Glossary

Elder Law Definitions

Community Spouse:

The spouse who does not need long-term or nursing home care. This spouse continues to live in the community.

Countable Assets:

Assets that are not exempt are countable. This includes, but is not limited to, checking and savings accounts, CDs, money markets, stocks, mutual funds, and second cars.

Division of Assets:

This is the name commonly used for the Spousal Impoverishment provisions of the Medicare Catastrophic Act of 1988. It applies only to couples. Their countable assets are divided in two, with the community spouse allowed to keep one-half of the total, up to a certain amount. The other half of the assets must be spent down.

Estate Planning Definitions

Annual Gift Tax Exclusion:

Technique to allow gifts without the imposition of estate or gift taxes and without using lifetime exclusion.

Charitable Remainder Interest Trust:

A trust whereby donors transfer property to a charitable Trust and retain an income stream from the property transferred. The donor receives a charitable contribution income tax deduction, and avoids a capital gains tax on transferred property.

Children’s or Grandchildren’s Irrevocable Education Trust:

A Trust used by parents and grandparents for a child’s or grandchild’s education.

Family Limited Partnership:

An entity used to:

1. Provide asset protection for partnership property from the creditors of a partner
2. Provide protection for limited partners from creditors
3. Enable gifts to children and parents maintaining management control
4. Reduce transfer tax value of property

Federal Estate Tax:

A tax levied by the federal government upon the estate of a deceased person. The federal government gives certain exclusions and deductions and then taxes everything above a set level.

Fractional Interest Gift:

Allows a donor to transfer partial interests in real property to donees and obtain fractional interest discounts for estate and gift tax purposes.

Funding:

Is the process that entails transferring assets you own as an individual into the name of your Trust.

Generation Skipping Tax:

This is a tax levied on assets that are given to individuals who are more than one generation away from the donor. An example would be a grandparent giving an asset to a grandchild either during the grandparent’s life or at death. Effective use of generation-skipping exemption allows the assets to avoid estate tax inclusion in the child’s taxable estate.

Guardianship/Conservatorship:

Is a court-supervised proceeding which names an individual or entity to manage the affairs of an incapacitated person. A guardianship may also include the duty to care for the incapacitated person.

Health Care Power of Attorney:

Instrument used to allow a person you name to make health care decisions for you should you become incapacitated.

Irrevocable Life Insurance Trust:

A Trust used to prevent estate taxes on insurance proceeds received at the death of an insured.

Joint Tenancy:

When property is held in joint tenancy with rights of survivorship by two or more people, upon the death of one of the owners, all of his or her interest in the property is transferred immediately to the surviving owners.

Living Will:

Sometimes called a physician’s directive, is a document in which you give directions for life sustaining treatment should you become unable to communicate your wishes. Some states have combined this into the advanced health care directive.

Pour Over Will:

Is used first to name a guardian for minor children. Second, it protects against intestacy in the event any assets have not been transferred into the Trust at the death of the Trustor/Owner. Its function is to “pour” any assets left out of the Trust into it so they are ultimately distributed according to the terms of the Trust.

Private Foundation:

An entity used by higher-wealth families to receive charitable income, gift, or estate tax deduction while allowing the family to retain some control over the assets in the foundation.

Probate:

Is the court procedure used to change title to assets from the name of an individual who has passed away into the name of the beneficiaries. It is also where all creditors of a decedent file claims to collect their debts and where interested parties can “contest” the Will. An individual who passes away with a Will or no estate plan will go through this process.

Property Power of Attorney:

Instrument used to allow an agent you name to manage your property.

Revocable living trust:

A device used to avoid probate and provide management of your property, both during life and after death.

State Estate or Inheritance Tax:

A state estate tax is a tax levied by a state government upon the estate of a deceased person. It is levied in much the same way as the federal estate tax. A state inheritance tax is a tax levied by a state government that varies depending upon the relationship of the inheritor to the deceased person. Nearly half the states have a separate state estate or inheritance tax which kicks in at a lower level than that of the federal government.

Step-up in Basis:

A step-up — or step-down — in basis is an adjustment for income tax purposes to an asset’s fair market value at the date of the death of the owner of the asset. For example, if you bought a share of stock for $100 that increased in value to $500 at the time of your death, your tax basis was $100 but increases to $500 at the time of death.

Trustee:

The person or entity in charge of the assets in a Trust. While you are alive, you may act as Trustee. For married couples, either one or both spouses may act as Trustee or co-Trustees. The successor Trustee is an individual or corporation fiduciary whom you designate to be in charge of your Trust in the event of disability or upon death.

