Administration/Settlement

The process or inventorying assets, paying debts and taxes and transferring assets titled in the name of a decedent (or the name of the decedent’s Trustee) are legally transferred to the decedent’s heirs or beneficiaries. Administration can either be through a trust or by will.

 

Advance Directive

Includes a “Health Care Power of Attorney” and “Living Will.” A document designating persons (“agents”) to make health care decisions for you if you are unable to do so and giving guidelines on the types of care you want and don’t want.

 

Annual Exclusion

The exclusion from gift taxes for gifts by each donor to each donee which is available on an annual basis. In 2023, the annual exclusion is $17,000 per donor, per donee, per calendar year.

 

Attorney-in-Fact

A person named as an agent in a financial power of attorney.

 

Beneficiary

A person who is a recipient of benefits from a will, a probate estate, a trust, a life insurance policy, individual retirement accounts, or annuities.

 

Bequest

A gift of property made in a will or trust.

 

Decanting

This is the process by which a Trustee exercises the power to distribute property from an existing irrevocable trust into a new irrevocable trust for the benefit of a beneficiary. Decanting is an increasingly common strategy to allow a Trustee to create new, more favorable trust terms for a beneficiary.

 

Decedent

A person who has died.

 

Fiduciary

A person or corporation that occupies a position of trust and accountability. One who acts on behalf of another.

 

Funding/Titling/Asset Alignment

The process of titling (owning) assets in a manner that is consistent with the owner of the assets estate plan. This includes transferring assets to a Trustee of a trust, changing beneficiary designations, creating and severing joint tenancies and assigning interests in property.

 

Gift

A gratuitous transfer of property to someone else for less than fair market value. For example, “selling” a car to someone for $1.00 is a gift.

Grantor

The person who creates a trust (also known as trustor, settlor or trustmaker).

 

Guardianship

A probate court proceeding in which the judge considers whether a person is legally incompetent to the extent they need someone else to make health care and financial decisions for them. In New Hampshire the person seeking the guardianship needs to prove their case “beyond a reasonable doubt.” In Vermont the standard is “clear and convincing” evidence.

 

Intangible Personal Property

Intangible personal property includes money, patents, copyrights, licenses, and royalties.

 

Intestate

When a person dies without a valid estate plan, or where an estate plan does not dispose of all the decedent’s property.

 

Joint Tenancy with Rights of Survivorship

A form of ownership of property among persons generally characterized by equality of ownership share and created at the same time. When an owner dies that person’s interest is terminated and the last survivor(s) owns the entire title.

 

Living Trust

A trust, typically revocable, created by agreement during one’s life, as opposed to a testamentary trust created by a will. Such a trust can be used to provide instructions for the use of assets during a person’s lifetime and after their death. In addition, if all of a person’s assets are titled in the Trustee’s name, probate can be avoided when the person dies.  Generally speaking, this type of trust has two purposes, “process,” it helps smooth the transitions between capacity and incapacity and between life and death and “substantive,” once irrevocable, at the trustmaker’s death, the trust can provide asset protection for the beneficiaries.

 

Minimum Required Distribution

In most retirement accounts, sometimes referred to as qualified plans, the owner is required to begin making withdrawals from the account by April 1 of the year after they reach 73. (The age used to be 70.5.  In 2033, the age will be 75) These withdrawals must meet certain minimum distribution requirements over the account owner’s life expectancy.  Minimums are minimums, more may always be withdrawn.

 

Personal Representative

A personal representative is a catch-all term that includes all fiduciaries, including administrators, agents, executors and Trustees.

 

Pay on Death/Transfer on Death/In Trust For (P.O.D./T.O.D/I.T.F)

An instruction to a depository institution, such as a bank, to pay the funds in the account to the beneficiary (named on a form provided by the financial institution) at the owner’s death.

  

Personal Property

Personal property is all property other than real property. It includes tangible persona property and intangible personal property.

 

Pour-over Will

A will which names the Trustee of an existing trust as the principal beneficiary. Thus, the probate estate “pours over” into the trust estate.

 

Power of Attorney

A grant of power to a person (agent) to make or carry out the decisions of the signer of the document (principal), which expires upon the death of the principal. A durable power document continues in effect during the principal’s incapacity if it contains specific language required by state law.

 

Probate

The process of administrating a decedent’s estate under the authority of the probate court.

 

Qualified Plan Assets

Property held in an IRA., 401(k), 403(b), or other pension plan, on which the owner has not yet paid federal income tax; sometimes called “tax deferred.”

 

Real Property

Land, and anything attached to it, such as a house.

 

Remainderman

The persons who will receive the benefit from a trust after the death of the income beneficiary(ies).

 

Residuary

The clause in a trust or will that disposes of all of the decedent’s property not previously mentioned. This clause usually begins, “All the rest, residue and remainder of my property, of whatsoever kind and nature, and wherever situated, I give…”

 

SNT: Special or Supplemental Needs Trust

This is a special type of trust designed to set aside assets for the benefit of the beneficiary whose disability may allow them to receive public assistance for medical and other care expenses. There are generally two types: first-party trusts someone establishes for their own benefit, and third-party trusts someone establishes for the benefit of someone else, such as a spouse, child or parent.

 

Tangible Personal Property

Tangible personal property means anything moveable you can touch, such as clothing, jewelry, artwork, and business equipment.

 

Testator

The person who creates and signs a will.

 

Trust

Instructions for the use of property over a period of time, often measured by lives. There are two primary reasons to create a trust: one concerns process, it is generally easier to manage assets during incapacity and following death if all of a person’s assets are in trust. The second concerns substance, a trust can provide asset protection for the beneficiaries of the trust. A trust has a trustmaker, a Trustee, and beneficiaries. The trust defines the Trustee’s powers and duties and the beneficiaries’ rights, if any. Trusts may be revocable (the trustmaker may amend or revoke the trust instrument) or irrevocable (neither the trustmaker nor the beneficiaries of the trust may revoke the trust).

 

Trustee

A person or corporation appointed by the Trustmaker to take control of trust property and administer it for the benefit of the beneficiaries of the trust.

 

Trust Protector

This is a person or entity who is given power to make adjustments to what is typically an irremovable trust.  A Trust Protector can correct scriveners errors, make adjustments to the trust for income and estate tax reasons and change fiduciaries, among other things.

 

Will

A document executed by a testator which sets out the testator’s instructions for winding up his or her affairs and disposing of assets after death. The will has no effect until the testator dies.

 

Various relevant IRS terms and forms:

 706: Estate (and Generation-Skipping Transfer) Tax Return

This is the form used to calculate the estate tax owed by a decedent. It can also be used to “port” (transfer) a decedent’s unused estate tax exemption to their surviving spouse.

 

709: Gift (and Generation-Skipping Transfer) Tax Return

This is the form used to report transfer subject to federal gift tax and generation-skipping tax during the transferor’s lifetime.

 

1041: Income Tax Return for Estates and Trusts

This is the form used to report yearly income for estates and irrevocable trusts.

 

SS-4: Application for Employer / Taxpayer Identification Number (EIN/TIN)

This is the form used to obtain a 9-digit number assigned to employers, sole proprietors, corporations, partnerships, estates, irrevocable trusts, certain individuals, and other entities for tax filing and reporting purposes.