Estate Planning Common Terms and Definitions

ADJUSTED GROSS ESTATE
The value of all assets owned by the Decedent reduced by certain debts and expenses.

ADMINISTRATOR
The person appointed by the court to oversee the distribution of property of someone who dies. Usually, this person is the person named in a will as the “executor” or “personal representative.”

ADVANCEMENT
If the Decedent paid an amount or distributed property to an intended Beneficiary before his death with the intent that it be an advance payment of the intended inheritance, it is called an advancement. An advancement should replace the bequest under the Will.

AFFIDAVIT
Statement made, offend signed under the penalties of perjury, for a specific purpose. For example, the Witnesses to a Will may sign an Affidavit stating the facts that occurred when the Will was signed.

AGENT
Person to whom the power of attorney is granted (a.k.a. “Attorney-in-fact”).

ANNUAL EXCLUSION
Every person is permitted to give away up to $12,000 (in 2006) per year (indexed) to any other person without incurring any gift tax. There is no limit on the number of people the Decedent could have made these gifts to in a year. To qualify for this exclusion, the gifts must be a gift of a present interest, meaning that the recipient can enjoy the fit immediately. This can present problems when you make gifts to Trusts. This exclusion can be doubled to $24,000 per person per year, if the Decedent was married and his spouse consented to join in making the gift.

ASSESSOR
One who estimates value of property for tax purposes.

ASSESSED VALUE
The valuation placed on property by public tax assessor for purposes of taxation.

ASSIGNMENT
A transfer to another of any property, real or personal, or of any rights or estates in said property. Common assignments are of leases, mortgages, and deed of trust, but the general term encompasses all transfers of title.

ATTESTATION CLAUSE
The last portion of a Will that includes one or more lines for the Testator, required number of Witnesses, and for the Notary to sign. The format can vary from state to state.

ATTORNEY-IN-FACT
Person to whom the power of attorney is granted (a.k.a. “Agent”).

BASIS
The cost of an asset increased by the cost of any improvements and reduced by depreciation or amortization deductions. This is used to calculate gain or loss on sale. On death, the Decedent’s Basis in most assets is increased to the value of those assets as reported on the Decedent’s Estate tax return.

BENEFICIARY
A “beneficiary” is a person who receives benefits from a will or trust (“your estate”). For example, if you leave one of your valuables to your child, that child is a beneficiary. A beneficiary is legally entitled to his share of your property only after you die.

BEQUEST
A “beneficiary” is a person who receives benefits from a will or trust. For example, if you leave one of your valuables to your child, that child is a beneficiary.

BEQUEATH
The legal term for “making a gift” pursuant to a will.

BOND
A legal arrangement whereby a third-party financial institution guarantees the performance of a Fiduciary.

BUY-SELL AGREEMENTS
Contractual arrangements governing the transfer of ownership interests (stock or partnership interests) in a closely held business. These often rely on insurance to provide the necessary funds.

BYPASS TRUST
A Trust formed typically under Decedent’s Will to receive, hold, and invests assets up to the Decedent’s Applicable Exclusion Amount. The purpose of a Bypass Trust is to hold assets for the benefit of the Decedent’s surviving spouse (and possibly other heirs) without those assets being taxed in the surviving spouse’s Estate.

CHARITABLE REMAINDER TRUST
The Decedent could have donated property or money to a charity, reserving the right to use the property, or to receive income from it for a specified time (a number of years, the duration of your life, or the duration of the Decedent’s life and the life of a second person such as his spouse). When the agreed period is over, the property belongs to the charitable organization. The Trust can be an annuity trusts (pays a fixed amount each year) or a unitrust (pays an amount to you based on a percentage of asset values held by the charity).

CHILDREN’S TRUST
See Testamentary Trust.

CLOUD ON TITLE
An invalid encumbrance on real property, which, if valid, would affect the rights of the owner.

CODICIL
A separate written document that bequeaths personal property or items of sentimental value to beneficiaries.

CO-EXECUTOR
Two or more persons serving as Executors.

CONSANGUINTITY
The degree of closeness of a particular relative.

CONSENT
A written agreement to abide by a particular decision or arrangement.

