A personal representative who was not nominated in the will. “Administrator” is the term for a male personal representative; “administratrix” is the term for a female personal representative.
Under the federal gift tax, a deduction (currently $15,000 in 2020), from gross gifts for gifts by any donor to each donee in a given year. Note: A husband and wife can both gift $15,000 to an individual for a total of $30,000. Should you give more than $15,000 to any one person, you are required to file IRS Form 709.
This is the wording in a will or trust intentionally limiting the freedom of holder of a power of appointment over property. The most common words of limitation are, ‘health,’ ‘education,’ ‘support,’ and ‘maintenance,’ derived from IRS Section 2041. Use of the words avoid federal estate taxation to the holder of the power as a general power of appointment.
A person who is receiving or will receive a gift of a beneficial interest in property.
An agreement between one or more owners of a closely held businesses and one or more other persons that obligates one or more of the parties to purchase the interest of one of the others upon the occurrence of specific future events, such as the latter’s death and, often the onset of his or her permanent disability.
An arrangement under which property owned by a decedent and intended for the lifetime benefit of the surviving spouse does not actually pass to the surviving spouse, thereby avoiding inclusion in the latter’s gross estate. This is often used to lower taxes and protect assets for the ultimate benefit of a decedent’s children.
Charitable Lead Trust:
A trust under which the client donates an asset’s income interest to charity, at the end of which the remainder interest passes to a private party, typically children or grandchildren for a specified term of years. The client (or the client’s estate) will receive an income tax deduction for the value of the income interest.
Charitable Remainder Annuity Trust (CRAT):
A trust into which the client transfers assets in exchange for a fixed annuity income of at least 5 percent of the original value of the assets transferred into trust, payable at least annually, usually for life. The value of the remainder is deductible on the income tax return.
Charitable Remainder Unitrust (CRUT):
A trust that is much like the charitable remainder annuity trust, except that the annual income depends on a fixed percentage of the current fair market value of the assets in the trust, determined annually.
A separate written document that amends or revokes a prior will. It is executed if the testator wishes to change or add to the will. In most cases, it is often easier for the attorney to simply revoke the entire will and redraft a new Last Will.
In the eight states recognizing it (Arkansas is NOT a community property state), all property that has been acquired by the efforts of either spouse during their marriage while living in a community property state, except property acquired by only one of the spouses by gift, devise, bequest or inheritance, or, in most of the community property states, by the income therefrom. The eight states are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington. In addition, Wisconsin has recently adopted a form of community property known as ‘marital partnership property.
A gift in which the donor has so parted with dominion and control (in an interest in property) as to leave him no power to change its disposition, whether for his own benefit or for the benefit of another. in
The property in a trust. Also called principal. Some trusts prohibit a person from having access to the corpus while allowing them only the income.
Credit Shelter Bypass Trust:
A bypass of an amount approximately equal to $11,580,000, the exemption equivalent of the unified credit. This allows affluent families to take full advantage of state and federal estate tax exemptions. The exempt amount is subject to change based on the actions of Congress. At times, it has been as low as $600,000. Our firm attempts to plan for the changes in Washington that could occur during the administration of your estate plan.
A general power clause found in some trusts that give one or more beneficiaries the right to withdraw, for a limited period of time each year, the lesser of the amount of the annual exclusion or the value of the gift property transferred into the trust. Allows the donor to claim an annual exclusion. Often found in trusts for minors and in irrevocable life insurance trusts.
A gift to a custodian for the benefit of a child, under the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act.
A tax levied on certain property owned or transferred by the decedent at death. Either an estate tax or an inheritance tax. Arkansas currently has no inheritance tax as of 2020.
The person who has died.
A gift, by will, of real or personal property.
A beneficiary, under a will, of a devise (i.e., a gift of real property).
An unqualified refusal to accept a gift. In estate planning, a valid disclaimer must meet the requirements of both local law and IRC Section 2518.
A person who is receiving or will receive a gift of a beneficial interest in property.
A person making a gift.
Durable Power of Attorney:
A power of attorney that does not become legally invalid at the onset of the principal’s incapacity. Today, most powers of attorney are durable even if they do not use that language.
Durable Power of Attorney for Health Care:
A durable power of attorney granting to the attorney-in-fact the power to make medical decisions on behalf of the principal. Today, most powers of attorney are durable even if they do not use that language.
A quantity of wealth or property. The term “estate” in a probate context refers only to assets subject to the court’s authority under the probate code.
A federal or state tax on the decedent’s right to transfer property.
The study of the principles of planning for the use, conservation, and efficient transfer of an individual’s wealth. The term “elder law” includes estate planning but offers a broader understanding of the issues with aging, capacity, living arrangements, and nursing home rights and payment options.
To complete a document (i.e., to do what is necessary to render it valid). Failure to properly execute a legal document can create major issues for loved ones.
