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ADMINISTRATION

The process by which assets in the name of a decedent are legally transferred to the decedent's rightful heirs or beneficiaries. Administration can either be through a trust or by will.

ADVANCE DIRECTIVE

An Oregon document nominating persons to manage your health care if you cannot do so and giving instructions to health care providers about your wishes during the final stages of an illness, generally requesting the withholding of extraordinary medical treatment, sometimes known as a "living will."

ANNUAL EXCLUSION

An exclusion from gift taxes for gifts by each donor to each donee which is available on an annual basis. The annual exclusion is currently $11,000 per donor, per donee, per calendar year (indexed for inflation after 1998). That is, a couple with three children could give $66,000 per year tax free to the next generation. In order to qualify for the annual exclusion, the gift must be a "present interest" i.e., a gift available immediately to the donee as opposed to one not available until the future or one requiring the consent of some other person.

APPLICABLE CREDIT AMOUNT

The amount of the Unified Credit that is applied against the tax computed for a taxpayer's estate. See also Credit Shelter/Trust Amount.

APPLICABLE EXCLUSION AMOUNT

The amount "sheltered" from federal tax by the taxpayer's Unified Credit, which increases as the Unified Credit increases. If the value of the estate is less than the Applicable Exclusion Amount for the year of death, no federal estate tax will be due. See Credit Shelter/Trust Amount for the amount of the credit and the applicable exclusion.

ASSIGNMENT

Transfer of title of an asset from one owner to another, such as from a person to a trust.

ATTORNEY-IN-FACT

A person named as an agent in a power of attorney.
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BENEFICIARY

A person who is, or will be, a recipient of benefits from a will, an estate or a trust.

BEQUEST

A gift of property made in a will or trust.

BOND

An insurance policy that insures that a fiduciary will faithfully perform his or her duties. In probate, the principal on the bond is the personal representative, the surety is the insurance company and the insured is the estate.

CONSERVATORSHIP

A probate court proceeding in which the judge considers whether a person has become so incapacitated that he or she needs someone to handle their money, business or financial affairs. The Court usually appoints a relative or an attorney as conservator, with a bond.
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COUNSELING-ORIENTED

A collaborative interaction between clients and their estate planning lawyer that begins with teaching the basics of the process and the options available to clients, and then listening to clients describe the unique dynamics of their family. This exchange defines the clients' goals and objectives, fears and concerns, and the standard of success.

CREDIT SHELTER/TRUST AMOUNT

The amount of property of a decedent on which the tax is essentially paid by the unified credit; currently being increased on the following schedule:

CREDIT SHELTER/TRUST AMOUNT

The amount of property of a decedent on which the tax is essentially paid by the unified credit; currently being increased on the following schedule:

        Exclusion Amt        Unified Credit
2002 and 2003        $1,000,000        $345,800
2004 and 2005        $1,500,000        $555,800
2006 to 2008        $2,000,000        $780,800
2009        $3,500,000        $1,455,800
2010        REPEALED        
2011        $1,000,000        $345,800

DECEDENT

A person who has died.

DISABILITY

A condition of helplessness preventing the person from conducting normal business, financial and personal functions, whether caused by mental or physical conditions.

DOD

A common abbreviation for date of death.
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ESTATE

An entity consisting of a person's property and all the rights and responsibilities relating to it. A trustee, personal representative, or conservator administers an estate. Sometimes legally referred to as the res or corpus.

ESTATE TAX

Sometimes used synonymously with the federal estate tax. Generically, any tax which is levied upon the estate as a whole, as opposed to being levied upon the takers of the property.

FAMILY / BYPASS TRUST

A trust which contains property on which federal taxes are paid at the death of the first spouse to die and which typically is not taxed at the second death. Where the optimum marital deduction plan is used, the tax on the property in this trust is paid by the Unified Transfer Credit, so the trust is sometimes called the Credit Shelter Trust.

FIDUCIARY

A person or corporation that occupies a position of trust and accountability. The word characterizes a relationship such as Trustee-Beneficiary, Attorney-Client, Doctor-Patient, Bank-Depositor, Principal-Agent, etc.

FUNDING

The process of transferring ownership or title of a trustmaker's assets into a trust estate by signing a new real estate deed, changing beneficiary designations, assigning personal property, leases, corporations or partnerships, changing title, changing ownership of financial accounts, etc.
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GIFT

A gratuitous transfer of property to someone else without receiving adequate consideration in return.

GIFT PROGRAM

Usually a planned program of making annual gifts to beneficiaries within the amount of the annual exclusion.

GRANTOR

In trust usage, the person who creates a trust (also known as Trustor, settlor or trustmaker).