CONSIDERATION
Consideration is something that is done or promised in return for a contractual promise. For example, in a promise between A and B for the sale of As car to B, B’s payment of the price of the car (or promise to do so) is the consideration for A’s promise.

Consideration is what must be given up by each party when making an agreement; this may be by means of doing or not doing an act or just promising to do or not do an act. Consideration can be defined as being a benefit to one party while being a detriment to the other one at the same time.

CONSERVATOR
In the absence of a power of attorney, the person appointed and supervised by the court to make decisions on your behalf should you become mentally incapacitated (a.k.a. committee, guardian of the estate, curator).

CONVEYANCE
The transferring of a property title from one individual to another.

CORPUS
The corpus is the main part of an account, trust, or estate you leave behind from which income is derived. For instance, let us assume you have rental property you want to leave behind to your child. However, you provide the property will be held in trust for your child until that child reaches the age of 18. The property is considered to be the corpus of your gift to your child.

CO-TRUSTEE
Two or more persons serving as Trustees.

COURT
The institution which handles and supervises Probate and related matters.

CY PRES
A legal doctrine that Courts use to prevent a charitable bequest under a Will from lapsing.

DEATH CERTIFICATE
A formal document issued by the appropriate governmental agency confirming the name, address, and date of death of the Decedent. Any original Death Certificates must be used to obtain release of many assets, be attached to a federal Estate tax return, and so on.

DEBT PROVISIONS
If any heir owes you money, this allows you to list amounts owed to you by any heirs and have them deducted from the gift you give them. For example, if an heir owes you $100 and you leave to him or her $300, then $100 will be collected for your estate, and $200 will go to the heir.

DECEDENT
A person who has died.

DECLARATION OF TRUST
A written acknowledgement by one holding legal title to property that the property is held in trust for the benefit of another.

DEED
A legal document conveying title to a property.
A written document for transfer of land or real property from one person to another.
A writing or instrument under seal, containing some contract or agreement, and which has been delivered by the parties.

For a deed to be valid, it must be written or printed on parchment or paper, there must be sufficient parties, a proper subject matter which is the object of the grant, sufficient consideration, an agreement properly set forth, it must be read if desired, signed and sealed, delivered, attested by witnesses, properly acknowledged before a competent officer, and a deed should be recorded.

DEED IN LIEU
A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure. Also, called a “voluntary conveyance.”

DEED OF TRUST
The document used in some states instead of a mortgage. Title is conveyed to a trustee rather than to the borrower.

DEFERRAL OF ESTATE TAX
Where a sufficient portion of the Decedent’s Estate is comprised of assets in a closely held and active business, his estate may qualify to pay the estate tax attributable to these assets over a 14-year period instead of within 9 months of death.

DESCENDANT
A child, grandchild, or great-grandchild.

DESIGNATED BENEFICIARY
A person indicated to be the recipient of a pension or retirement plan where such designation is made with the necessary formalities.

DEVISE
Real property left to someone in a will. See also Bequest.

DOMICILE
The permanent home of the Decedent that becomes the location in which Probate proceedings are commenced.

DONEE
A person who receives a gift.

DONOR
A person who makes a gift.

DURABLE POWER OF ATTORNEY
A document in which the Decedent granted certain people the authority to handle financial matters. Where a Power of Attorney is durable, it will remain valid even if the Decedent becomes disabled, but it always terminates on death.

ELECTIVE SHARE
The portion of a Decedent’s assets which the surviving spouse can claim under the Spousal Right of Election laws in the state where the Probate occurs.

ESCROW
Documents, real estate, money, or securities deposited with a neutral third party (the escrow agent) to be delivered upon fulfillment of certain conditions, as established in a written agreement. –
An account held by the lender into which a homeowner pays money for taxes and insurance.

ESTATE TAXES
An estate is subject to two kinds of taxes: Federal Estate Tax and State Death Tax. These taxes apply to money and assets passed to heirs.

ESTATE
Generally, an estate is everything you possess, including your property and items of value. More precisely, an estate is the property owned, and debts owed, by the deceased person. In other words, when a person dies, all of his or her worldly property and debts become the “estate” of that person. Your home, other real estate, bank accounts, investments, retirement benefits, IRAs, insurance policies, collectibles, and personal belongings are all considered as part of your estate. The estate must be disposed of either in accordance to a Last Will and Testament, or if there is no will, under the laws of intestate succession.

