A/B Trust: A type of revocable living trust used by married couples. In this type of living trust, two trusts (trust A and trust B) are created at the death of the first spouse. By dividing the couple’s estate into two trusts at the first death, each spouse can pass the maximum amount of property allowed to avoid federal estate taxes. One trust, usually trust A, is often referred to as the “Marital Trust” and the other trust, usually trust B, is often referred to as the “Family Trust” or the “Credit Shelter Trust”.
Alternate Valuation Date: A date exactly six months following a decedent’s date of death that the Personal Representative may choose to revalue, for estate tax purposes, all assets owned or controlled by the decedent.
Annual Exclusion: The amount of $13,000 that can be given each year to any individual or any number of individuals gift tax free. A husband and wife together can give each year $26,000 to each person, provide the couple makes such election on a filed federal gift tax return.
Annuity: The periodic payment of a definite sum of money, with such payments to continue for life or for a definite number of years.
Assets: All types of property which can be made available for the payment of debts.
Basis: A tax term, which refers to the original purchase price of property, used to determine the amount of income tax that will be assessed on sale. Basis is deducted from the sales price of the property when it is sold to determine the gain or loss for income tax purposes. For certain property, basis can be depreciated or amortized over time for income tax purposes.
Beneficiary: A person (or institution) who derives benefit from the creation of a trust, proceeds of insurance policy, proceeds from a retirement plan (such as 401(k), pension, and IRA), or property designated by a Will.
Bequest: A legal term meaning a gift of a specific item of property or specific amount of cash under a Will.
Bypass Trust: See Credit Shelter, Trust
Charitable Remainder Trust: A trust used to make large donations of property or money to a charity so the person making the gift or donation can obtain an income and estate tax advantage. In a charitable remainder trust, the donor reserves the right to receive trust income during his life (or some other specified time period) and when the agreed period is over the property in such trust goes to one or more designated charities.
Closely-Held Business: A business organization in which the ownership is held by a limited number of people, often within the same family, rather than owned by the public at large.
Codicil: A supplement, amendment, or addition to a Will executed with all the formalities of the Will itself. A codicil may explain, modify, add to, subtract from, qualify, alter, or revoke provisions in a Will.
Common Disaster Clause: A statement in a Will telling how property is to be distributed if would-be devisees die from the same accident.
Community Property: Some state laws require that all assets acquired during a marriage belong equally to both spouses, except for gifts and inheritances received by one spouse. The eight states with such laws are known as ‘community property’ states. The eight states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas and Washington. Puerto Rico also uses the community property system, and Wisconsin has a modified community property system. Utah is NOT a community property state, although in some instances those moving to Utah from a community property state may have assets that retain their character as community property.
Conservator: A person who is appointed by a court to manage the estate of an incapacitated person who, because of age, injury, disability, or other physical or mental health limitations, is incapable of managing his or her own affairs.
Consideration: Something which has value, such as real or personal property or a promise given in exchange for another promise.
Contingency: The possibility of coming to pass; an event that may occur.
Corpus: See Principal.
Credit Shelter Trust: [TBP]
Death Taxes: Estate or inheritance taxes due by reason of death of an individual.
Decedent: A deceased person.
Deed: A legal instrument used to convey title to real property.
Disclaimer: Refusal of a beneficiary to accept property Willed to him or her. When a disclaimer is made, the property is generally transferred to the person next in line under the Will. Also called a renunciation.
Devise: When used as a noun, real or personal property given to another by Will. When used as a verb, to dispose of real or personal property by Will.
Devisee: Any person designated in a Will to receive real or personal property.
Domicile: Place where a person has voluntarily fixed his/her habitation, not for a temporary or special purpose but with a present intention of making it his/her permanent home unless and until something, which is uncertain and unexpected, happens to induce him/her to adopt some other permanent home.
Donee: One who receives a gift.
Donor: One who makes a gift.
Durable Power of Attorney: A power of attorney that continues in effect during the grantor’s disability.
Escheat: When a decedent’s property goes to the State due to lack of heirs.
Estate Tax: Tax assessed by the federal government upon a person’s transfer of property at death.
Fiduciary: A person holding an office of trust and confidence involving scrupulous good faith. It includes a Personal Representative, guardian, conservator and trustee.
Gift Tax: A tax levied by the federal government upon the gratuitous transfer of property by an individual to another person during lifetime.
Grantor Trust: A trust in which the person establishing the trust retains enough “ownership rights” or “incidents of ownership” that the person is treated by the IRS as the owner of the trust assets for income tax purposes. The right to revoke the trust is sufficient to make the trust a grantor trust.
Gross Estate: For federal estate tax purposes, the total value of all property—real or personal, tangible or intangible—that a decedent owned or controlled at death.
Guardian: A person legally empowered and charged with the duty of caring for an individual who, because of incapacity, cannot manage his or her own affairs. The guardian manages the person. In contrast, a conservator manages the property of an incapacitated individual. The same person can be appointed both guardian and conservator.
Heirs: Those persons under the statutes of intestate succession to the property of a decedent who dies without a Will or where a Will is not timely probated.
Holographic Will: A Will in which the signature and material provisions are in the handwriting of the testator.
Incidents of Ownership: Rights applying to an ownership interest in a life insurance policy. These include the right to change a beneficiary, to borrow on a policy, to change premium modes, and so on.
Inherit: To receive property from a deceased person.
Inter Vivos Trust: See Living Trust.
Intestate: A term used when a person dies without leaving a valid Will.
Irrevocable: A term used to describe a trust in which the trustor (maker of the trust) has, by the terms of the trust agreement, specifically given up the power to revoke or terminate the trust, either entirely or in part.
