Glossary
No terms for this letter.
A trust
In a joint revocable trust, the subtrust that holds the surviving spouse’s portion of an A-B or A-B-C trust; it is established upon the death of the first spouse. Also called a survivor’s trust.
In an individual trust, a subtrust that holds the portion of the trust property qualifying for the marital deduction; it is established upon the grantor’s death. Also called a marital trust, marital deduction trust, QTIP trust, or spousal trust.
A-B trust
A joint trust that divides a married couple’s property into the surviving spouse’s portion (A trust) and the deceased spouse’s portion (B trust) upon the first spouse’s death. Typically used for a married couple that does not have a taxable estate.
An individual trust that includes a provision that divides the grantor’s property into an A trust and a B trust upon the grantor’s death according to a marital deduction or other funding formula. Marital deduction funding formulas often create a share covered by all or part of the grantor’s applicable exclusion amount (B trust) and another share covered by the unlimited marital deduction (A trust). Typically used for a married individual with a taxable estate for federal estate tax purposes.
This trust structure generally allows a grantor to provide for the grantor’s surviving spouse and control the disposition of the grantor’s assets remaining upon the death of the surviving spouse.
A-B-C trust
A joint trust that divides a married couple’s property into the surviving spouse’s portion (A trust) and divides the deceased spouse’s portion into a B trust and a C trust upon the deceased spouse’s death according to a marital deduction or other funding formula. Marital deduction funding formulas often create a share covered by all or part of the grantor’s applicable exclusion amount (B trust) and another share (or shares) covered by the unlimited marital deduction (C trust). Typically used for a married couple with a taxable estate for federal estate tax purposes. If the married couple has a taxable estate for state estate tax purposes as well, the C trust must be further divided into exempt and nonexempt shares.
An individual trust that includes a provision that divides the grantor’s property into an A trust, a B trust, and a C trust upon the grantor’s death according to a marital deduction or other funding formula. Marital deduction funding formulas often create a share covered by all or part of the grantor’s applicable exclusion amount (B trust), a share covered by the unlimited marital deduction for federal purposes (A trust), and a share covered by the unlimited marital deduction for state purposes (C trust). Typically used for a married individual with a taxable estate for federal and state estate tax purposes.
administration
For an estate, the court-supervised process for distributing a decedent’s probate assets after the decedent’s death. The estate administration process is also called probate. Assets that must pass through probate include assets that were individually owned by the decedent at death that do not pass by contract (e.g., via beneficiary designation, transfer-on-death registration, or pay-on-death designation) or by operation of law. The probate process differs by state (and even by county in some states). A personal representative is appointed by the court and charged with the duty of marshaling and inventorying the assets; paying the decedent’s debts, taxes, and expenses; and distributing the remaining assets in accordance with the terms of the will if a valid will is admitted to probate, or the state’s intestacy laws if the decedent did not have a valid will. Some states offer a faster and less costly form of probate (sometimes called summary administration or small estate affidavit) for estates composed of probate assets under a certain value.
For a trust, the process of managing and distributing trust assets after a trust is established or upon the grantor’s death. The trust administration process is often private, but court involvement may be necessary or appropriate in certain circumstances.
administrative costs
Attorney’s and accountant’s fees; fiduciary commissions; costs of appraisals, court filings, and public recordings; and other costs in the course of a postdeath administration. Often deductible for estate tax purposes and payable from estate or trust assets prior to distribution of assets to beneficiaries.
administrator
Person named by the court to administer a probate estate when there is no will or the will did not name a personal representative. A female administrator is called an administratrix. Also called an executor or executrix (female).
ancillary administration
An estate or probate administration that is in addition to the estate or probate administration in the decedent’s home state. Typically required when the decedent owns real property in another state that was titled in the decedent’s name and did not pass by operation of law upon the decedent’s death.