ESTATE TAX DEFERRAL
A portion of the Estate tax attributable to interest in certain business assets can be deferred for up to 14 years.

ESTATE TAX RETURN
If the Decedent’s assets exceed the Applicable Exclusion Amount, a tax filing must be made to report the Estate’s assets, less expenses and liabilities to the IRS.

EXECUTE
The act of signing and witnessing the signing of the will.

EXECUTOR
Person who makes decisions on behalf of your estate after your death. This is the person appointed in your will to manage your estate, deal with the probate court, pay your outstanding debts, collect your assets, and distribute your estate according to the provisions in your will. This person in essence becomes your personal representative.

If there is no Last Will and Testament, the court will appoint a person to administer the estate after a hearing to determine which person is most qualified. If it can be shown that the person you appointed as your Executor, is not in the best interest of all those involved, then the person may be replaced by the court. Therefore, you should carefully decide which person you want as your executor.

EXECUTOR FEES
The compensation which the person serving as Executor is entitled. State law usually restricts the amount that can be paid.

FIDUCIARY
A person serving in a position of trust. It is typically used as a generic term to encompass Executors, Trustees, and Guardians.

FILING
The procedure of mailing or delivering documents or tax returns to the Court or IRS.

TAX RETURN
After death, a last income tax return must be filed for the Decedent.

FORMAL ACCOUNTING
An analysis of all assets received by the Estate, the gains or losses, income and expenses realized by the Estate, and distributions to Beneficiaries, which is made in a detailed manner conforming to specific statutory and Court requirements.

GUARDIAN (FOR MINOR CHILD) – An adult appointed to care for a minor child and control that child’s property. If you have a spouse who is legally the mother or father of the children, then you should appoint the spouse as guardian in most cases. If you appoint someone other than his or her spouse to be the guardian, the court will balance what is in the best interest of the children.

If there is no Declaration Naming Pre-Need Guardian, the Court, after a hearing, will decide who will be the guardian, after considering the best interest of the children.

GUARDIANSHIP (FOR MINOR CHILD) – The arrangement or relationship of a Court-appointed person designated with the responsibility of managing the assets and/or affairs of a specified disabled or minor beneficiary.

GENERAL POWER OF APPOINTMENT
The right given to a person, the power holder, to direct where certain assets can be distributed. This right must include the right to designate the Decedent, his creditors, his Estate, or the Creditors of his Estate as recipients. This specific inclusion will assure that the assets subject to this General Power of Appointment will be included in the Decedent’s Estate for tax purposes. This is generally done to avoid imposition of a Generation Skipping Transfer (GST) tax.

GENERATION SKIPPING TRANSFER (GST) TAX
A transfer tax imposed in addition to a gift or Estate tax on transfers to skip persons such as grandchildren.

GIFT
Where the Decedent transferred property without receiving something of equal value in return, the federal government will assess a transfer tax where the value of the gift exceeds the annual exclusion and the Decedent’s Applicable Exclusion Amount is exhausted.

GIFT SPLITTING
If the Decedent and his spouse join in giving an Annual Exclusion.

GRANT DEED
A form for the conveyance of interest in real property. A grant deed implies certain warranties. It implies the grantor has not previously conveyed any title to the property to another. It implies the property is, at the time of the conveyance, free from any liens allowed to be placed on the property by the grantor or grantor’s agent.

GRANTEE
One to whom a grant is made. Generally, the buyer.

GRANTOR
The grantor is the person who creates the living trust. She decides what property to include in the trust. She also decides who the beneficiaries of the trust will be. Because the trust is revocable until the grantor’s death, she can change any part of the trust as often as she likes. The grantor is also known as the trustor.

GRANTOR-GRANTEE INDEX
The record of the passing of title to all the properties in a county as kept by the county recorder’s office. Property is checked by tracing the names of the sellers and buyers (chain of title). Title companies usually have more efficient methods by keeping records according to property description, rather than people’s names.

GROSS ESTATE
The value of all assets owned by the Decedent at death. Some important tax benefits are based on certain assets meeting specified percentages of the Gross Estate.

