APPRECIATED ASSETS: Assets that have a higher market value than their basis or tax purpose value. Such assets would, if sold by an individual or non-charitable organization at a price higher than their basis, potentially generate a taxable capital gain (either long-term or short-term depending on the holding period). Giving appreciated assets is often a tax-wise strategy.
ATTORNEY: The person licensed by the state to practice law and assist the executor, trustee, and guardian. It is conceivable that each could hire a separate attorney, but usually one attorney represents all three.
BASIS: The tax purpose value of the property or asset used in establishing the potential capital gain amount.
BENEFICIARY: The person and/or organization that receives the benefits (usually assets or income) of a trust.
BEQUEST: A gift of property or assets to a beneficiary as defined in a will or trust.
BYPASS TRUST: Established to avoid or bypass the surviving spouse's estate, which enables each spouse to use the federal estate tax exemption.
CHARITABLE GIFT ANNUITY: A charitable gift plan that is used by many to provide income for the annuitant and a second beneficiary, if any. The annuitant (the person providing funds to the charity) receives a contract or agreement from the charity which states that the charity will pay the annuitant a fixed income for life (lives) with payments to start immediately or at some set future time. Probate or court involvement is avoided on these funds. The income paid under the charitable gift annuity is secured by the assets of the charity.
CHARITABLE LEAD TRUST: During the term or life of the charitable lead trust, an annuity or unitrust income interest is distributed each year to the designated charitable beneficiary and the assets are eventually transferred to the trustor's or grantor's designated non-charitable beneficiary(ies), or to the trustor/grantor.
CHARITABLE REMAINDER ANNUITY TRUST: A trust that is set up to pay a fixed annual percentage of 5 percent or more of the net fair market value of the assets placed in the trust. The charitable remainder annuity trust assets are valued at the time the property is placed in the trust. The trust assets are never revalued. At the end of the trust term the remaining assets are transferred to the charitable beneficiary(ies).
CHARITABLE REMAINDER UNITRUST: A trust that is set up to pay a return or fixed annual percentage of 5 percent or more of the net fair market value of the assets placed in the trust. The charitable remainder unitrust assets are revalued annually. At the end of the trust term the remaining assets are transferred to the charitable beneficiary(ies).
CODICIL: A written change or amendment made to a will.
EXECUTOR: The person or institution named in a person's will that carries out the terms of the will.
GUARDIAN: The person appointed by the Court to care for the person and/or estate of a minor child or incompetent person. One can nominate a guardian in a will, and though normally the court will honor that nomination, the Court has the right to agree or disagree.
JOINT TENANCY: A type of ownership where any two or more persons, related or not, may hold (own) property. The property passes to the survivor or survivors on the death of one. This passing is not automatic, as some think, and the procedure for passing will depend on local law. But this form of ownership does have the advantage of allowing property to pass to the survivor without delays of probate and court administration costs.
LIFE INSURANCE TRUST: Usually established for the purpose of excluding the proceeds of life insurance from the insured's and the spouse of the insured's estate for estate tax purposes. Life insurance trusts are irrevocable.
LIVING TRUST: Established to operate during the life (and can operate after the death) of the person setting up the trust. A living trust can be revocable, or, in other words, you can change your mind and have some or all of the trust property returned to you during your life. An irrevocable trust cannot be changed except in certain legal circumstances (fraud, unlawful agreements, merger of interests, decision of the Court).
PROBATE: The legal process of proving a will, appointing an executor, and settling an estate; but by custom, it has come to be understood as the legal process whereby a dead person's estate is administered and distributed.
RETAINED LIFE ESTATE: A gift plan defined by federal tax law allowing the donation of a personal residence (to include a vacation home) or farm with the donor retaining the right to life enjoyment. A life estate may be retained for one or more lives or it may be retained for a term of years. The donor receives an income tax deduction for a significant portion of the value of the contributed property (the property is irrevocably deeded to the charity) and estate tax benefits.
TENANTS IN COMMON: A property ownership arrangement in which two or more persons own property jointly. It is not necessary that the ownership consist of equal shares or percentages of the property. Generally there is no right of survivorship when a co-owner dies. The share of the property belonging to the deceased co-owner passes to his or her heirs and the shares of the remaining original co-owners do not change.
TESTAMENTARY TRUST: A will can have a trust written into it, called a Testamentary Trust, which is set into motion by the Court after the will reaches a certain point of execution, and is used only after the death of the person whose estate it represents.
TRUST: Any arrangement where property is to be held and administered by a trustee for the benefit of those for whom the trust was created. Depending on the type and how it is established, a trust may be revocable (changeable) or irrevocable (not changeable).
TRUSTEE: The person or institution named by a person making the trust, or appointed by the court, to carry out the terms of the trust. Assuming a trust has been set up through a will, when the executor's job is finished, the trustee's job begins.
TRUSTOR: The individual that establishes the trust. Also referred to as the GRANTOR and/or SETTLOR.
WILL: A will is the legal expression or declaration of a person's mind or wishes as to the disposition of the person's property, to be performed or take effect after the person's death.
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