Numbers
706
IRS Form 706 “United States Estate (and Generation Skipping Transfer) Tax Return.”
529 College Education Plan
An education savings plan with favorable income tax treatment. Contributions are not tax deductible, but growth (interest, etc.) is tax free until withdrawn. If used for eligible expenditures, growth remains tax free. You keep control of the fund until it is used.
– A –
Acceleration Clause
Provision in most mortgages and home equity loans that allows the lender to call the loan due if the property is transferred. Putting your residence into a living trust will generally not trigger acceleration, but putting other properties into trust might – such as rental properties.
Administrator
California Probate term: An “administrator” performs the same job as an “executor” but when there is no Will, the term “administrator” is used.
Advance Healthcare Directive
Also known as a “living will.” Allows you to appoint another person to make healthcare decisions for you if you are incapacitated, including your end-of-life decisions.
Agent
A person you have appointed to act on your behalf, such as under a power of attorney or an advance healthcare directive.
AHCD
Abbreviation for “Advance Healthcare Directive”
Amendment
A change made to a previous document without re-writing the entire document.
Attorney-in-Fact
The agent appointed by a person a power of attorney for financial matters.
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Basis
A tax term: The basis of an asset is generally its cost and is not taxed on sale, but certain events can increase or decrease the basis.
Beneficiary
A person or entity selected by you to inherit an asset, such as under a Will or Trust, life insurance payout, or pension and IRA accounts.
Beneficiary Designation Form
The paperwork that you sign with the life insurance company, pension administrator or IRA holder to name the person(s) who will receive those assets when you die.
Bond
A contract somewhat similar to insurance; it guarantees payment up to a stated amount if a fiduciary acts wrongfully. Often required in probate proceedings and sometimes under trusts.
Breach of Fiduciary Duty
A fiduciary’s failure to carry out the fiduciary duty; the fiduciary is liable for any resulting damage and sometimes subject to additional liability designed to punish the conduct.
Breach of Trust
A trustee’s violation of an obligation imposed upon trustees, usually includes both intentional and negligent conduct.
By Right of Representation
Probate term: Refers to a method for deciding who will inherit a decedent’s property when there is no Will. Generally means that, if the primary heir is already deceased, that heir’s living children will inherit that share.
Bypass Trust
A trust established after death to hold that portion of the decedent’s property that is not subject to federal estate tax. The property “bypasses” estate tax. Also sometimes called an “exemption trust” because the property is “exempt” from federal estate tax.
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Capacity
Mental competency; different degrees of capacity are required for different acts.
Charitable Remainder Trust
A trust designed to provide for the settlor during life, with the rest going to charity after the settlor’s death.
Charitable Lead Trust
A trust donating certain income or use to charity for a specific time period, with the rest going to your heirs or beneficiaries.
Claim for Exclusion from Reassessment
California property tax term: Prop 13 exempts real estate from property tax reassessment while you still own it. When you sell it or die, reassessment occurs unless the new owner qualifies for an exemption. Some exemptions are automatic (such as transfers between spouses) but others require you to submit a written claim for exemption.
Codicil
An amendment to a Will.
Community Property
California (and some other states’) property right: All property acquired during marriage, other than separate property. Each spouse owns an “undivided” fifty percent of the community property, meaning half of each component of the total (not the right half or the left half, not an equal share of a set; for example, not six out of 12 forks, but half of each fork).
Community Property with Right of Survivorship
Community property that the spouses can designate will automatically pass to the survivor of them. Usually used with real estate.
Competent
Having the required degree of mental capacity to make a particular decision or perform a specific act.
Conservatee
A person under a conservatorship; under the control of the court and a conservator.
Conservator
A person appointed by the Probate Court to manage the affairs of an incapacitated adult. Similar to a guardianship, but that term only applies to minors in California (some other states use “guardianship” to also refer to adults).
Conservator of the Estate
A conservator appointed by the Probate Court to manage the finances and assets of a conservatee. The same person can be appointed as both Conservator of the Person and Conservator of the Estate.
Conservator of the Person
A conservator appointed by the Probate Court to be in charge of the conservatee’s day to day care, living conditions, medical care, etc. The same person can be appointed as both Conservator of the Person and Conservator of the Estate.
Conservatorship
Similar to “guardianship” but, in California, guardianship refers only to children; conservatorship refers to adults.