GROSS-UP, GIFT TAXES

If gifts have been made within three years of the projected year of death on which gift taxes were actually paid out of pocket, those gift taxes will be added back to the value of the estate for purposes of computing federal estate taxes. This is called the gift tax gross up.

GUARDIANSHIP

A probate court proceeding in which the judge considers whether a person has become so disabled that he/she needs someone else to make decisions about the person's care. Generally, the Court appoints a relative as guardian, with a bond.
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HEALTH CARE DIRECTIVE/ADVANCE DIRECTIVE

An Oregon document nominating persons to manage your health care if you cannot do so and giving instructions to health care providers about your wishes during the final stages of an illness, generally requesting the withholding of extraordinary medical treatment, sometimes known as a "living will."

HEALTH CARE POWER OF ATTORNEY

A grant of power to a person to make or carry out the decision of the signor of the document, under terms of a state law, to withdraw food and water during the final stages of a fatal illness. In Oregon, this is included in the Advance Directive.

HEIR

A person who inherits something from a decedent under the Law of Descent and Distribution, where the decedent had no will. Heirs receive notice of probate court actions even if the decedent had a will.
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INCOME BENEFICIARY

The person who will receive the income from a trust for a specified period of time (e.g., the beneficiary's life). See also, Remaindermen.

INHERITANCE TAX

Any death tax levied by a non-federal government (e.g. a state) upon the takers of the property as opposed to the estate as a whole (see estate tax).

INTER-VIVOS

"During lifetime." A term used to describe a trust created during the lifetime of the grantor, distinguished from a testamentary trust created by a will.

INTERVIVOS TRUST

A trust created by agreement currently, as opposed to a testamentary trust created by a Will. Such a trust can be used to hold assets during a person's lifetime and thereby remove those assets from probate at the person's death. Also sometimes called a "living trust".

INTESTATE

When one dies without a valid will, or where a will does not dispose of all the decedent's property.

INVENTORY

In a probate court case, a list of the assets of the decedent or disabled person, prepared and signed by the fiduciary (personal representative or conservator).
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JOINT AND SURVIVOR ANNUITY

This is an annuity payable to two people (e.g. a husband and wife) through the lifetime of the survivor of the two of them. For qualified plans, this is the type of distribution mandated by law, unless both spouses consent to a different form of payment.

JOINT TENANCY WITH RIGHT OF SURVIVORSHIP

A form of ownership of property among natural persons, characterized by equality of ownership share and created by the same ownership document. As each owner dies that person's interest evaporates and the last survivor owns the entire title.

 

LAW OF DESCENT AND DISTRIBUTION

A state statute that prescribes the distribution of the property of a decedent who died without a valid will (intestate) to the decedent's heirs.

LEGACY

A cash bequest in a will.

LIFE INSURANCE GIFT VALUE

The value of a life insurance policy which is given to someone else normally is its interpolated terminal reserve value, which is generally very close to the cash surrender value. In most cases, this gift value will be less than the face value of the policy. Where the insured is in bad health and could not obtain new insurance within normal cost limits, the gift value of the policy may be greater.

LIVING TRUST

A trust created by agreement currently, as opposed to a testamentary trust created by a Will. Such a trust can be used to hold assets during a person's lifetime and thereby remove those assets from probate at the person's death. Also sometimes called an "intervivos trust".

LIVING WILL

A set of signed, written instructions telling friends, relatives, and health care providers not to interfere with the process of dying by using machines or other heroic measures to delay the natural course of a terminal illness. Some states prescribe the form by statute. In Oregon, the living will is called the Advance Directive.

LUMP SUM GIFT

Typically a gift which is made on a one-time basis only, as opposed to a gift program which is designed to use the annual exclusion on a yearly basis.
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MARGINAL ESTATE TAX RATE

The tax rate at which the top dollars in an estate are taxed.

MARITAL DEDUCTION

A deduction allowed on the federal estate tax return (Form 706) for property passing in a qualifying manner to a surviving spouse. Prior to 1981, there was a maximum limit of marital deduction that could be taken. This maximum was the greater of one-half of the decedent's separate property, or $250,000. From 1982 on, the marital deduction was allowed without limit for any qualifying property (essentially property which provided the surviving spouse with a fee interest in the asset). For an exception, see Qualified Terminable Interest Property.

MINIMUM DISTRIBUTIONS

In retirement planning, a participant is required to begin making withdrawals from his or her retirement plans in the year after he or she reaches age 70-1/2. These withdrawals must meet certain minimum distribution requirements, based on the payout election the participant makes at that time. In general, the participant must withdraw the funds over his or her life expectancy (if not more rapidly).

NET TAX

Generally the actual amount of tax which is payable in a given situation, after all deductions, credits and other adjustments have been made.
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OPTIMUM MARITAL DEDUCTION

The technique by which only that amount of a decedent's estate not "sheltered" by the decedent's unified credit passes under the marital deduction to the surviving spouse.