annual gift tax exclusion
Amount a donor can give to any donee each year that is not subject to gift tax. In 2022, the annual gift tax exclusion amount is $16,000 per nonspouse donee ($32,000 if the donors are married and elect to split gifts for that year). The exclusion amount may be adjusted for inflation over time. The unlimited marital deduction applies to gifts to spouses who are US citizens while the marital deduction is generally limited for gifts to spouses who are not US citizens. See also marital deduction.
assets
Any interest in property that can be owned, including real property; checking, savings, and investment accounts; retirement accounts; pension plans; stocks; bonds; life insurance; annuities; interests in corporations, limited liability companies, partnerships, and other business entities; oil, gas, and mineral interests; loans, promissory notes, and other receivables; tangible personal property such as furniture, jewelry, art, clothing, and collectibles; and intangible personal property such as patents and trademarks.
assignment
A document that transfers an interest in one or more assets from the owner to another person or entity. Often used when transferring certain assets such as personal property, receivables, or interests in business entities, from a grantor to the grantor’s trust.
B trust
The subtrust that holds a deceased spouse’s portion of an A-B trust or the portion of the deceased spouse’s property to which the deceased spouse’s applicable exclusion amount is applied in an A-B-C trust. Also called a credit shelter, bypass, or family trust. Designed to be exempt from federal estate and generation-skipping transfer taxes.
basis
Amount of an owner’s capital investment in an asset, often what the owner paid for the asset. Used to determine gain or loss upon the sale, exchange, or other disposition of the asset for income tax purposes.
basis adjustment
Adjustment of the basis of an asset upon the death of the asset’s owner to the fair market value of the asset as of the decedent’s date of death (or the alternate valuation date, if used on the decedent’s estate tax return). Also called stepped-up basis, because assets often appreciate above the owner’s basis and the basis is stepped up as a result. If a beneficiary sells an inherited asset soon after the decedent’s death, a stepped-up basis can save a considerable amount in capital gains tax. See also basis and gain.
beneficiaries
The persons or entities designated to receive or benefit from a particular asset.
by representation
A way of distributing a decedent’s property so that the living descendants of the same generation will each receive the same share. Specifically, property distributed by representation is divided into as many equal shares as there are living descendants in the nearest degree of kinship to the decedent and deceased descendants in the same degree who left then-living descendants. Each then-living descendant in the nearest degree will receive one share, and the share of each deceased descendant in the same degree will be divided among his descendants in the same manner. Compare to per capita at each generation and per stirpes.
bypass trust
The assets in this trust bypass federal estate and generation-skipping transfer taxes. Also called a B trust.
C trust
certificate of trust
A document that verifies the trust’s existence, the identity of the current and successor trustee(s), and certain trustee powers. It is intended to keep the trust document private and serve as a replacement for the trust document for certain transactions such as the trust’s purchase or sale of real property. It does not reveal any information about the trust assets, beneficiaries, or the dispositive provisions of the trust. Also called certification of trust, affidavit of trust, or trustee’s affidavit.
co-trustees
Two or more individuals or entities who have been named to act together as trustees.
codicil
A written amendment to a will.
common trust
A subtrust established in a trust document for the benefit of two or more individuals or entities, typically for a period of time or until one or more contingencies are met, such as the youngest beneficiary reaches age twenty-five or graduates from college.
community property
Property acquired by either spouse during marriage while living in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin, or by opting into community property law treatment in Alaska). Each spouse generally owns one-half of the assets classified as community property in the event of divorce or death unless the parties agree to another arrangement. Can include income, property paid for with community property funds, retirement accounts, and debts. Does not include assets owned by either spouse prior to the marriage or after a legal separation or gifts or inheritances received by one spouse during the marriage. Compare to separate property.
conservator
A person who is legally responsible for an incapacitated person’s financial affairs, care, or both. If appointed by a court, the conservator is under the court’s supervision. A conservator’s duties and title can vary by state or type of conservatorship. Also called a guardian.
