A-B Trust: Also called a “Marital Bypass Trust.” The purpose of an A-B Trust is to save estate taxes (death taxes) which are assessed by the IRS at the time of death. An A-B Trust only works if you are married at the time of your death. Upon the death of the first spouse the couple’s assets must be transferred into two separate trusts. The “A trust,” sometimes referred to as the “Survivor’s Trust,” remains revocable by and under the control of the surviving spouse. The “B trust,” sometimes referred to as the “Decedent’s Trust” or “Exemption Trust,” is irrevocable, and gives the surviving spouse limited or no right to receive its assets. The principal tax benefit from using an A-B trust is to utilize the unified credit upon the death of the first spouse.
A-B-C Trust: Also called a “QTIP Trust” is used by married couples and provides for the allocation of assets to three separate trusts, established upon the death of the first spouse. The A – Survivor’s Trust and B – Decedent’s Trust are generally the same as in the typical A-B trust described above. The third trust known as a QTIP trust, commonly called a “Marital Trust,” generally has similar provisions for the Surviving Spouse as the Decedent’s Trust. However, an election is made on the estate tax return of the first spouse to die that the QTIP trust will qualify for the marital deduction in order that the assets allocated to it will be taxed at the death of the second spouse rather than the death of the first spouse. This allows the assets to ultimately pass to beneficiaries designated by the first spouse but defers the tax on those assets until the death of the surviving spouse.
Account (by Executors, Administrators, Trustees, Conservators, Guardians and other Fiduciaries): A record of a fiduciary’s transactions. A fiduciary may wish to file an account in court in order to be released from liability, and a court may order a fiduciary to file an account whenever there are questions about the administration of the estate or trust. Accounts typically include a statement of receipts and disbursements of principal and income, a statement of assets and liabilities, the fiduciary’s compensation, notice of any agents hired by the fiduciary, their relationship to the fiduciary, their compensation and a statement of any claims made against the estate. Some accounts must be prepared and served on interested persons on an annual basis.
Administrator of the Estate (Probate): The person or institution appointed to collect, manage, and distribute a decedent’s estate when there is no executor. An administrator is appointed whenever (a) there is no will, (b) there is a will but the will fails to name an executor, or (c) there is a will and the will names executors but all of the executors have failed or ceased to serve.
Adult Protective Services (APS): APS is responsible for investigating abuse, neglect, and exploitation of adults who are elderly or have disabilities.
Agent: A person that has express written authority to act for another (the principal) so as to bring the principal into contractual relations with others. An agent is under the control (is obligated to) the principal, and (when acting within the scope of authority delegated by the principal) may bind the principal with his or her acts. (Note: Also known as an Attorney-in-fact.)
Attest: To confirm in writing that a Will is genuine; to bear witness to attest that a Will was signed and declared to be a Will.
Attestation: The act of witnessing the signing a Will for the purpose of declaring that the Will was properly signed and declared by the signer to be his or her signature. (Note: Attest: to confirm in writing that a Will in genuine; or to bear witness to attest that a Will was signed and declared to be the signer’s Will.
Attorney-in-fact: A person with the power to act for another person (the “principal”) under a document called a “power of attorney.” An attorney-in-fact is sometimes referred to as an “agent.” In a “general power of attorney,” the attorney-in-fact can conduct all business and personal matters and sign any documents. In a “special power of attorney,” the attorney-in-fact can only act or sign documents on specially identified matters. An Attorney-in-fact is a fiduciary. (Note: an Attorney-in-fact is also known as an “agent.”)
Beneficiary: A person entitled to any income or principal of an estate or trust or other contract (such as a life insurance contract or retirement plan). Beneficiaries can have present interests or future interests. An “income beneficiary” is a person presently entitled to some or all of the income of a trust. A “remainderman” is a beneficiary entitled to the balance of a trust fund only after another beneficiary has died (or the trust otherwise ends).
Beneficiary Designation: You may name any person or institution as a beneficiary of your bank account, brokerage account, retirement plan (including an IRA and 401k), annuity contract, life insurance policy and other similar financial accounts. Upon your death, the asset will transfer outside probate, directly to that beneficiary.