GUARDIAN
An adult appointed to care for a minor child and control that child’s property. If the will maker has a spouse who is legally the mother or father of the children, then the will maker should appoint the spouse as guardian in most cases. If the will maker appoints someone other than his or her spouse to be the guardian, the Court will balance the will maker’s desires with what is in the best interest of the children.

If there is no will, the Court, after a hearing, will decide who will be the guardian, after considering the best interest of the children.

GUARDIAN AD LITEM
A person appointed by the court to protect the interests of a minor.

GUARDIANSHIP
The arrangement or relationship of a Court-appointed person designated with the responsibility of managing the assets and/or affairs of a specified disabled or minor beneficiary, and that person.

HEIR
An heir refers to any person designated to receive something of value from the estate of a deceased person.

HOLOGRAPHIC WILL
A will that has all major provisions hand-written. Hand-written wills are allowed in about half of the states.

HOMESTEAD
The dwelling (house and contiguous land) of the head of a family. Some states grant statutory exemptions, protecting homestead property (usually to a set maximum amount) against the rights of creditors. Property tax exemptions (for all or part of the tax) are also available in some states. Statutory requirements to establish a homestead may include a formal declaration to be recorded.

INCOME IN RESPECT OF DECEDENT
Income earned, such as interest accrued on a bond that is included in the Decedent’s federal Estate tax calculation as an asset, and which is also reported on the Decedent’s final income tax return. A credit for the Estate tax paid may be claimed.

INFORMAL ACCOUNTING
An analysis of all assets received by the Estate, the gains or loss, income and expenses realized by the Estate, and distributions to Beneficiaries, which is made in a manner that the Beneficiaries agree to, but which does not conform to the specific statutory and detailed Court requirements. An Informal Accounting is used to minimize the substantial costs and time requirements of completing a Formal Accounting.

INHERITANCE TAX
A number of states assess a tax based on the value of property that Beneficiaries inherit.

INSURANCE TRUST
A trust established to own the Decedent’s life insurance policies and thereby prevent them from being included in the Decedent’s Estate if the transfer was complete. The Decedent did not die within three years of making the transfer.

INTANGIBLE ASSET
Ownership interests in copyright, royalty, and other similar assets.

INTERMENT
Interment is another word for burial, as opposed to cremation.

INTER-VIVOS TRUST
A trust created during the Decedent’s lifetime. Also called a living trust.

INTESTACY
If the Decedent did not sign a Will, he or she will have died Intestate. Since there is no Will to direct what should happen, the laws of the state where the Decedent resided will determine who should serve as Executor (sometimes called Administrator), who will receive property, and so on.

INTESTATE
The word “intestate” refers to a probate proceeding whereby the deceased person either did not prepare a will or the will cannot be located.

INVENTORY
A formal listing of the Decedent’s assets, sometimes required to be filed with the Court.

IRREVOCABLE
Where a trust cannot be changed after the Decedent established it, the trust is irrevocable.

IRREVOCABLE TRUST
An irrevocable trust is one that neither you nor your successor trustee can alter in any way.

LEGAL DESCRIPTION
A property description, recognized by law, which is sufficient to locate and identify the property without oral testimony.

LETTER INSTRUCTION
A non-bonding letter from the Decedent providing information on personal matters relevant to the Estate.

LETTERS TRUSTEESHIP
A formal document given to you by the Court after a Will, which includes one or more Trusts (e.g., a Bypass Trust or QTIP Trust) has been admitted to Probate confirming your authority to act as Trustee.

LIVING TRUST
A living trust is a legal document that allows you to give property and control of your property to a trustee. It is a legal entity – a piece of paper – that is capable of owning property.

A trust allows you to gather together in one document all your significant property. This is important if you want to make sure that your property is distributed easily and quickly after your death. The trust, not you, owns that property. This doesn’t mean that you no longer have control of your assets. Since you, the grantor, will usually appoint yourself as the trust’s initial trustee, you still have complete control of your property. You can do what you want with that property – you can even transfer some property out of the trust or add property to it. Most importantly, a living trust allows you to provide for the quick and efficient distribution of your property to loved ones when you die.

