GLOSSARY OF ESTATE PLANNING AND GIFTING TERMS

501(c)(3):  Section of the Internal Revenue Code that designates organizations as charitable and tax-exempt. Organizations qualifying under this section include religious, educational, charitable, amateur athletic, scientific, and literary groups; and organizations involved in the prevention of cruelty to children or animals.  The Presbyterian Church in America is a 501© 3 organization.

Adjusted Gross Estate:  Also known as the taxable estate, the gross estate less estate settlement costs.

Adjusted Gross Income:  Amount of income remaining after the expenses of earning that income have been deducted.

Administrator:  An individual appointed by a court to settle the financial and legal affairs of a person who dies without a will.

Administratrix:  A female administrator.

Ancillary Administration:  Administration of a decedent's estate in a state other than the state of residence, where the decedent owned real property.

Appreciated Property:  Property with a value greater than the cost basis.

Attestation Clause:  That clause in a will in which the witnesses certify that the will has been signed before them and describes how all parties signed the will.

Beneficiary:  A person or organization named in a will to receive or use estate assets.

Bequest:  A transfer of personal property by will.  Distinguished from a devise which is a transfer of real property by will.

Board of Trustees:  The policy-making body of a nonprofit institution.  In the case of the PCA Foundation, the Board is elected by the Presbyterian Church in America’s General Assembly.

Capital Gains: capital gain/loss:  The difference between the sale price of an asset—such as a mutual fund, stock, or bond—and the original cost of the asset.

Carryover of Charitable Deductions:  Contribution deductions which exceed the IRS set percentage limitations may be carried over into the next year – up to five succeeding years, if necessary, and still be counted as a charitable deduction.    

Charitable Lead Annuity Trust (CLAT):  A trust in which a fixed dollar amount or a percentage of the initial value of the trust assets is paid to charitable entities for a term of years, after which the trust principal is transferred to designated beneficiaries of the grantor.  The charitable interest “leads” the beneficiary’s interests in a CLAT.

Charitable Lead Unitrust (CLUT):  A trust in which a fixed annual percentage of the value of the trust assets, revalued annually, is paid to charitable entities for a term of years, after which the trust principal is transferred to designated beneficiaries of the grantor. 

Charitable Remainder Annuity Trust:  A trust made possible by the 1969 Tax Reform Act.  It provides for a donor to transfer property to a trustee subject to his right to receive a fixed percentage of the initial fair market value of the property for as long as he or she lives.  Whatever remains in the trust at his death becomes the property of the beneficiary institution.

Charitable Remainder Unitrust:  A trust made possible by the 1969 Tax Reform Act.  It is similar to the Charitable Remainder Annuity Trust, except that the income is a percentage of the fair market value of the property transferred, determined annually.

Co-administrators:  Two or more persons named in a will to settle an estate.

Codicil:  The only legal document that can change a will.  It is a supplement to a will, adding, taking from, or altering the will's provisions.  It must be executed with the same formalities as a will.

Common Disaster:  When two or more persons (usually husband and wife) die as a result of the same accident, when the death of each follows in a relatively short period of time.

Community Property:  In some states property acquired by the efforts of either husband or wife forms a common fund in which each has an equal interest.

Conservator:  One who is appointed by the court to protect the interests of an incompetent.

Corporate Fiduciary:  A bank or trust company exercising fiduciary powers under statutory authorization.

Corpus:  The principal in a trust.

Cost Basis:  The original cost of the property plus improvements and other expenses paid by the owner during the period of ownership.

Co-trustee:  A joint trustee to whom specific duties are assigned.

Credit Estate Tax:  State death tax added to basic levies to bring state taxes up to the total maximum credit available under federal tax law.

Designated Fund:  A fund that operates similarly to an endowment, but from which all distributions are made according to the specified purpose set forth in the original fund agreement.

Domicile:  The location of a person's home or principal residence although he may also have living quarters in another location.