Benefactor: A benefactor is a person or entity that supports another person or entity by giving funds or property.
Bequest: To give or leave personal property or assets by Will to an individual or charity. A bequest may be for a specific amount or percentage of the estate.
Bond: When an individual dies, that person has most likely left property and assets to be distributed. This property is referred to as an estate. Frequently, another person will oversee the distribution of the property and assets to the heirs of the estate. The probate bond is similar to collateral. In other words, money is put up to insure that the executor or administrator will perform his duties in good faith. In order to provide certain protections to the heirs and creditors of the estate, this person must post a probate bond. While there are standard probate bonds, there are also other types of bonds. Conservator bonds, guardian bonds and trustee bonds are other types of bonds frequently considered as probate bonds when utilized in accordance with the administration of a trust or estate.
Breach of Trust: Failure of the trustee to fulfill required duties; includes doing things illegally, negligently or forgetfully.
Children’s Trust: A document that controls when your children will be able to access the money you’ve left them. Frequently the trust provides for equitable payment of college costs for each child. Then assets are distributed as you direct. Many times parents will choose to stagger when the money is paid out — for instance, one third at age 25, one third at age 30, and the final third at age 40.
Charitable Lead Trust: A trust (for a fixed term) in which a charity is the income beneficiary and the remainder or principal (at the end of the term) is given to a non-charitable beneficiary.
Charitable Remainder Trust: A trust (for a fixed term) for the life of an individual where the income is paid to a non-charitable beneficiary (during the term) and the remainder or principal is paid to a charity upon termination.
Charitable Shelter Trust (Bypass Trust): A taxable trust funded with the credit shelter amount. Frequently this type of trust is used to provide benefits to a decedent’s surviving spouse, while avoiding inclusion in that spouse’s gross estate. Assets in this type of trust pass to descendants with no further estate taxes.
Coercion: The improper use (or threat of improper use) of authority, economic power, physical force, or other such advantage, by a party to compel another to submit to the wishes of its wielder. Agreements entered into, or testaments (Wills or Trusts) signed, under coercion are considered illegal and invalid. (Note: See also duress and undue influence)
Codicil: An amendment to a will (or another codicil). A codicil must be signed with the same formalities as a will.
Conservatee: An adult who is unable to manage self, property, or self and property and for whom the probate court has appointed a conservator.
Conservatee Rights: In general conservatees have the right to: 1.) control their own salary, 2.) make or change their will, 3.) get married, 4.) receive mail, 5.) have their own attorney, 6.) ask a judge to change conservators, 7.) ask a judge to end the conservatorship, 8.) vote, unless a judge says they are unable to, 9.) control personal spending money, if a judge says they can have an allowance, 10.) make their own health care decisions, unless a judge gives that right to someone else.
Conservator: A person appointed by probate court to take care of the person, property, or person and property of another adult (the conservatee). Conservators can be family members, paid professionals or someone from the Public Guardian’s office.
Conservatorship: A conservatorship is a court process where a court appoints a responsible person (called a conservator) to care for another adult who cannot care for himself or his finances (called a conservatee). There are two kinds of conservators: 1.) A conservator of the “person” cares for and protects a person when the judge decides that the conservatee can’t do it for himself; 2.) A conservator of the “estate” handles the conservatee’s financial matters – like paying bills and collecting a person’s income – if the judge decides that the conservatee can’t do it for himself. Conservators are generally family members, professionals from conservatorship companies or employees of the Public Guardian’s office.
Contingent Beneficiary: A person who may share in an estate or Trust depending upon the happening of an event. For example, a person who must reach the age of 25 before receiving anything from a Trust is a contingent beneficiary.
Custodian of the Will: The person who has possession of the Will when the person who wrote it dies.
Crummy Trust: The beneficiaries have a limited power of withdrawal from this kind of trust. The withdrawal is usually limited to the amount excludable from gift tax under the annual exclusion.