CPWROS
Abbreviation meaning “Community Property with Right of Survivorship”
Custodian
A person in charge of the property of a minor under the Uniform Transfers to Minors Act. For example, to open savings account in your child’s name, the account would name you as custodian.
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DAPT
Abbreviation for “Domestic Asset Protection Trust.”
Death Tax
A tax on the value of the estate of a deceased person. There is a federal estate tax. Some states have their own death tax, others have an “inheritance tax,” which taxes the value you inherit. California does not have a death tax or an inheritance tax.
Decedent
The deceases; the person that died.
Deed of Trust
A lien against property that secures a mortgage, home equity loan or the like. This is NOT the type of “trust” discussed in this blog.
Devisee
A person named to receive something under a Will.
Discharge
California Probate term: The court’s order confirming that the executor or administrator has completed the probate process and is relieved of duty.
Disinherit
To provide in a Will or Trust that specific persons will not receive anything from the deceased.
Distributee
A person receiving property from a trust or an estate.
Disqualified Transferees
California Probate term: Under specified circumstances, certain persons are prohibited from inheriting under a Will or Trust unless special procedures are followed. Such persons may include, for example, caregivers and the person who drafted the Will or Trust.
Domestic Asset Protection Trust
Domestic Asset Protection Trust. Permitted in some states as a means of increasing protection of assets against future creditors. Not provided for under California law.
DNR
“Do Not Resuscitate” order completed at a hospital directing the doctors and nurses not to use artificial means of sustaining life. Can be given by patient or by agent under healthcare directive.
Durable Power of Attorney
A power of attorney for financial matters that continues even if / after you are incapacitated.
Dynasty Trust
A Trust designed to last over many generations. Most states preclude a trust from lasting more than 90 days or so after the death of specified persons. A few states allow several hundred years (not California).
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ERISA
The Employee Retirement Income Security Act of 1974. This is the federal law governing pensions, 401k and similar retirement benefits.
Estate
The assets of a decedent that are subject to probate administration and controlled by the personal representative. People often refer to an estate as though it were a separate entity, like a corporation, but that is not technically correct. An estate does not “exist,” it is just a collection of assets. Sometimes, people use the term “estate” to refer to all property a deceased person owned at death, even non-probate transfers, but this is also not technically correct.
Estate Administration
The probate court process for gathering a deceased person’s assets, paying bills and completing distributions to heirs and devisees.
Estate Tax
A federal tax on the privilege of leaving your assets to others at your death. The top tax bracket is currently 35%, but has been as high as 55% and may return to that level.
Executor
A person named in a Will to handle the deceased person’s final affairs and appointed by a probate court to complete the estate administration. Historically, “executor” referred to a man and “executrix” to a woman, but “executor” now refers to both in California.
Exemption Amount
Conceptually similar to a standard deduction on your income tax return. The total value of property that a person can leave to others at death without paying federal estate tax. Most lifetime gifts also count against this amount.
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Fiduciary
A person who, by law, owes a fiduciary duty to another because he occupies a position of great trust and confidence. Lawyers, executors and trustees all hold fiduciary positions.
Fiduciary Duty
The duty of highest good faith and utmost fair dealing with the person to whom the duty is owed.
Fiduciary Income Tax Return
An income tax return that must be filed by certain persons acting as a fiduciary, such as the executor of an estate or the trustee of certain trusts.
Free of Trust
No longer subject to the restrictions of a trust or the control of a trustee. Often used in the phrase “outright and free of trust,” meaning a gift is given directly to the recipient to do with as he or she pleases, it is not (or no longer) to be held in trust.
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Generation Skipping Transfer Tax
An additional federal tax levied against estates in certain circumstances when a deceased person leaves assets to someone more than one generation younger than the deceased person.
Gift Tax Return
A federal tax return required to be filed for any gifts given during the donor’s lifetime that exceed $13,000.
Gift Tax
Tax due on lifetime gifts in excess of the “Exemption Amount.”
GST
Abbreviation for “Generation Skipping Transfer Tax.”
Guardian
A person charged with the care and control of a minor and/or the minor’s assets. Parents are natural guardians of their children and do not need court appointment. Legal guardians are appointed a court.
Guardian ad Litem
A special, temporary appointment to act on behalf of a minor in a court proceeding. This is not the same as a legal guardian.
Guardian of the Estate
A person appointed by the court to manage and control the property of a minor.
Guardian of the Person
A person appointed by the court and responsible for seeing to the proper day to day care and supervision of a minor.
Guardianship
The legal relationship established when a court appoints a guardian for a minor.