The trust must contain the following elements: expression of your intent to create a trust; naming your trust beneficiaries; description of the trust property; a valid trust purpose (e.g. to provide for the welfare of your children or grandchildren); and the transfer of property.

LIVING WILL
A living will is a document outlining very specific medical instructions that apply while you are still alive, but are unable to communicate your wishes. Unlike a typical Last Will and Testament, it really has nothing to do with how you want your property divided when you die. It simply states that you do, or do not, want artificial life support if you become either:

  1. terminally ill and will die within a short period of time without life support, or
  2. in an irreversible coma or vegetative state.

A living will also allows you to make decisions regarding whether or not you would like to receive pain medication and artificial nutrition. In addition, you can indicate special wishes or instructions. For example, some people may want to remain on life support for only a certain period of time.

MARITAL DEDUCTION
Assets bequeathed to the Decedent’s surviving spouse or to certain qualifying Trusts for the benefit of the Decedent’s surviving spouse (see OTIP and ODOT) qualify for an unlimited state tax deduction.

MENTAL INCAPACITATION
Point at which one is no longer able to make legally binding decisions (i.e. comatose, brain-damaged).

NOTARY
A person who has complied with a particular state’s requirements to witness documents and place a seal or stamp on them indicating that the document has been signed with a specified degree of formality. Requirements and procedures differ by state.

PECUNIARY BEQUESTS
Specific dollar distributions provided under the Will.

PER CAPITA
Under per capita distribution, that gift which would have gone to the heir is divided among your other heirs still living. For example, if you leave your Microsoft stock to Child X, but Child X is no longer living, then the Microsoft stock will be divided equally among your living heirs.

PER STIRPES
Under per stirpes distribution, that gift which would have gone to the heir is divided among that beneficiary’s heirs. For example, if you leave all of your estate to John (who has two children), but John dies before you, then John’s children would receive your property.

Distribution by representation. If child A has 3 children and child B has 2, and each child was intended to receive 50 percent of the Estate, if both child A and child B die, child A’s 3 children each receive 1/3 of 50 percent and child B’s 2 children each receive 1/2 of 50%. State laws vary.

PERSONAL PROPERTY
Any piece of property that is moveable, as opposed to land or attached to land. For instance, cars, jewelry, furniture, all fall into the category of personal property. Personal property can be divided into community and separate property.

If specific items of personal property will be given to a named heir, describe the property in as much detail as possible in order to leave no room for doubts. For example, “To my son, John Doe, I leave my stainless steel Timex wristwatch that has a white face and black dials.”

PERSONAL REPRESENTATIVE
It is a common term used for a person appointed to oversee the will’s distributions. See Executor.

POWER OF ATTORNEY
An authority by which one person (principal) enables another (attorney in fact) to act for him.

POD ACCOUNT
An account, such as a bank account, which specifies that on the death of the primary account holder the account will be paid to the next named person. “John Doe, P.O.D., Jane Smith” means that the account is Paid On Death of John, to Jane. This is a non-Probate asset.

POUR OVER WILL
A Will that distributes assets into a Revocable Living Trust for ultimate distribution.

POWER OF APPOINTMENT
The right given to a person, the power holder, to direct where certain assets can be distributed. For example, the Decedent’s mother may have left the Decedent the right under her Will for the Decedent to designate under his Will, how and when his children should inherit assets from a Trust formed under his mother’s Will.

PRINCIPAL
You (the person who creates the durable power of attorney).

PRINCIPAL HEIR
A principal heir is the person who will receive the bulk of the estate after all smaller gifts and valuables are distributed to other heirs.

PROBATE
Probate is the legal process the courts use to implement your will. In that proceeding, the court decides how an estate will be divided. Probate typically takes six months to three years to complete. It may also require the service of a lawyer. Even if you die without a will your estate must still pass through the probate system. In that case, the court will decide how to distribute your estate among your relatives. The court will look to your Last Will and Testament in deciding how to distribute your property and will follow the will unless it is contested by your heirs. –
Generally, if an estate includes real property or minor children, a formal probate action must be brought in the correct court. However, in many states, if the estate is of minimal value or consists solely of personal property, probate is not required, as other legal remedies are available.

The court process following a person’s death that includes:

Formal court-supervised probate is costly, time-consuming, and best avoided if possible.