conservatorship
A court-supervised legal relationship in which a conservator, appointed by a court, cares for a person who is unable to manage his or her own affairs due to incapacity. A conservator’s duties and title can vary by state or type of conservatorship. Also called a guardianship.
contest
A dispute regarding or challenge to the validity or terms of a will or trust.
contingent beneficiary
A person or organization named to receive assets if the primary beneficiary named in the decedent’s will, trust, or beneficiary designation (for life insurance or an account) dies before the decedent.
corporate trustee
A financial institution, trust company, or other professional entity that offers fiduciary services and serves as trustee or co-trustee of a trust. Also called a corporate fiduciary.
credit shelter trust
A trust in which the assets are sheltered by the deceased spouse’s applicable exclusion amount or tax credit. See also B trust.
creditor
A person or entity to whom money is owed.
custodian
A person named to manage assets on behalf of a minor under the Uniform Transfer to Minors Act. In most states, the minor may receive the assets upon reaching the state’s age of majority. May also refer to an entity holding or managing assets on behalf of the owner, such as the custodian of a participant’s retirement account.
decedent
A person who has died.
deed
A document that transfers title to an interest in real property to one or more persons or entities. See also warranty deed and quitclaim deed.
descendant’s trust
A subtrust established under a trust document for the benefit of the grantor’s descendant (usually a child or grandchild).
disclaimer
A written document in which a person or entity (the disclaimant) voluntarily renounces a legal claim to property or an interest in property from a decedent. A disclaimer causes the disclaimant to be treated as though he or she is also deceased. As a result, the property or interest in property passes instead to the next heir or beneficiary in line to receive the property or interest in property in accordance with the terms of the decedent’s will, trust, beneficiary designation, or the laws of intestacy. Disclaimers are governed by federal and state law. A disclaimer that is qualified under federal tax law will not cause transfer taxes.
discretion
The degree of power to make a decision or judgment. A trustee with sole and absolute discretion to make distributions from a trust must still exercise the trustee’s discretion within certain legal bounds. Limitations on a trustee’s exercise of discretion and factors for the trustee’s consideration when exercising discretion may come from statutory law, common law, case law, or the trust document.
disinherit
To prevent an heir from inheriting property, usually by a statement excluding the heir as a beneficiary under the terms of a will, trust, or both.
distribution
A payment of cash, one or more assets, or a combination of both to a person or entity who is entitled or authorized to receive it.
donee
The recipient of a gift.
donor
A giver of a gift.
durable power of attorney
A legal document that gives another person (the agent or attorney-in-fact) full or limited legal authority to act on behalf of another person (the principal) with respect to the principal’s property and financial affairs, often as a result of the principal’s absence or incapacity. Called durable because the document is executed by the principal when the principal has capacity but remains valid in the event of the principal’s subsequent incapacity. Becomes invalid at the principal’s death, meaning that the agent may no longer act on behalf of the principal with respect to the principal’s property or financial affairs.
equity
The market value of an asset less any claim, lien, loan, or other encumbrance on or against the asset.
estate
Property and assets of all types owned by a person at death. Can also refer to a decedent’s probate estate or taxable estate for federal or state estate tax purposes.
estate taxes
A federal or state tax on a decedent’s right to transfer property at death. Assessed against the total value of assets owned by a decedent at death, less the decedent’s debts, certain administrative expenses, and the value of any property qualifying for marital, charitable, or other deductions, plus the value of the decedent’s lifetime taxable gifts. The tax is then reduced by the applicable unified credit. Also called death or transfer taxes.
executor
Person or entity named in a will to carry out its instructions. A female executor is sometimes called an executrix. Also called a personal representative.
federal estate tax exemption
The amount of a person’s estate that is exempt from federal estate taxes. In 2020, the exemption is $11,580,000. For a list of federal estate tax exemption amounts in recent years, visit Estate Tax, Internal Revenue Service, https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax.
fiduciary
A person with a legal duty to act primarily for another person’s benefit. Implies great confidence and trust; usually associated with a trustee or a personal representative.