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Heggstad Petition
California probate term: A special petition requesting a court determination that an asset inadvertently left out of a trust may be treated as a trust asset without need of a formal probate.
Heir
A person entitled to inherit from someone if they do not leave a Will. Usually follows the family tree.
HIPAA
The Health Insurance Portability and Accountability Act 1996. A federal law regarding medical privacy rights and limiting authority to access medical information.
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ILIT
Abbreviation for “Irrevocable Life Insurance Trust.”
In Trust
Subject to the provisions of a trust document and the authority of a trustee.
Incapacity
Mental or physical impairment precluding or substantially reducing one’s ability to make decisions or peform certain tasks.
Incompetent
Lacking the required level of mental capacity to make certain decisions or perform certain acts under law. Often used interchangeably with mental incapacity.
Inheritance Tax
A tax charged in some states against the person receiving an inheritance. California does not have an inheritance tax.
Intangible Personal Property
Property that is not real estate and that cannot be touched or moved or that has no value of its own other than for what it represents. Copyrights, patents, goodwill, trademarks, cash, insurance and stock are all examples of intangible personal property.
Inter Vivos
A Latin term meaning “during life.” It is used to describe a trust that is effective during the lifetime of the person who created it. The trust is usually also effective after death and usually subject to amendment by the creator. This type of trust is more often called a “living trust.”
Intestate
Dying without leaving a valid Will.
Inventory & Appraisal
California probate term: A formal listing of all of the assets of a probate estate with values as of the date of death.
Irrevocable Life Insurance Trust
A trust that cannot be amended or revoked, does not benefit the settlor, and is established to hold and administer proceeds of a life insurance policy.
Irrevocable Trust
A trust that cannot be amended or revoked.
Issue
A legal term historically meaning a person’s legally recognized lineal bodily descendants. In California, this term now includes persons legally adopted and persons born out of wedlock.
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Joint Trust
A trust established by two or more settlors, most commonly by a husband and wife, a same-sex married couple, or registered domestic partners.
Joint Tenancy with Right of Survivorship
A form of title by which two or more persons own an asset and, as each owner dies, the remaining owners inherit the deceased person’s share without need of a probate action or Will.
JTWRS
Abbreviation meaning “Joint Title with Right of Survivorship.”
– L –
Last Will and Testament
A Will. A document expressing a person’s desire for the disposition of his assets upon death. Includes Codicils.
Letters
California Probate term: A document issued by the court to an “executor” or “administrator” to prove that person’s official appointment as “personal representative.”
Living Trust
A trust created during the settlor’s lifetime, usually for the benefit of the settlor and usually subject to amendment or revocation by the settlor. Also called an “inter-vivos” trust, which means “during life.” As opposed to a “testamentary trust,” which is established under a Will and created only after death.
Living Will
Another name for an Advance Healthcare Directive.
– M –
Marital Deduction
A federal estate tax deduction. Assets passing to a surviving spouse (who is a U.S. citizen) are generally not subject to the estate tax. (Tax exemption for assets passing to a non-citizen spouse are limited.)
Marital Deduction Trust
A trust established to hold assets passing to the surviving spouse in order to reduce or eliminate estate tax.
Medi-Cal
California’s version of Medicaid; needs-based aid subject to financial eligibility.
Medicare
A federal entitlement providing health benefits to persons over the age of 65.
Modifiable
Able to be changed, revised or amended.
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No Contest Clause
A provision in a Will or Trust stating that anyone contesting the document and losing will only get a certain sum (or nothing at all).
Nonmodifiable
Changes are not allowed; not subject to amendment.
Non-Probate Transfer
Passage of a decedent’s property without need of a probate proceeding. Examples include property held in a living trust; jointly owned property passing by right of survivorship and retirement or insurance benefits paid directly to the beneficiary.
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Objector / Objection
California Probate term: A person objecting to a petition or proposed action in the probate court. There are no “plaintiffs” and “defendants” in probate court. There are petitioners and objectors. Petitioners seek a court order for something and objectors oppose it.
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Per Capita
A term referring to a formula for calculating who will inherit a person’s assets if they left no Will. Per Capita literally means “by the head” and generally means that everyone receiving a share will get the same amount.
Per Stirpes
A term referring to a formula for calculating who will inherit a person’s assets if they left no Will. Per stirpes means that each branch of the family will receive a share. For example, each child of a deceased person will get an equal share and if a child died before the deceased person, then that child’s children get his share.