A living trust can help avoid probate. The reason for this is because if your assets are placed into a trust, you do not “own” the assets, the trust does. You can still control the trust assets as if they were your own, but when you die, you do not “own” anything in your trust and therefore, you avoid probate for the assets placed into the trust.

PROBATE ASSET
An asset that passes through the Estate. This is an asset that is governed by the Will and the probate process. A jointly owned asset that passes directly to the joint owner on death would not be a probate asset. Nor would an IRA account that is paid directly to the named beneficiary.

PROPERTY TAX
Local tax assessed on property owned, such as real estate or automobiles. Usually federal income tax-deductible.

QUALIFIED DOMESTIC TRUST (QDOT)
A Trust that will qualify for the unlimited Estate tax marital deduction when the surviving spouse is not a U.S. citizen.

QUALIFIED TERMINABLE INTEREST PROPERTY TRUST (QTIP)
This is a Qualified Terminable Interest Property Trust under the Will designed to qualify for the unlimited estate tax marital deduction. It is not available to a noncitizen surviving spouse.

QUIT CLAIM DEED
A deed that transfers whatever interest or title a grantor may have, without warranty. A quit claim deed conveys only such rights as the grantor has.

REAL PROPERTY
Real property means “land” and anything attached to the land, such as a building, home, or even trees. It includes anything underneath the land as well, such as minerals or water.

RECORDER
The public official who keeps records of transactions that affect real property in the area. Sometimes known as a “Registrar of Deeds” or “County Clerk.”

RECORDING
The noting in the registrar’s office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.

REMAINDER BENEFICIARY
The person, Beneficiary, intended to receive assets or income from a Trust or Estate only after a prior person’s interest ends or is satisfied.

REQUIRED BEGINNING DATE (RBD)
Distributions from qualified plans and IRAs must usually begin by the required beginning date. This is April 1 of the year following the year in which the Decedent reached age 70 1/2.

REVERSIONARY INTEREST
Where Decedent gave property away but there is some possibility that the property will return to him, this is said to be a Reversionary Interest. A sufficient Reversionary Interest can cause the asset to be taxable in the Decedent’s Estate.

REVOCABLE TRUST
A revocable trust is one that you can change at any time during your lifetime. When you die, your trust becomes irrevocable.

RULE AGAINST PERPETUITIES
Most states have a requirement that a Trust must terminate not later than some specified time.

SCHEDULE
A schedule is a list of all property that is in your trust. For an individual trust there is only one schedule. For a basic shared trust there are three schedules: one for property owned solely by the wife; one for property owned solely by the husband; and one for property owned jointly by the husband and wife.

SELF-PROVING AFFIDAVIT
A form added to a will in which the will maker and witnesses state under oath that they have signed and witnessed the will. Usually, a notary public will oversee the oath swearing and signing. This is not required in most states, but is usually recommended to insure that the will is valid.

SELF-PROVING WILL
If a Will is signed with certain required formalities, the Witnesses may not have to appear in Court.

SEPARATE PROPERTY
Separate property is everything that a husband and wife OWN SEPARATELY. In most cases, it is (1) anything you or your spouse owned prior to marriage, (2) anything you or your spouse inherited or received as a gift, and (3) anything you or your spouse earned after your separation. It can also include anything that one spouse gives up to the other spouse in writing.

SIMULTANEOUS DEATH PROVISION
This is a clause in the Will, or if none, it is an issue that state law will govern. If a bequest is to be made to a beneficiary who died in a car accident with the Decedent, for example, who is deemed to have died first? This can have important implications concerning who inherits what assets. If the named beneficiary is deemed to survive, his or her Estate will receive the bequest and distribute the property according to his or her will. If the named beneficiary is considered to have died first, then the Decedent’s Will for which you are responsible will determine who gets the property.

SOUND MIND
A person making a will must be of sound mind. The will maker cannot be mentally ill or handicapped. In addition, if the will maker is terminally ill and heavily sedated, then it is questionable whether such a will could stand up in court.

