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GLOSSARY OF ESTATE PLANNING TERMS

Beneficiary. A person designated to receive the income, principal, or proceeds of a trust, estate, insurance policy, or retirement plan.

Charitable Trust. A trust having a charitable organization as a life-time beneficiary (Charitable Lead Trust) or a death beneficiary (Charitable Remainder Trust).

Federal Estate Tax. The tax paid to the federal government by the personal representative or trustee of a person’s estate or trust out of the estate or trust assets.

Fiduciary. A person in a position of trust or confidence. The fiduciary is bound by a duty to act in good faith. Examples: trustees, executors, and administrators.

Future interest. A property interest which cannot be currently possessed, used or enjoyed.

Gift tax. Tax on gifts generally paid by the person making the gift rather than the recipient.

Gift Tax Annual Exclusion. The provision in the tax law that exempts from federal gift taxes the first $12,000 (as adjusted for inflation) in present-interest gifts a person gives to each recipient during a year.

Gross Estate. The total value of an individual’s property for estate-tax purposes.

Guardian (or Conservator). A person legally appointed to manage the rights and/or property of a person incapable of taking care of his or her own affairs. A “guardian ad litem” is appointed by the court to prosecute or defend action for a minor.

Heir. A person entitled to inherit a portion of the estate of a person who has died without a Will.

Interest. Any right in property.

Intestate. Dying without a Will.

Joint ownership. The ownership of property by two or more persons, usually with the right of survivorship.

Last Will and Testament. A legally executed document which explains how and to whom a person would like his or her property distributed after death.

Letters of Administration. Letters issued to a personal representative by the probate court giving him oher power to affect and transfer the decedent's probate property.

Life Insurance Trust. An irrevocable trust that owns a person’s life insurance policy as its principal asset. Properly created and maintained, the proceeds of the life insurance policy owned by a life insurance trust may not be considered as part of the decedent's Gross Estate for estate tax purposes. Sometimes called an Irrevocable Life Insurance Trust or "ILIT".

Living Trust. A trust that goes into effect while the trust creator is still living. Usually meant to include all property which does not pass by title, beneficiary designation or otherwise, so as to avoid probate. A Living Trust, in and of itself, does not avoid estate taxes.

Personal Representative (or Executor or Special Administrator). Someone appointed by a person in a Will or by the Court to carry out the Will’s provisions or the distributions pursuant to statute. A “ co-personal representative” acts as personal representative with another or others. A "successor" personal representative takes the place of a personal representative who can no longer hold office.

Power of Appointment. The authority given by one person to another to decide who will receive and enjoy an interest in property under a Will or trust arrangement.

General Durable Power of Attorney. A document which authorizes a person to act as another person’s agent even after that person is found to be disabled.

Probate. A state level process that determines, among other things, the validity of a Will (if any), the value of assets in the name of the decedent at the time of death, and the validity of debts or claims against an estate. In probate the Register of Wills or Probate office will oversee accountings, income and disbursements from the estate.

Probate Court. A court with the power to probate and settle Wills and administer intestate estates. In Maryland this power is given to the Orphan's Court; in DC and Virgina that power resides in divisions of the regular courts.

Probate estate. Those estate assets which fall within the jurisdiction of the probate court before being transferred to another person. Retirement accounts and life insurance proceeds, for example, are not generally part of the probate estate.

Testator. A person who makes or has made a Will.

Testamentary trust. A trust established in a will which comes into effect after the testator’s death.

Trust. A legal relationship where property is transferred to and managed by a person or institution for the benefit of another person.

Trust Agreement. The document which creates a trust and establishes the rules which control the trust’s management.

Trustee. The person or institution entrusted with the duty of managing property placed in the trust. A “co-trustee” serves as trustee with another. A “contingent trustee” becomes trustee upon the occurrence of a specified future event. A "successor" Trustee takes the place of a Trustee who can no longer perform his or her duty.


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