Personal Representative
The person officially in charge of a decedent’s probate administration, such as an executor, administrator or special administrator.
Personal Property
Property other than real estate, which is referred to as “real property.”
Pet Trust
A type of trust created to provide for a person’s pets after the person dies. California allows this type of trust, but not all states do.
Petitioner
California Probate term: A person seeking a court order for something in the probate court. There are no “plaintiffs” and “defendants” in probate court. There are petitioners and objectors. Petitioners seek a court order for something and objectors oppose it.
Power of Attorney
A legal document granting someone authority over your person or your assets. Can be used if you are incapacitated or unavailable. Terminates upon your death. Used by itself, the term “power of attorney” usually refers to a power of attorney for finances, not healthcare.
Power of Attorney for Finances
A legal document granting someone authority over your finances and other assets, as opposed to a power of attorney for healthcare, which is limited to medical circumstances.
Power of Attorney for Healthcare
An Advance Healthcare Directive. In some states, it is only called a power of attorney for healthcare. Grants someone authority to make medical decisions for you and carry out your wishes.
Probate
The process of proving the validity of a Will and having it officially recognized (also know as “admitting the Will to probate”); in California, a shortened reference to the Probate court.
Probate Court
In California, the division of the superior court that oversees matters relating to Wills, conservatorships, trusts and guardianships.
Probate Examiner
A court official (but not a judge) who reviews all petitions and most other documents filed in the probate court to check for compliance with rules and procedures. The probate examiner generates a short report for the judge, describing the nature of the document and any violations of rules or procedures or other deficiencies that the examiner feels are present. This report, known as the “examiner’s notes,” is available to the public prior to the court hearing.
Probate Investigator
A court official (but not a judge) used in conservatorships and guardianships whose job is to visit the home of the proposed ward or conservatee, interview that person and other relevant persons, review certain records, and submit a report to the judge.
Probate Referee
A person that conducts the probate court’s official appraisals of property. Court appraisals are required for decedent estate administration as well as for conservatorships and guardianships. With some exceptions, most property must be appraised by the official probate referee, not your own appraiser.
Professional Fiduciary
A person licensed in California to act as an agent under a healthcare or financial power of attorney or as a conservator, guardian or trustee. These are usually people who do this for a living. Generally, anyone doing one or more of those jobs for more than three families that are not related to the person doing the job must get licensed.
Property Tax Reassessment
Recalculation of your property tax by the county tax assessor based upon the current market value of the property, rather than the value of the property at the time you got it.
Proposition 13
A California law that limits the county tax assessor’s ability to reassess the property tax, usually only allowing reassessment when you transfer the property.
– Q –
QDOT
Abbreviation for “Qualified Domestic Trust.”
QPRT
Abbreviation for “Qualified Personal Residence Trust.”
QTIP
Abbreviation for “Qualified Terminable Interest Property” or a trust governing such property.
Qualified Domestic Trust
A special type of trust used when the surviving spouse is not a citizen of the United States.
Qualified Terminable Interest Property
A type of property (and a type of trust by the same name) that qualifies for the marital deduction but still enables the decedent to control who gets the leftovers when the surviving spouse dies.
Qualified Personal Residence Trust
A type of trust used to shelter appreciation of a residence from estate tax.
– R –
RDP
Abbreviation for “Registered Domestic Partner.”
Registered Domestic Partners
California law that recognizes the union of an unmarried same-sex couple (or, in some instances, an unmarried heterosexual elderly couple) and grants the couple the same rights as married persons. Federal law does not currently recognize registered domestic partners as “spouses,” but it does recognize community property rights of the partners.
Restatement
An amendment of a living trust that restates the entire trust as a new document. The restated trust becomes the official trust document and prior versions are obsolete.
Revocable Trust
A trust that may be revoked (canceled) by the settlor.
Revocation
The act of canceling a trust or Will.
– S –
Schedule of Assets
A listing of the initial property to be governed by a trust, usually attached to the trust document. A trust must have property to exist. The schedule of assets identifies the initial trust property. It may also be helpful in a “Heggstad Petition.” It is not necessary to amend the schedule of assets when assets are added to or removed from the trust in the future, but keeping an updated property list with the trust is generally advisable.
Separate Trust
A trust established by one individual to hold that person’s separate property, as opposed to holding community property.