SPECIAL DIRECTIVE
A special directive is a special instruction in your will. It can be used for many purposes, from making a specific request to leaving a message. Examples of special directives include:

I direct my sister, Betty Ann Barker, be given the first right of refusal to purchase for cash my home situated at Box 471, Rural Route 7, Pleasant, Co.

If all my heirs agree, I would like my home to be sold for cash and distributed according to the provisions of my will.

SPOUSAL RIGHT OF ELECTION
A surviving spouse is protected under the laws of most Estates. These laws provide generally that if the Decedent left an inadequate proportion of his assets to his spouse, she can sue the Estate and claim a minimum statutory share.

SPRINGING
Power of attorney that is not effective until a specific event occurs (i.e. point of mental incapacitation).

STEP-UP IN BASIS
On death, assets held by the Decedent receive a Tax basis, in most but not all circumstances, equal to the fair market value of those assets at death.

SUCCESSOR
An Executor or Trustee designated to serve in the event that the person listed previously in the Will or Trust cannot serve.

SUCCESSOR ATTORNEY-IN-FACT
Person to whom the power of attorney is granted if the attorney-in-fact dies, resigns, or becomes legally disabled.

SUCCESSOR TRUSTEE
The successor trustee is the person who assumes control of the trust after you, the initial trustee, die. The successor trustee makes sure that your estate is distributed among your beneficiaries according to the terms of the trust. Usually the successor trustee is someone that you know well and trust.

SURETY
A company which offers, for a fee, a Bond which a Fiduciary may have to post to guarantee performance.

SURVIVORSHIP PROVISION
If a prospective heir passes away before you do, you have the option of leaving the property to that person’s heirs (as per stirpes) or leaving it to your remaining heirs (as per capita).

TAXABLE ESTATE
The assets that are subject to inclusion in the Decedent’s Estate for tax purposes (e.g., filing a federal Estate tax return). Many assets that are not included in the Probate Estate are included in the taxable Estate. The fact that an insurance policy is paid directly to the Decedent’s sister on death as the named beneficiary doesn’t mean that the proceeds are not included in the Decedent’s taxable Estate.

TAX ALLOCATION CLAUSE
The provisions of a Will that direct which bequests and assets should be used to pay taxes.

TAX BASIS
The cost, plus improvements, less depreciation, and subject to certain other adjustments, of an asset. Tax basis is used to calculate the capital or other taxable gain when an asset is sold. On death, assets held by the Decedent generally have their tax basis stepped-up to fair value.

TENANCY
The possession and use of real estate owned by another party.

TENANCY BY THE ENTIRETY
A type of joint tenancy of property that provides rights of survivorship and is available only to a married couple.

A form of co-ownership in English law where, when a husband transferred land to his wife, the property could not be sold unless both spouses agreed nor could it be severed except by ending the marriage.

TENANCY IN COMMON
Ownership of property by two or more people, in which each owner’s share goes to those persons heirs, not to the other owners.

A type of joint tenancy of property without right of survivorship; each tenant’s portion of ownership is distributable under will.

A way two or more people can own property together. Each can leave his or her interest upon death to beneficiaries of his choosing instead of to the other owners, as is required with joint tenancy. Also, unlike joint tenancy, the ownership shares need not be equal. In most states, each tenant in common may encumber only his share of the property, so that the other share is debt-free. In some states, two people are presumed to own property as tenants in common unless they’ve agree otherwise in writing.

Similar to joint tenants; tenants in common share equal rights except that, upon the death of a tenant in common, that share does not go to the surviving tenants but is transferred to the estate of the deceased tenant. Unity of possession but distinct titles.

Undivided ownership in real estate by two or more persons. The interests need not be equal, and upon the death of one of the owners, no right of survivorship in the owners exists, but instead the interest passes to the heirs of the deceased. It exists when two or more persons acquire title, not as community property or as joint tenants. Each owner has a separate and distinct interest, which must be shown on the deed of acquisition. Each owner may deal with their interest without the consent of the other co-tenants.

TESTAMENTARY CAPACITY
In order for a person to sign a Will that will be respected as the means of distributing that person’s assets on death, a number of conditions must be met. One of these is that the person had to have Testamentary Capacity to sign the Will. This means the person had to have sufficient knowledge to understand what he or she was doing, the assets involved, and the natural objects of his or her bounty (e.g., children).