A personal representative who was nominated in the will. A female personal representative is called an “executrix.”
Exemption Equivalent (of the unified credit):
In federal estate taxation, the amount by which the taxable amount can exceed zero and still be sheltered by the unified credit.
Exercise a Power of Appointment:
To invoke the power by appointing a permissible appointee.
Family Limited Partnership:
A limited partnership meeting the requirements of §704(e) for the benefit of family members, generally with parents as the general partners and children as the limited partners. Used to take advantage of lack of control discounts and lack of marketability discounts as the parents transfer limited partnership units to the children.
Fee Simple Interest:
The greatest interest that a person can have over property, corresponding to the layperson’s usual notion of full ownership.
A person in a position of trust and confidence; one who has a legal duty to act for the benefit of another. Examples include executor, trustee, attorney-in-fact, and custodian.
An income tax year that ends on the last day of any month except December.
A gift payable out of the general assets of the estate but not one that specifies one or more particular items.
Generation-Skipping Transfer Tax (GSTT):
A federal or state tax on certain property transfers to a skip person, that is, someone who is two generations or more younger than the donor.
A completed lifetime or deathtime transfer of property by an individual in exchange for any amount that is less than full consideration. There are three requirements: (1) intent to give; (2) transfers; and (3) acceptance of the gift.
A tax on a completed lifetime transfer of property for less than full consideration.
The person who creates the trust and whose property usually ends up in it. Also called creator, settlor, or trustor.
A court-appointed fiduciary responsible for the person or property of a minor or, in some cases, an incompetent adult, or both. In some states, a guardian is called ‘committee.’ A guardian will have the responsibility of financial decisions (estate) and medical decisions (medical).
A beneficiary who will receive property that passes by intestacy (without a will).
Holder (of a power of appointment):
The person who has received the power of appointment; i.e., the one who has the right to appoint designated property to a permissible appointee. Also called the donee of the power.
In income tax law, the length of time that property is held. It determines whether a gain is short term or long term. The current threshold is eighteen (18) months.
A will, recognized in many states, that is usually required to be written entirely in the hand of the testator. It need not be witnessed. However, witnesses will be required at a court hearing to prove the handwriting.
The beneficiary of a trust who has a life estate or estate for years in the trust income.
A tax levied on income earned by a taxpayer during a given year. Income tax is the most common tax that beneficiaries should address in estate planning and administration.
To receive property by intestate succession.
Intangible Personal Property:
Personal property that is not in itself valuable, but derives its value from that which it represents. This is often the most emotional or sentimental property of the decedent. Leaving intangible personal property to a child or grandchild can leave a great impression upon them.
Inter Vivos Trust:
A trust taking effect during the life of the trustor. Also called a ‘living trust.’ Our firm prefers the term “revocable trust” to distinguish between an “irrevocable trust.”
Dying without a Will. The law of intestacy is very complex and will largely depend on surviving spouses, years of marriage, and whether or not the decedent had a child.
A person’s direct offspring, including children, grandchildren, great-grandchildren, and the like. Also called descendants.
A form of equal, undivided ownership in property that, upon the death of one owner, automatically passes to the surviving owner(s). Also called joint tenancy.
A gift, by will, of personal property. Also called a bequest.
A formal court document in probate indicating the court’s authorization and empowerment of the estate’s personal representative to deal legally with third parties. In Arkansas, the Letters occur after the court’s order appointing a Personal Representative. It is typically just one sheet of paper, which allows a person to open an estate account and get access to the decedent’s property.
An interest in property that ceases upon someone’s death.
Limited Liability Companies:
A business organization in which the owners, called members, do not have personal liability for the contracts or the torts of the business, yet the organization is taxed like a partnership.
A trust taking effect during the lifetime of a trustor. Also called an inter vivos trust. Our firm prefers the title “revocable trust” in our drafting.
A document detailing those health care interventions that a person does or does not want to be subjected to in situations when he or she is no longer capable of making those decisions.
In federal gift and estate taxation, the deduction for certain transfers to a spouse.
A trust structured to receive property that will qualify for the marital deduction.
A valuation discount given to an interest in a business that is not controlling interest.
A scheme of distribution from a will or trust requiring that issue of a decedent of all degrees share equally. Per stirpes is the more common scheme of distribution.
A scheme of distribution from a will or trust requiring that certain issue of a decedent, as a group, inherit the share of an estate that their immediate ancestor would have inherited if he or she had been living.
A clause in a will or trust that prevents interests from being ruled invalid under the rule against perpetuities.
All property except fee simple and life estates in land and its improvements.
The person appointed by the probate court to represent and manage the estate. If nominated in the will, called an Executor/Executrix.
A trust established for the benefit of minor children which typically remains undivided until the youngest child reaches age 21 (or age 18). At that time, the assets are divided into equal separate shares, one for each child. The assets are distributed outright or they are held for distribution at some older age. Also called a Family Pot Trust.