funding
The process of re-titling assets such as real estate, financial accounts, stocks, business interests, and other possessions to trusts.
gain
The difference between what an owner receives for an asset when it is sold and the owner’s basis in the asset (often what the owner paid for it). Used to determine the amount of capital gains tax due. See also basis.
generation-skipping transfer (GST) tax
A tax on assets that "skip" a generation and are left directly to grandchildren or younger generations. In 2020, the GST tax exemption is the same as the federal estate tax exemption with a tax rate of 40 percent.
gift
A transfer of property from a living person to another person or entity for nothing or less than full fair market value in return. May be taxable or nontaxable. See also annual gift tax exclusion, gift tax, and taxable gift.
gift tax
A tax on the transfer of property by a living person to another person for nothing or less than full fair market value in return. The tax applies whether the donor intends the transfer to be a gift or not. In 2022, $16,000 per person per year is exempt from gift tax. Generally, gifts that are not taxable include tuition or medical expenses that the donor pays for someone else (the educational and medical exclusions), gifts to the donor’s spouse, and gifts to political organizations and qualifying charities. See also annual gift tax exclusion and taxable gift.
grantor
A person who creates a trust. There may be more than one grantor of a trust, such as when a married couple creates a joint trust together. Also called the settlor, trustor, trustmaker, or, in the case of a testamentary trust created under a will, the testator.
gross estate
The value of an estate (everything a decedent owns) before deductions are made. Gross estate property may include cash and securities, real property, insurance, trusts, annuities, business interests, and other assets. The fair market value of these assets is used, not necessarily what the decedent paid for them or what their values were when the decedent acquired them. The total of all of these items is the decedent’s gross estate. Compare to taxable estate.
guardianship
See conservatorship.
healthcare power of attorney
A legal document that gives another person (the agent, healthcare agent, healthcare proxy, healthcare surrogate, or other term) the authority to make certain healthcare decisions on behalf of another person (the principal) in the event the principal is unable to make them. Also called a medical power of attorney, designation of healthcare surrogate, or medical proxy.
healthcare proxy
heir
A person who is entitled by law to inherit property from a decedent.
holographic will
A will that is entirely handwritten and signed by the testator. Valid in some states, although specific requirements vary.
homestead exemption
A legal provision that protects the value of an owner-occupied primary residence from property taxes and creditors following the death of a homeowner spouse. May also be applied to reduce property taxes while the homeowner spouse is living. Availability varies by state.
incapacitated/incompetent
Unable to manage one’s own affairs, either temporarily or permanently. Lack of legal power.
independent administration
A form of probate available in many states, it is intended to simplify the probate process by requiring fewer court appearances and less court supervision.
inheritance
The assets received from someone who has died.
inheritance taxes
A tax imposed by certain states on those who inherit assets from the estate of a decedent. The applicable tax rate depends on the state of residence, the value of the inheritance, and the beneficiary’s relationship to the decedent.
inter vivos
Latin term that means “between the living.” An inter vivos trust is created while the grantor is living instead of after death. A revocable living trust is an inter vivos trust.
intestate
Without a will. May be used to describe a person who has died without having made a will (e.g., "he died intestate") or that person's estate (e.g., "his intestate estate").
irrevocable trust
A trust that cannot be amended, restated, or revoked once it is executed.
joint ownership
A form of ownership in which two or more persons own the same asset together. Types of joint ownership include joint tenants with right of survivorship, tenants in common, and tenants by the entirety.
joint tenants with right of survivorship
A form of joint ownership in which the deceased owner’s share of the asset automatically and immediately transfers to the surviving joint tenants without a probate being required.
joint trust
One living trust established by two or more individuals (usually a married couple). May have gift tax consequences if the individuals are not married or are not US citizens. Compare to separate trust.
land trust
An entity that holds real property for the benefit of certain other persons or entities. Often used for privacy because title to the real property is held in the name of the trustee of the trust. May also refer to a private, nonprofit organization that, as all or part of its mission, actively works to conserve land by undertaking or assisting in land or conservation easement acquisition or by its stewardship of such land or easements.