TESTAMENTARY TRUST
A testamentary trust is a trust established in a Last Will and Testament, typically for the benefit of minor children. This trust allows you to leave property to minor children but have other responsible adults manage that property until the children reach a certain age.

TESTATOR (TESTATRIX)
The person making the will.

TITLE
A legal document establishing evidence of ownership.

TITLE INSURANCE
Title insurance is a contract of indemnity, which guarantees that the title is as reported and, if not reported and the owner is damaged, the title policy covers the insured for their loss up to the amount of the policy.

Title insurance assures owners that they are acquiring marketable title. Title insurance is designed to eliminate risk or loss caused by defect in title from the past. Title insurance provides coverage only for title problems, which were already in existence at the time the policy was issued.

TITLE REPORT
A report showing the condition of title before a sale or loan transaction. After completion of the transaction, a title insurance policy is issued.

TITLE SEARCH
The process of examining all relevant records to confirm that the seller is the legal owner of a property and that there are no liens or other claims outstanding.

TRANSFER
A changing of ownership, such as real estate, a security or a financial account, from one party to another. A movement of funds from one account to another.

TRANSFER TAX
The state or local tax payable upon the transfer of a title.

TRUST
A legal arrangement in which an individual (the trustor) gives fiduciary control of property to a person or institution (the trustee) for the benefit of beneficiaries.

Property given by a person called the settler, to a trustee, for the benefit of another person (the beneficiary). The trustee manages and administers the property. Actual ownership is shared between the trustee and the beneficiary and all the profits go to the beneficiary.

TRUST DEED
The most common method of financing real estate purchases in California (most other states use mortgages). The trust deed transfers the title to the property to a trustee—often a title company—who holds it as security for a loan. When the loan is paid off, the title is transferred to the borrower. The trustee will not become involved in the arrangement unless the borrower defaults on the loan. At that point, the trustee can sell the property and pay the lender from the proceeds.

TRUSTEE
The trustee is the person who is in charge of the trust during your lifetime. In most cases, the initial trustee is the person who created the trust – – you. You may later designate someone else or an institution, like a bank, to act as a trustee. The trustee is responsible for managing the property covered by the trust.

The person who holds property rights for the benefit of another through the legal mechanism of the trust. A trustee usually has full management and administration rights over the property but these rights must always be exercised to the full advantage of the beneficiary. All profits from the property go to the beneficiary although the trustee is entitled to reimbursement for administrative costs. There is no legal impediment for a trustee to also be a beneficiary of the same property.

UNDUE INFLUENCE
The influence of another person that destroys the free will of the testator. In the extreme example, if an heir is pointing a gun at the will maker, that heir is said to have exerted undue influenced, thus, nullifying the will.

UNIFORM GIFTS (TRANSFERS) TO MINORS ACT (UGMA OR UTMA)
A method to hold property for the benefit of a minor person, such as the Decedent’s child, which is similar to a Trust, but which is governed by state law. It is simpler and much cheaper to establish and administer, but is far less flexible.

VESTING
Give an immediate fixed right of present or future enjoyment; an estate is vested in possession when there exists a right of present enjoyment; and an estate is vested in interest, when there is a present fixed right of future, enjoyment. Vesting also refers to who “owns” the contributions in a pension account. If the employee is 100% vested, he/she owns the funds in his/her account.

WAIVER
A formal written statement whereby the signer gives up certain rights.

WARRANTY DEED
A deed which guarantees the title from the seller to the buyer.
A warranty deed conveys specifically described rights which together comprise good title.

WILL
The word “will” is merely an abbreviated way of referring to a Last Will and Testament.
A will is perhaps the most important legal document the average person will ever sign. It is an instrument that, upon your death, controls who gets your property, who will be the guardian of your children, and who will manage your estate.

WILL SUBSTITUTE
Techniques used to transfer assets on death without the Probate process. For example, owning assets in joint name results in the surviving owner taking title on the death of the other joint owner.

WITNESS
A person who watches you sign your will. Most states require two witnesses. They cannot be related to you and cannot be entitled to receive anything under your will.

For more information, see our Estate Planning Frequently Asked Questions and Wills, Trusts, Estate Planning, Probate and Guardianship pages.