Donor Advised Fund:  Any separately accounted for fund maintained by a sponsoring charity where (a) the donor or a designee of the donor is given the opportunity to advise the charity regarding investments, grant recipients, and the amount and timing of grants; and (b) the sponsoring charity retains exclusive legal control over all decisions regarding investments, grant recipients, and the amount and timing of grants

Durable Power of Attorney:  A written instrument by which one person authorizes another to take specific actions for him, as stated in the instrument; authority is extended to periods of disability and incompetency.

Endowment:  A bequest, gift, or set of funds that are intended to be kept permanently and invested to generate income for an organization or foundation.

Estate:  The property of an individual, both real and personal, in the process of administration.

Estate Plan:  An arrangement for the management and disposition of a person's property during lifetime and at death.  This can be accomplished by a will, trusts, gifts made during life, or a combination of these.

Executor:  A person or agency named in a will to administer the estate of a deceased person.  (Synonymous with personal representative.)

Executrix:  Feminine form of executor.

Guardian:  A person who has the legal duty and power to take care of the person and property of another who because of some disability (usually age or incompetence) is considered incapable of administering his or her own affairs.

Holographic Will:  One that is written entirely in the maker's own handwriting, not attested by subscribing witnesses.

Incompetent:  A person judicially declared to be incapable of managing his or her affairs.

Inheritance Tax:  A tax levied on the right to receive property from a deceased person.  This tax should be distinguished from the estate tax that is levied on the right to transmit property, not the right to receive it.

Inter Vivos:  Term used in law to describe agreements made while living.

Intestate:  Death without leaving a valid will.

Irrevocable:  Incapable of being retracted, revoked or taken back.

Joint Tenancy:  Where two or more persons own property, either real or personal, according to a separate agreement.  The property does not pass to heirs and cannot be disposed of by will.  It passes only to a survivor (or survivors) of the tenancy.

Living Trust:  A trust created during the trust maker’s lifetime.  A living trust can be either revocable or irrevocable.

Marital Deduction:  A provision under the federal tax law by which a qualified estate of an unlimited amount may be transferred to a spouse, exempt from tax.

Mutual Wills (Reciprocal):  Two documents that have the same provisions but are executed separately by husband and wife.

Nuncupative Will:  One that is given orally, in the presence of witnesses, usually during one's last illness under circumstances that make it impossible to prepare a written will.

Per Capita Distribution:  Distribution of property among descendants as individuals and not by right of representation.

Per Stirpes Distribution:  Where the children of a decedent receive only that share of property which the parent would have received if living.

Personal Representative:  A person or agency named in a will to administer the estate of a deceased person.  (Also executor/executrix.)

Probate:  The action of proving before a competent judicial authority that a document offered for official recognition and registration as the last will and testament of a deceased person is genuine.

Property:  Anything that may be the subject of ownership, real and personal, tangible and intangible.  It is that which belongs exclusively to a person, with full rights to enjoy and dispose of it.  Real property is land, or any estate in land.  It generally includes whatever is built or growing upon the land.  It may be defined to include anything that is immovable.  Personal property is all property other than real property.  It generally refers to property that is movable.

Remainderman:  The person or entity designated to receive from a trust that which remains of the principal after the income interest or other intervening interest has terminated.

Revocable:  Capable of being revoked, retracted or taken back.

Successor Trustee:  A trustee who follows the original or prior trustee.

Term Life Insurance:  A life insurance policy purchased for a term of years.  If the person dies during this term, the beneficiary receives the face amount of the policy.  The policy expires at the end of the stated number of years.   

Trust:  A legal relationship when one party (the trustee) holds legal title to property for the benefit of another (the beneficiary).

Trustee:  A person holding a right or power and property for another person (the beneficiary).

Will:  A legal declaration that makes provisions for the distribution of property at death.

Witness:  One who personally sees or perceives a thing, and testifies to what he has seen, heard, or otherwise observed or learned.

 

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