liquid assets
Cash and other assets (like marketable securities or stocks) that can be converted into cash quickly and easily.
living probate
The court-supervised process of managing the assets of a person who is incapacitated. See also conservatorship.
living trust
A written legal document that creates an entity to which an individual transfers ownership of his or her assets. Contains instructions for managing those assets during the individual’s lifetime and for their distribution upon the individual’s incapacity or death. Avoids probate at death and court control of assets at incapacity. A trust created during one’s lifetime. Also called a revocable trust, revocable living trust, or inter vivos trust.
living will
A legal document detailing a person’s wishes regarding medical treatment if the person is no longer able to express informed consent. Often states the person’s desire not to be kept alive by artificial means when the person has a terminal condition or is in a vegetative state. May also be called an advance directive and combined or used in conjunction with the person’s health care power of attorney.
marital deduction
A deduction that may be made on a federal or state gift or estate tax return that lets one spouse transfer property to the other spouse, during lifetime or at death, with reduced or no federal or state gift or estate taxes imposed. To qualify for the marital deduction, transfers must generally be made outright or meet certain requirements. For estate tax purposes, the marital deduction allows married couples to delay the payment of estate taxes on property inherited from the first spouse to die upon the death of the surviving spouse. The marital deduction is unlimited for transfers to spouses who are US citizens. The marital deduction is generally limited (to $157,000 for 2020) for transfers to spouses who are not US citizens, with some exceptions.
marital trust
See A trust for an individual trust.
Medicaid
A joint federal and state healthcare program that helps with medical costs for some people with limited income and resources. Medicaid programs vary from state to state, but most healthcare costs are covered if an individual qualifies for both Medicare and Medicaid. See also Medicare.
Medicare
A federal health insurance program for people who are sixty-five or older, certain younger people with disabilities, and people with end-stage renal disease (permanent kidney failure requiring dialysis or a transplant, sometimes called ESRD).
minor
Person who is under the legal age of majority, which varies by state but usually falls between ages eighteen and twenty-one.
net estate
See taxable estate.
net value
The fair market value of an asset minus any loan or debt.
pay-on-death designation
A method of transferring a bank account to one or more beneficiaries upon the death of the account owner. Must generally be completed on a form provided by the bank. An account with a pay-on-death designation may be referred to as a pay-on-death account or Totten trust.
per capita at each generation
A Latin term (per capita) that means “by head.” A way of distributing a decedent’s property so that living descendants of the same generation will each receive the same share. Specifically, property distributed per capita at each generation is divided into as many equal shares as there are, at that time, descendants in the nearest degree of kinship to the decedent and the deceased descendants in the same degree who left then-living descendants. Each then-living descendant in the nearest degree receives one share. The remaining shares, if any, are combined and then divided in the same manner among the then-living descendants of the deceased descendants as if the then-living descendants who received a share, and their descendants, had predeceased the date of distribution. Compare to by representation and per stirpes.
per stirpes
Latin term that means “by root” or “by branch.” A way of distributing a decedent’s property so that each branch of the decedent’s family will receive an equal share. Specifically, property distributed per stirpes is divided into as many shares as there are then-living children of the decedent and deceased children who left then-living descendants. Each then-living child will receive one share, and the share of each deceased child will be divided among the deceased child’s then-living descendants in the same manner. Compare to by representation and per capita at each generation.
personal property
May be tangible or intangible. Tangible personal property includes furniture, household items, clothing, jewelry, automobiles, artwork, and collectibles. Intangible personal property includes patents, trademarks, and copyrights.
personal representative
Another term for an executor or administrator.
pour-over will
A will used for estate planning together with a revocable living trust. It directs that any assets left out of the decedent’s living trust upon the decedent’s death become part of (i.e., pour over into) the decedent’s living trust (typically through probate).
power of attorney
A legal document that gives someone (the agent or attorney-in-fact) legal authority to act on behalf of another person (the principal) in the principal’s absence. Ends at incapacity (unless it is a durable power of attorney) or death.
probate
The court-supervised legal process of validating a will, paying debts, and distributing assets after death. See also administration for an estate.