Will:

A legally enforceable declaration of how a person wishes his or her property to be distributed after death. In a Will, a person can also recommend a guardian for his or her children.

Incapacity Planning Definitions

Conservatorships/Guardianships:

This is the court-supervised proceeding which names an individual or entity to manage the affairs of an incapacitated person.

Durable Power of Attorney for Health and Living Will:

These documents authorize termination of life support if you are terminally ill and appoint an Agent, of your choice, to make health care decisions for you if you become incapacitated.

General Durable Power of Attorney:

This is a General Power of Attorney that remains valid even during your incapacity.

General Power of Attorney:

Provides your Agent with broad authority. It says that at any time – and in just about any capacity – your Agent can conduct business in your name. The Agent can be given great discretion.

Gifting Language:

Special language that may be drafted and included with your Trust document and Power of Attorney to give authority to gift assets to accomplish planning goals.

HIPAA Release:

The Health Insurance Portability and Accountability Act of 2003, known as “HIPAA,” created privacy protections for medical information which prevents hospitals and physicians from providing your personal health information to anyone that is not listed in a signed HIPAA Release. This release allows the Agents under your Advance Health Care Directive/Durable Power of Attorney for Health Care, and the Trustees under your Revocable Living Trust to carry out their duties.

Medicaid Triggers:

These “triggers” or events can put into motion the shift of assets out of the name of the person who is incapacitated in order to qualify for Medicaid benefits.

Power of Attorney:

You empower someone else to act on your behalf. Technically, this person becomes your “Attorney in Fact,” but is more commonly referred to as your “Agent.”

Legacy Planning Definitions

Annual Gift Tax Exclusion:

Technique to allow gifts without the imposition of estate or gift taxes and without using lifetime exclusion.

Children’s or Grandchildren’s Irrevocable Education Trust:

A Trust used by parents and grandparents for a child’s or grandchild’s education.

Charitable Remainder Interest Trust:

A trust whereby donors transfer property to a charitable Trust and retain an income stream from the property transferred. The donor receives a charitable contribution income tax deduction, and avoids a capital gains tax on transferred property.

Family Limited Partnership:

An entity used to:

1. Provide asset protection for partnership property from the creditors of a partner
2. Provide protection for limited partners from creditors
3. Enable gifts to children and parents maintaining management control
4. Reduce transfer tax value of property.

Family Wealth Trust:

A Family Wealth Trust is the main component of a Legacy Wealth Plan and covers important issues other than avoiding probate.

Federal Estate Tax:

A tax levied by the federal government upon the estate of a deceased person. The federal government gives certain exclusions and deductions and then taxes everything above a set level.

Fractional Interest Gift:

Allows a donor to transfer partial interests in real property to donees and obtain fractional interest discounts for estate and gift tax purposes.

Funding:

Is the process that entails transferring assets you own as an individual into the name of your Trust.

Generation Skipping Tax:

This is a tax levied on assets that are given to individuals who are more than one generation away from the donor. An example would be a grandparent giving an asset to a grandchild either during the grandparent’s life or at death. Effective use of generation-skipping exemption allows the assets to avoid estate tax inclusion in the child’s taxable estate.

Guardianship/Conservatorship:

Is a court-supervised proceeding which names an individual or entity to manage the affairs of an incapacitated person. A guardianship may also include the duty to care for the incapacitated person.

Health Care Power of Attorney:

Instrument used to allow a person you name to make health care decisions for you should you become incapacitated.

Irrevocable Life Insurance Trust:

A Trust used to prevent estate taxes on insurance proceeds received at the death of an insured.

Joint Tenancy:

When property is held in joint tenancy with rights of survivorship by two or more people, upon the death of one of the owners, all of his or her interest in the property is transferred immediately to the surviving owners.

Living will:

Sometimes called a physician’s directive, is a document in which you give directions for life sustaining treatment should you become unable to communicate your wishes. Some states have combined this into the advanced health care directive.

Pour Over Will:

Is used first to name a guardian for minor children. Second, it protects against intestacy in the event any assets have not been transferred into the Trust at the death of the Trustor/Owner. Its function is to “pour” any assets left out of the Trust into it so they are ultimately distributed according to the terms of the Trust.

Private Foundation:

An entity used by higher-wealth families to receive charitable income, gift, or estate tax deduction while allowing the family to retain some control over the assets in the foundation.

Probate:

Is the court procedure used to change title to assets from the name of an individual who has passed away into the name of the beneficiaries. It is also where all creditors of a decedent file claims to collect their debts and where interested parties can “contest” the Will. An individual who passes away with a Will or no estate plan will go through this process.