Separate Property
Under California law, separate property is property owned prior to marriage, or acquired during marriage by gift, inheritance or by spending or exchanging other separate property. However, under some circumstances, separate property can become community property.
Settlor
The person who creates a trust or provides the assets for the trust. Also known as the “trustor.”
SNT
Abbreviation for “Special Needs Trust.”
Special Administrator
California Probate term: A “special administrator” is a temporary administrator with limited power appointed to serve only until a “general administrator” or executor can appointed.
Special Needs Trust
A special type of trust established for persons with disabilities who are receiving needs-based government aid, such as SSI, Medi-Cal or various state resources and benefits. The trust is designed to prevent disqualification from aid while still providing a fund to enhance the person’s quality of life. The government may have a right of reimbursement from the trust after the recipient’s death, depending upon the type of trust.
Special Trustee
A trustee with limited authority over trust assets, such as having the power to direct investments but not having other powers.
Spendthrift Provision
A provision in a trust that prohibits a beneficiary from assigning his interest to creditors and prevents creditors from attaching the interest before the beneficiary receives it.
Springing Power of Attorney
A power of attorney that only becomes effective (“springs” to life) when the person becomes incapacitated.
SSDI
“Supplemental Security Disability Income,” a component of social security that provides disability payments to persons who worked a minimum number of quarters (usually 20) but who are no longer able to perform gainful employment. This is not a “needs-based” benefit – earning too much money can disqualify the recipient, but unearned assets such as gifts and inheritances do not.
SSI
“Supplemental Security Income,” a component of social security that provides needs-based payments to disabled persons, regardless whether they worked the required number of quarters. This is a “needs-based” benefit and the recipient will be disqualified if he earns too much or has too many assets, even by gift or inheritance.
Statutory Compensation
California law sets the amount of compensation that the personal representative and the attorney for the personal representative are to be paid for a probate estate administration. It is based upon a percentage of the value of the estate. On a $1 million estate, compensation for the personal representative would be $23,000 and an additional $23,000 would go to the attorney.
Surcharge
A penalty assessed against the personal representative or trustee for breach of a duty or mismanagement of a trust or estate; often in the same amount as the waste or damage caused, but can be much more or sometimes less.
Survivor’s Trust
A trust setup to hold the surviving spouse’s share of the community property and the surviving spouse’s separate property.
– T –
Tangible Personal Property
Personal property that can moved or touched, such as clothing, jewelry, furniture, artwork, pets, vehicles and other “things.”
Tenants-in-Common
A form of title for joint ownership that does NOT include a right of survivorship.
Testamentary Trust
A trust setup under a person’s Will that doesn’t get created until the person dies.
Transmutation
A community property term for changing community property into separate property, or separate property into community, through an agreement meeting specified conditions.
Trust
A trust is a fiduciary relationship whereby a person (the trustee) agrees to manage the property of another person (the settlor or trustor) on certain terms and conditions set forth in a written trust document. A trust does not exist independently of the relationship, but most people talk about trusts as though they are separate entities, like a corporation. This is a common practice, but not technically correct.
Trust Administration
The activity of the trustee connected with the operation of a trust. Similar to probate administration, but applicable to trusts and trustees.
Trust Proceeding
A California probate court proceeding concerning the affairs of a trust.
Trust Protector
A special person designated in a trust to have the authority to supervise, consent to or veto specified actions of the trustee under specified circumstances.
Trustee
The person in charge of a trust and its assets. Can be an individual or a trust company.
Trustor
Another name for the settlor; the person who established the trust and put assets into the trust.
– U –
Undue Influence
Unfair influence over the will of another such that the influencing person is able to so control the other person that the other person makes decisions based upon the influencer’s desires, rather than the person’s own desires, and the person is unable to stop or resist.
Unified Credit
Another term for the estate tax exemption amount. It is “unified” because, under current law, the credit is the same for lifetime gifts and for property passing at death.
Uniform Fraudulent Transfers Act
A law prohibiting a person from giving away his assets for less than fair market value if doing so will make him insolvent or is done to avoid creditors.
Uniform Transfers to Minors Act
A law used in many states to allow an adult to manage specified property for a minor for a specific period of time without needing a formal appointment as guardian of the estate. In California, it is called CUTMA, “California Uniform Transfers to Minors Act.”
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Ward
A minor subject to the supervision of the probate court, such as a child having a legal guardian.
Will
A legal document used by a person to state his desires for matters at death, such as identifying a guardian for minor children, nominating an executor, and listing who should receive which of his assets.