Assets that must pass through probate include assets that were individually owned by the decedent at death that do not pass by operation of law or contract (e.g., assets that pass via beneficiary designation, transfer-on-death registration, or pay-on-death designation). The probate process differs from state to state (and even county to county in some states). A personal representative must be appointed by the court and is then charged with the duty of marshalling and inventorying the assets; paying the decedent’s debts, taxes and expenses; and distributing the remaining assets in accordance with either the terms of the will, if a valid will is admitted to probate, or the state’s intestacy laws, if the decedent did not have a valid will. Some states may offer a faster and less costly form of probate (sometimes called summary administration or small estate affidavit) for estates composed of probate assets under a certain value.
probate estate
The assets that go through probate after a person dies. These usually include assets the person owns in his or her individual name and those paid to the person’s estate. Usually does not include assets owned jointly with right of survivorship or as tenants by the entirety, or assets subject to pay-on-death designations, transfer-on-death accounts, or beneficiary designations. Assets in a trust also do not go through probate except in limited circumstances, such as a pour-back provision for Medicaid purposes in the trust document.
qualified domestic trust (QDOT)
A type of trust with specific requirements that allows a surviving spouse who is not a US citizen to qualify for the marital deduction.
qualified terminable interest property (QTIP) trust
A type of trust that allows a deceased spouse to provide assets for the surviving spouse’s lifetime benefit while still allowing the deceased spouse to control the distribution of the assets remaining at the death of the surviving spouse. Property held by a QTIP trust qualifies for the marital deduction so that the payment of any estate taxes on the assets is delayed until the death of the surviving spouse.
qualifying Subchapter S trust (QSST)
A type of trust that meets certain Internal Revenue Service qualifications and is allowed to own Subchapter S stock.
quitclaim deed
A type of deed that transfers title to or ownership of real property but makes no guarantees as to the status of the title or rights held by the owner (called the grantor on the deed). Compare to warranty deed.
real property
Land and property that is permanently attached to land (like a building or a house). Also called real estate.
recorded deed
A deed that has been filed with the county’s official land records. This creates a public record of all changes in ownership of property in the county.
required beginning date (RBD)
The date an individual must begin taking required minimum distributions from his or her tax-deferred retirement plans. Usually, it is April 1 of the calendar year following the calendar year in which the individual turns seventy-two. Roth IRAs do not require withdrawals until after the death of the owner.
required minimum distribution (RMD)
The minimum amount an individual is required to withdraw each year from his or her tax-deferred retirement plan after the individual reaches the required beginning date. This amount is determined by dividing the year-end value of the individual’s tax-deferred retirement account by a life expectancy divisor found on a chart provided by the Internal Revenue Service. If the individual does not take any distributions, or if the distributions are not large enough, the individual may have to pay a large excise tax on the amount not distributed as required. Roth IRAs do not require withdrawals until after the death of the owner.
revocable trust
See living trust.
separate property
Generally, all assets that a spouse acquires prior to marriage and assets acquired by gift or inheritance during marriage. Compare to community property.
separate trust
A trust established by one person. A married couple has separate trusts if each spouse has his or her own trust with its own assets. Also called an individual trust. Compare to joint trust.
settle an estate
The process of handling the final affairs (i.e., valuation of assets, payment of debts and taxes, distribution of assets to beneficiaries) after someone dies. See administration.
settlor
See grantor.
special needs trust
A type of trust that allows an individual to provide for a disabled beneficiary without disqualifying the beneficiary from government benefits. Also called a supplemental needs trust.
specific distribution
A separate provision in a trust document for the distribution of a certain amount or asset to a specific individual, class of individuals, or an organization upon the death of a grantor. Also called a specific bequest if included in the terms of a will.
spendthrift clause
Protects assets in a trust from a beneficiary’s creditors.
spouse
A married person.
stepped-up basis
See basis adjustment.