Property Power of Attorney:

Instrument used to allow an agent you name to manage your property.

Revocable Living Trust:

A device used to avoid probate and provide management of your property, both during life and after death.

State Estate or Inheritance Tax:

A state estate tax is a tax levied by a state government upon the estate of a deceased person. It is levied in much the same way as the federal estate tax. A state inheritance tax is a tax levied by a state government that varies depending upon the relationship of the inheritor to the deceased person. Nearly half the states have a separate state estate or inheritance tax which kicks in at a lower level than that of the federal government.

Step-up in Basis:

A step-up — or step-down — in basis is an adjustment for income tax purposes to an asset’s fair market value at the date of the death of the owner of the asset. For example, if you bought a share of stock for $100 that increased in value to $500 at the time of your death, your tax basis was $100 but increases to $500 at the time of death.

Trustee:

The person or entity in charge of the assets in a Trust. While you are alive, you may act as Trustee. For married couples, either one or both spouses may act as Trustee or co-Trustees. The successor Trustee is an individual or corporation fiduciary whom you designate to be in charge of your Trust in the event of disability or upon death.

Will:

A legally enforceable declaration of how a person wishes his or her property to be distributed after death. In a Will, a person can also recommend a guardian for his or her children.

Trust Administration & Probate Definitions

Agent:

A person authorized to act on behalf of another person, the “principal.”

Appraiser:

Determines the value of hard to value assets – such as a business, real estate, or various types of collections – for tax purposes, as well as to assist the trustee in establishing values for distributions.

Beneficiary:

A person entitled to receive benefits from the trust. The trust’s assets may be distributed outright to the beneficiary, or they may continue to be held in trust for the beneficiary.

Decedent:

The deceased person.

Estate Planning Attorney:

The point-person for the trust administration, assisting the trustee with the inventorying of assets, preparation of estate tax (Form 706) and other tax returns, making of tax elections, and distribution of trust assets as provided under the trust document. Often, the estate attorney coordinates the interaction of other professionals needed for the trust administration.

Executor:

In the case of individuals who have died intestate, the person playing the role of executor is often called the administrator or personal representative.

Financial Planner:

Assists the trustee or estate planning attorney in valuing securities, re-titling assets and making distributions to the beneficiaries.

Funding a Trust:

Transferring ownership of property to a trust.

Gift:

A voluntary, gratuitous transfer of property made to another person.

General Partner:

One or more persons carrying on a business for profit as a partnership or limited partnership, having personal liability for all debts of the partnership, and, if in a limited partnership, having control of operations of the partnership.

Intestate:

Each state has their own set of laws dealing with the procedure to be followed when an individual dies without a Will.

Life Insurance Agent:

Assists the trustee or estate planning attorney in obtaining death benefits that may be payable to a beneficiary or the trust itself.

Limited Partner:

One or more persons associated in a limited partnership, having no personal liability for the debts of the partnership beyond his or her partnership investment, and having no direct control over operations of the limited partnership.

Living Probate:

Most people typically think of “probate” as something that happens after you die. However, court proceedings can also occur while you are alive and is referred to as a “living probate.” A living probate can arise if you become mentally or physically disabled. A living probate is often referred to as either a “guardianship” or “conservatorship.” A guardian is someone appointed by the Court to look after the incapacitated person. A conservator is someone appointed by the Court to look after the assets of an incapacitated person.

Power of Attorney:

A document authorizing one person, the “agent,” to act on behalf of another person, the “principal.” Also, referred to as “Attorney-in-Fact.”

Principal:

A person who has appointed another person, his or her “agent,” to act on his or her behalf.

Probate:

The legal process which transfers legal title from the decedent to the appropriate recipient of the property. This process is necessary when someone dies with a will or no estate plan in place.

Successor Trustee:

Any person appointed to handle a trust after the death or disability of the trustor.

Survivor Trustor/Trustee:

If the trust was a joint trust and the death was the first one for the couple, the surviving spouse is known as the surviving trustor. If the surviving spouse continues in his or her role as manager of the trust, then her or she also acts as the surviving trustee. In some situations, a co-trustee is appointed to act with the surviving spouse, or a third party takes over as trustee after the death of the first spouse.

Trustee:

The person who manages assets owned by a trust under the terms of the trust.

Trustor:

The creator of a trust.

Trust Administration:

The process of following a trust’s instructions after the death of the grantor. For example, a trust may provide for funding of subtrusts.
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