Joint Tenancy: A form of co-ownership in which two or more persons hold interests in the same property with right of survivorship.
Life Estate: A condition created whereby a person has the right to use property or receive income from property only for his or her lifetime.
Lineal Descendant: One who is, by blood relationship, in the direct line of descent from an ancestor. The term includes adopted children in Utah.
Marital Deduction (Gift): Allows married persons to make lifetime gifts to each other and claim a marital deduction for all such amounts without a gift tax.
Marital Deduction (Estate): Allows married persons to transfer assets to their surviving spouse without an estate tax at the death of the first spouse.
Minor: A child who is not old enough to have legal capacity to govern his or her own affairs. In Utah a person is a minor until he or she becomes 18 years old.
Pay on Death (POD): Designation or naming of a beneficiary to receive an account balance on a party’s death.
Per Capita: Equal shares to all who inherit.
Personal Property: Assets whose ownership arises either out of physical possession of the property, or as the result of a document showing ownership. Examples include jewelry, livestock, machinery, bank deposits, stocks and bonds, checking and savings accounts, automobiles and recreational vehicles. In Utah, all property other than real estate.
Personal Representative: A person named in a Will or appointed by the district court to administer the estate of a decedent. Formerly referred to as executor or administrator.
Pour-over Will: A Will which contains a clause that transfers some or all of the assets that pass through the Will into a trust for final distribution from the trust. The Will’s assets are said to “pour over” into the trust.
Power of Attorney: A written, notarized document in which one individual gives another person the power to conduct certain acts on his or her behalf.
Pre-nuptial Agreement: A contract between two potential marriage partners specifying how the property owned by each prior to marriage and owned individually or jointly during marriage will be divided should the couple die or divorce.
Private Annuity: A means of transferring property from one owner to another by “selling” it for an unsecured promise to pay the original owner an income for life. The sale price is based on fair market value at the time of sale.
Probate: The process of gathering all property of someone who died, paying all just debts and taxes, and distributing the balance to the persons designated in the Will (or to the heirs as prescribed by intestacy law where there is no Will, or the Will is defective, or the Will is filed late).
QTIP Trust: A “Qualified Terminable Interest Trust” which provides an unlimited marital deduction for estate tax purposes for qualified property put into the trust. However, rather than permitting the surviving spouse to have full power to distribute the property to anyone he or she wishes, the trust restricts the ability of the surviving spouse to distribute the property in the trust to a select group of individuals, such as children, as the other spouse directed during his/her life. Typically, the surviving spouse enjoys the trust income during his/her lifetime, then ownership of the trust property passes to the persons selected by the now-deceased spouse during his/her life. Without the QTIP laws, any attempt to “tie down” the property and restrict the surviving spouse’s rights to transfer the trust property would have resulted in the property not qualifying for the marital deduction under the estate tax.
Real Property: Real estate, minerals and royalty interests, appurtenant water rights, growing timber, land, fixtures and buildings attached to the land.
Remainderman: One entitled to the remainder of a life estate after a particular reserved right or interest has expired.
Revocable: A trust in which the trustor (maker of the trust) has, by the terms of the trust agreement, reserved the power to revoke or terminate the trust in whole or in part, and receive the property back from the trustee.
Right of Representation: Term used by a testator to describe the division of property among different degrees of kinship. For example: A had children B and C. B had one child, B1, and C had two children, C1 and C2. A dies with B surviving and with C pre-deceasing A but leaving C1 and C2 surviving. If A provided in his Will that his property be divided by representation, then B would receive one-half and the children, C1 and C2, would split the other half (¼ to each). If the property had been divided per capita, B and children C1 and C2 would have received equal shares of one-third each.
Separate List of Tangible Personal Property: A list separate from the Will or Trust that identifies both items of tangible personal property and the persons to receive them.
Sole Ownership: Title to property in one name alone.
Spendthrift: An individual who cannot handle money wisely or spends it wastefully.
Spouse: An individual’s wife or husband.
Stepped-up Basis: At a person’s death, the “basis” of his property for income tax purposes changes to the property’s fair market value at death. Oftentimes, the basis changes from a low figure before death, to a higher figure at death. Thus, the basis is said to have “stepped-up”. Stepped-up basis is an extremely valuable, and often overlooked, income tax benefit that results from a person’s death.
Taxable Estate: The portion of an estate that is subject to federal estate tax. It is the gross estate less all applicable deductions and exclusions.
Tenancy in Common: A type of co-ownership between two or more persons who hold undivided interests in the same property with no right of survivorship for the surviving tenant in common. When one dies, his or her share becomes part of his or her estate. That share goes to his or her heirs and not to the other tenants in common, unless they are also his/her heirs or, if there is a Will, to his/her devisees.
Testamentary: Pertaining to a Will.
Testamentary Trust: A trust, set up in a Will, which does not become effective until the death of the testator.
Testator: A person making a Will.
Transfer on Death (TOD): Designation on securities that allows the naming of a beneficiary to receive them upon death of an owner.
Trust: The legal relationship created by one person’s holding legal title to property, whether real or personal, for the benefit of another. The term commonly refers to a written document such as a “Trust Agreement” or “Declaration of Trust”.
Trustee: The person who holds title to trust property, and who is appointed to administer and carry out the terms of a trust for the benefit of the beneficiaries.
Trustor: See Trustmaker.
Uniform Transfers to Minors Act: A Utah statute that provides a method for transferring property by gift to a custodian for a minor who cannot legally manage property. The laws allow an adult to manage the property for the minor’s benefit until the minor turns age 21 [see UCA §75-5a-102(11).].
Will: The legal instrument expressing a person’s wishes and directions as to the disposition and distribution of his/her property after death.
Witness: A person who observes the signing of a Will or other document and attests to the signature.