A will that distributes, at the testator’s death, probate assets to a trust that had been created during the testator’s lifetime. Nearly every trust drafted by our firm also includes a pour-over will.
Power of Appointment:
A power to name someone to receive a beneficial interest in property.
Power of Attorney:
A document executed by one person (called the principal) authorizing another person (called the attorney-in-fact) to perform designated acts on behalf of the principal (see Durable Power of Attorney).
The property in a trust. Also called corpus.
The legal process of administering the estate of a decedent. It focuses on the will and the probate estate, that is, property which will be disposed of, and only by, either the will or by the state laws of intestate succession. More narrowly and less commonly, probate is used to mean certifying or proving the validity of the will after the death of the testator.
All of the decedent’s property passing to others by means of the probate process. This includes all property owned by the decedent except joint tenancy interests. In addition, the probate estate does not include property transferred by the decedent before death to a trustee, life insurance proceeds on the decedent’s life, and the decedent’s interest in pension and profit sharing plans.
An election by the executor of the estate of the first spouse to die to treat certain property as QTIP property, thereby qualifying it for the marital deduction.
A marital trust for which a federal estate tax election is made. It provides that the surviving spouse is entitled to all of the income from the trust property, payable at least annually. In addition, the trust cannot give anyone a power to appoint any of the property to anyone other than the surviving spouse. Its uniqueness lies in the fact that its property need not pass to or be controlled by the surviving spouse.
In the context of trusts, the future interest right to the remaining trust assets at the termination of all other interests. More technically, the right to use, possess and enjoy property after a prior owner’s interest ends in a situation where both interests were created at the same time and in the same document.
The beneficiary of a trust who will receive the remainder at the termination of all other interests.
A gift of that part of the testator’s estate not otherwise disposed of by the will.
Rule Against Perpetuities:
A common law principle invalidating a dispositive clause in a will or a trust if the contingent interest transferred may vest in the transferee too long after the client’s death.
The person who creates the trust and whose property usually winds up in it. Also called creator, grantor, or trustor.
A will prepared for a family having a small estate, one for whom death tax planning is not a significant concern. Also, a simple will could be used to name a guardian for a minor child.
A gift of a particular item of property which is capable of being identified and distinguished from all other property. Contrasted with general bequest and residuary bequest. An example would be a $10,000 distribution to a charity or a vehicle to a grandchild.
A clause in a trust that restricts the beneficiary from transferring any of his or her future interest in the corpus or income. For example, a typical spendthrift clause would not permit the beneficiary to pledge the interest as collateral against a loan.
Splitting a Gift:
Treating a gift of the property owned by one spouse on the federal gift tax return as if it were made one-half by each spouse.
Springing Durable Power of Attorney:
A durable power of attorney that becomes effective at the onset of the principal’s incapacity. It is important for the power of attorney to define “incapacity” to be court-determined or by letter (or in some cases two letters) of a physician.
Step-Up In Basis:
In income tax law, the upward adjustment in basis resulting from the acquisition of property from a decedent. This is one of the most important tax benefits proper planning can offer. A gift before death can remove the step-up basis benefit, which will cost more in taxes to your loved ones.
A disposition provision in a will or trust naming an alternate taker of certain property if the donee fails to survive the donor.
In federal gift tax law, for a given year, total gross gifts reduced by total deductions and exclusions.
A provision in a will specifying which property bears the burden of paying taxes.
Used in this text to indicate the value of a cash value life insurance policy that is currently in force. Formally called the policy’s interpolated terminal reserve value, its amount is nearly equal to its cash surrender value.
The mental ability required by a testator to validly execute a will.
A transfer at death by will.
A trust established by a trust-will into which probate property is transferred at the testator’s death. This planning option can be extremely expenses compared to a revocable or irrevocable trust.
Dying with a valid will.
The person who executes a will. A Testatrix is a female who executes a will.
A legal arrangement between trustor and trustee that divides legal and beneficial interests in property among two or more people.
A person who is named to enjoy a beneficial interest in the trust.
Unification of Gift and Estate Taxes:
Partially successful efforts by Congress in 1976 to tax lifetime and deathtime transfers equally, so that an individual would be indifferent, from a total transfer tax planning point of view, between making lifetime and deathtime gifts.
Uniform Gifts to Minors Act:
Like the Uniform Transfers to Minors Act, a statute in many states permitting custodial gifts for the benefit of a minor.
Uniform Transfers to Minors Act:
See ‘Uniform Gifts to Minors Act.
A written document disposing of a person’s probate property at death.
At McClelland Law Firm, we believe that limiting our practice areas provides the greatest value to our clients. To us, value means providing exceptional service and efficient processes for each of our practice areas.
We are committed to compassionate representations, especially as it relates to elder law. No one should feel pressured, controlled, or “talked down” to in any meeting. Every client deserves to be heard and understood.