PICKUP STATE

A state which does not impose an estate tax or an inheritance tax, but does "pick up" an amount equal to the federal state death tax credit.

PERSONAL PROPERTY

"Tangible" personal property means anything moveable that you can touch. "Intangible" personal property refers to financial assets such as stocks, bonds, bank accounts, insurance, etc.

PERSONAL REPRESENTATIVE

A person or institution appointed by the probate court (nominated in a will, if any) to administer the decedent's estate. Formerly known as Executor (for a will), or Administrator (without a will).

PETITION

A formal request to a court to make a finding of fact and enter an order or judgment based upon the facts and the law.

P.O.D.

An instruction to a depository institution such as a bank to pay the funds in the account to the beneficiary named in the memorandum signed by the account owner.

POUR-OVER

A will which names an existing trust as the principal beneficiary. Thus, the probate estate "pours over" into the trust estate.

POWER OF ATTORNEY

A grant of power to a person (agent) to make or carry out the decision of the signer of the document, under terms of a state law, which expires upon the death or disability of the signer. A durable power document continues in effect during the signer's disability if and only if it contains specific language required by state law. A general power document contains no limitations on the grant of power. A springing power takes effect only upon the happening of an ascertainable event such as the declaration of disability of the signer.

PROBATE

The process of administration of a decedent's estate under the authority of the probate court.
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QUALIFIED PLAN ASSETS

Property held in an I.R.A., 401(k) plan or other pension plan on which the owner has not yet paid federal income tax; sometimes called "tax-deferred."

QTIP TRUST (QUALIFIED TERMINABLE INTEREST PROPERTY)

Although most limited or terminable interests in property (such as life estates) do not qualify for the marital deduction, in 1981 laws were enacted to allow a marital deduction for such interests if all of the income were payable to the surviving spouse in all events during the survivor's lifetime. This type of property is known as Qualified Terminable Interest Property.

REAL PROPERTY

Land, and anything permanently attached to it.

REMAINDERMEN

The persons who will receive the benefit from a trust after the death of the income beneficiary(ies).

REQUIRED BEGINNING DATE (RBD)

This is the date on which a retirement plan participant is required to begin making distributions from his or her retirement plan(s), and is April 1st of the year following the year the participant reaches age 70-1/2.

RESIDUARY

The clause in a will that disposed of all of the decedent's property not previously mentioned. This clause usually begins, "All the rest, residue and remainder of my property, of whatsoever kind and nature, and wherever situated, I give . . . "
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ROLLOVER (SEE SPOUSAL ROLLOVER)

SEPARATE PROPERTY

A person's earnings while residing in a separate property state or prior to marriage in a community property state, and the assets acquired with those funds. Also, in separate property jurisdictions and most community property jurisdictions, property received by inheritance, gift or personal injury settlement or award, together with income generated therefrom.

SETTLOR

Same as grantor.

SPOUSAL ROLLOVER

Where retirement plans and IRAs are payable to a surviving spouse, the survivor will have an option to "roll over" the funds into his or her own IRA, thereby deferring the income tax on the plan funds.

SURETY

The guarantor of the principal's performance on a surety bond.

SURVIVOR

Usually referring to the surviving spouse in a husband and wife couple.
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TENTATIVE TAX

The gross value of the federal estate tax prior to application of the Applicable Exclusion Amount and the credit for gift taxes paid after 1976 (and any other applicable credits).

TESTAMENT

Same as a will.

TESTATOR

The person who signs the will or testament.

T.O.D.

Transfer on death. A memorandum attached to the ownership document of non-cash personal property, such as a car title or stock certificate, signed by the owner, changing title of the property to the beneficiary named in the memorandum at the death of the owner.

TRUST

An agreement between the trustmaker and the trustee, naming the trustee to control the trustmaker's property, or some of it, for the benefit of a beneficiary. The trust agreement defines the trustee's powers and duties.

TRUSTEE

A person or corporation appointed by a grantor to take control of trust property and administer it for the benefit of a beneficiary named by the grantor in the trust document. The grantor may also designate himself as the trustee and beneficiary. The trustee has a strict duty of accountability (fiduciary) to the beneficiary.

TRUSTMAKER

The person who creates a trust (also known as a grantor or settlor).
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UNIFIED CREDIT

A credit applicable against federal gift and/or estate taxes. The Unified Credit has been at varying levels since 1976, but reached a level of $192,800 for 1987-1997. The Credit is increasing again between 2002 and 2009 (see Credit Shelter Trust Amount). It is now referred to as the Applicable Exclusion Amount.

 

WILL

A document (testament) executed by a testator, in the presence of two witnesses, which sets out the testator's instructions for winding up his or her affairs after death. The will has no effect until the testator dies.