More
- Prudent man ruleA legal principle requiring a trustee to manage the trust property with the same care that a prudent, honest, intelligent, and diligent person would use to handle the property under the same circumstances. See Prudent Investor Act. Read More
q
- Qualified domestic trustA marital trust (referred to as a “QDOT”) created for the benefit of a non-U.S. citizen spouse containing special provisions specified by the Internal Revenue Code to qualify for the marital deduction. Read More
- Qualified personal residence trustAn irrevocable trust (referred to as a “QPRT”) designed to hold title to an individual’s residence for a term of years subject to the retained right of the individual to reside in the home for the term, with title passing to children or other beneficiaries at the end of the term. Read More
- Qualified terminable interest propertyProperty (referred to as “QTIP”) held in a marital trust or life estate arrangement that qualifies for the marital deduction because the surviving spouse is the sole beneficiary for life and entitled to all income. Read More
r
- Real propertyThe legal definition of real property is land, and anything growing on, affixed to, or built upon land. This also includes man-made buildings as well as crops. Real property is best characterized as property that doesn’t move, or that is attached to the land. This is in contrast to personal(...) Read More
- Remainder interestAn interest in property owned by the remainderman that does not become possessory until the expiration of an intervening income interest, life estate or term of years. Read More
- ResidueThe 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. Also called the residuary estate. Read More
- Revocable trustA trust created during lifetime over which the grantor reserves the right to terminate, revoke, modify, or amend. Read More
s
- S corporationA corporation that has made a Subchapter S election to be taxed as a pass-through entity (much like a partnership). Certain trusts are permitted to be shareholders only if they make the appropriate elections. Read More
- Self-dealingPersonally benefiting from a financial transaction carried out on behalf of a trust or other entity, for example, the purchasing of an asset from a trust by the trustee unless specifically authorized by the trust instrument. Read More
- SettlorTerm frequently used for one who establishes or settles a trust. Also called a “trustor” or “grantor.” Read More
- Special needs trustTrust established for the benefit of a disabled individual that is designed to allow him or her to be eligible for government financial aid by limiting the use of trust assets for purposes other than the beneficiary’s basic care Read More
- Spendthrift provisionA trust provision restricting both voluntary and involuntary transfers of a beneficiary’s interest, frequently in order to protect assets from claims of the beneficiary’s creditors. Read More
- Springing power of attorneyA springing power of attorney is a power of attorney that only becomes effective at a certain date in the future or when some event occurs in the future. The date or the event must be written into the power of attorney. Oftentimes, the event that makes the power of attorney become effective(...) Read More
t
- Tangible personal propertyProperty 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,(...) Read More
- Tenancy by the entiretyA joint ownership arrangement between a husband and wife, generally with respect to real property, under which the entire property passes to the survivor at the first death and while both are alive, may not be sold without the approval of both. Read More
- Tenancy in commonA co-ownership arrangement under which each owner possesses rights and ownership of an undivided interest in the property, which may be sold or transferred by gift during lifetime or at death. Read More
- Terms of a trustThe 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. Read More
- TestamentaryRelating to a will or other document effective at death. Read More
- Testamentary trustA 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. Read More
- TestatorA person who signs a will. If a woman, may be referred to as the testatrix. Read More
- Transfer on death designationA 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. Read More
- TrustAn 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. Read More
- Trust instrumentA 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. Read More
- Trustee (Wills & Estate)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(...) Read More
u
- Unified creditA credit against the federal gift and estate tax otherwise payable by an individual or estate. Frequently referred to as the estate tax exemption amount, the exemption equivalent, or applicable exclusion amount. The current exemption amount is $5 million inflation adjusted ($5.25 million in 2013). Read More
- Uniform custodial trust actA law enacted by some states providing a simple way to create a trust for a minor or adult beneficiary without the need for a complex trust document. Such a trust typically is used for a trust of modest size, particularly for a disabled beneficiary. An adult beneficiary may terminate the trust(...) Read More
- Uniform transfers to minors actA law enacted by some states providing a convenient means to transfer property to a minor. An adult person known as a “custodian” is designated by the donor to receive and manage property for the benefit of a minor. The Pennsylvania Uniform Transfers to Minors Act (sometimes known as PAUTMA or(...) Read More
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- Virtual RepresentationA mechanism provided in a will or trust, or in some instances by state law, to permit a beneficiary to make decisions on behalf of another beneficiary who can claim or receive property only under or after them. Read More
w
- WillsA 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. Read More
- WillA 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. Read More
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