Subchapter S corporation stock
Stock in a corporation that has chosen to be subject to the rules of Subchapter S of the Internal Revenue Code.
successor trustee
Person or institution named in the trust document to serve as trustee in the event that the prior trustee dies, resigns, becomes incapacitated, or otherwise is unable to serve.
surviving spouse
The spouse who is living after the other spouse has died.
survivor’s trust
See A trust for a joint trust.
tax-deferred retirement plan
A retirement savings plan (like an IRA, 401(k), pension, profit sharing, or Keogh plan) that qualifies for special income tax treatment. The contributions made to the plan and subsequent appreciation of the assets are not taxed until they are withdrawn at a later time—ideally, at retirement, when the participant’s income and income tax rate are lower.
taxable estate
The value of an estate after allowable deductions are made. Deductions may include mortgages and other debts, estate administration expenses, and property that passes to the decedent’s surviving spouse and qualified charities. Also called net estate. Compare to gross estate.
taxable gift
Generally, a gift of more than $16,000 in one year to someone other than the donor’s spouse, a political organization, or a qualifying charity that is not for the payment of the donee’s tuition or medical expenses. The value of the taxable gift reduces the donor’s gift tax exemption. After a donor has used up the donor’s gift tax exemption, additional gifts will be taxed. In 2022, the federal gift tax exemption is the same as the federal estate tax exemption ($11.58 million), and the tax rate is 40 percent. The donor is generally responsible for paying the gift tax.
tenants by the entirety
A form of joint ownership available in some states in which a married couple owns the same property together. When one spouse dies, the deceased spouse’s share of the property automatically transfers to the surviving spouse without requiring a probate.
tenants in common
A form of joint ownership in which two or more persons own the same asset. Upon the death of a tenant in common (or co-owner), the deceased co-owner’s share of the asset transfers to his or her estate instead of being automatically transferred to the surviving co-owners. If the deceased co-owner’s share was owned in his or her individual name (as opposed to a trust), the transfer of the deceased co-owner’s share will require a probate.
testamentary trust
A trust in a will. Can only go into effect at death. Does not avoid probate.
testate
With a valid will. May be used to describe the person who has died having made a will or that person’s estate.
title
Document proving ownership of an asset.
Totten trust
See pay-on-death designation.
transfer tax
Tax on assets when they are transferred to another. The estate tax, gift tax, and generation-skipping transfer tax are all transfer taxes.
trust
An entity that holds assets for the benefit of certain other persons or entities. May be individual or joint, revocable or irrevocable, inter vivos or testamentary.
trust company
An institution that specializes in managing trusts as trustees. Also called a corporate trustee.
trustee
Person or institution that manages and distributes trust assets according to the instructions in the trust document.
trustor
See grantor.
unfunded
When a trust or other entity holds no assets, it is unfunded. A revocable living trust is unfunded if the grantor has not transferred assets into it.
unified credit
The amount each person is allowed to deduct from federal estate taxes owed after death. In other words, this is the amount of estate taxes that would be due on net assets having a value equal to the estate tax exemption.
Uniform Transfer to Minors Act (UTMA)
Law drafted and recommended by the National Conference of Commissioners on Uniform State Laws in 1986 and subsequently enacted in many states. Allows a minor to receive assets by appointing a custodian, who has the fiduciary duty to manage the assets on behalf of the minor until the minor reaches the legal age of majority for the state.
warranty deed
A type of deed that transfers title to or ownership of real property and guarantees that the owner (called the grantor on the deed) holds clear title and has the right to transfer the property. If the title is defective, the grantor is liable. Compare to quitclaim deed.
will
A legal document with instructions for disposing of a person’s assets after death. Generally, a will can only be enforced through a probate court. Also called a last will, testament, or last will and testament.