Administrator. A person appointed by the probate court to administer the estate of a person who died without a will.
Agent. A person who acts for and by the authority of another person. The distinguishing characteristics of an agent are (l) the agent acts on behalf and is subject to the control of the principal, and (2) the agent does not have title to the principal's property.
Ancestor. One who precedes you in the line of descent (e.g., your father, grandfather, etc.).
Annual exclusion. A federal gift tax provision allowing a donor to exclude gifts of $11,000 per year per donee from federal gift tax liability. The annual exclusion is $22,000 per year per donee for gifts made jointly by a husband and wife. There is no limit to the number of donees to whom the exclusion may be applied.
Annuity. A specified amount payable annually or at regular intervals for a person's lifetime or for a specified period. A payment made under the terms of an annuity contract.
Attestation clause. The clause immediately following the testator's signature on a will that contains language stating that the witnesses have observed the signing of the will by the testator or the acknowledgement by the testator that the signature appearing on the will is that of the testator.
Attorney at law. A person who is legally qualified and authorized to act on behalf of another person in court and other legal proceedings and on matters that constitute the practice of law.
Attorney in fact. An agent who is authorized by you under a written power of attorney to transact business for you, but not as an attorney at law.
Beneficiary. A person for whose benefit a trust is created. A person who is named to receive gifts under a will. A person to whom the benefits of an insurance policy or annuity contract are payable.
Bequest. Under the common law a bequest was a gift of personal property under a will and a devise was a gift of real property under a will. Today the terms "bequest" and "devise" are often used interchangeably.
Charitable trust. One of several different types of charitable trusts, including charitable lead trusts and charitable remainder trusts, established to benefit a particular charity or the public. Typically charitable trusts are often established as part of an estate plan to lower or avoid imposition of federal estate and gift taxes and/or to save capital gains tax.
Codicil. An amendment or supplement to a will. A codicil must be executed in the same manner as a will.
Community property. Property in which a husband and wife each have a one-half interest by reason of their marriage. Communty property is recognized in the so-called "community property" states, which are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington. Missouri is not a community property state.
Cost basis. The amount originally paid for property. The tax basis is the value that is used to determine gain or loss for income tax purposes. Generally, the tax basis will equal the cost basis plus the cost of capital improvements, less depreciation. Once the property is transferred upon the owner's death, it is revalued as of the date of death; this is called the stepped-up basis for federal income tax purposes.
Death taxes. A general term for taxes imposed on the transfer of property by reason of a person's death. Includes estate taxes, inheritance taxes, and other succession or transfer taxes.
Declaration of trust. An acknowledgement, usually in writing, by one holding or taking title to property that he or she holds the property in trust for the benefit of others.
Descendant. One who is descended in a direct blood line from an ancestor. Your child or grandchild is a descendant.
Devise. Under the common law a devise was a gift of real property under a will. Today the term may denote a gift of either real or personal property under a will.
Devisee. A person who receives a gift under a will.
Disclaimer. An unqualified refusal by a person to accept a gift of an interest in property. A renunciation of a gift of property. A disclaimer must be in writing and must be made and delivered before acceptance of the gifted property and in all events within nine months from the gift or devise. Any type of gift may be disclaimed, including gifts made under a will or a trust, joint tenancy transfers and intestate transfers. A person who disclaims a gift of property is treated as though he or she predeceased the donor for purposes of determining who gets the disclaimed property.
Domicile. The place where a person has his or her permanent home or principal residence.
Donee. The person to whom a gift is made.
Donor. A person who makes a gift.
Durable power of attorney. A power of attorney wherein the authority of the agent to act under the power continues in the event of the physical or mental disability of the principal.
Durable power of attorney for health care. A document authorized by statute in Missouri wherein a person designates another person as his or her agent for the purpose of making healthcare decisions in the event of his or her physical or mental disability.
Elective share. The share of a deceased spouse's estate which the surviving spouse may claim regardless of the provisions of the deceased spouse's will. Missouri has statutes that govern the amount of a surviving spouse's elective share and the procedures for claiming the elective share.
Estate. The total of all assets, all debts, and other obligations of an individual. At the time of death the total amount of benefits (life insurance, annuity, and retirement benefits) to be paid to beneficiaries constitute the estate for federal estate tax purposes.
Estate tax. An excise tax imposed upon the transfer of property by reason of the death of the property owner. It is not a tax on the property itself, but is assessed on the privilege of transferring the property.
Executor. A person appointed by court to administer and settle the estate of a person who died leaving a valid will. The personal representative of the testator's estate. Historically, the term "executor" denoted a man or corporation and the term "executrix" denoted a woman.
Executrix. A woman appointed as a personal representative of an estate. See Executor.
Exemption credit. The amount of tax credit, similar in nature to the personal income tax exemption, applied to the transfer tax due at a person's death. The exemption credit enables a person to transfer a total of up to $1,500,000 of property (as of 2004-2005) from his/her estate both during his/her lifetime and after death without incurring a transfer tax. Currently, annual gifts of up to $11,000 to as many individuals as one wishes may be made in each calendar year by an individual (and gifts of up to $22,000 may be made by a married couple) without counting against the $1,500,000 lifetime exemption credit.
Family trust. Also called a "bypass trust." The purpose of a family trust is to keep certain assets out of the surviving spouse's estate so that they would not be subject to federal estate taxes upon the survivor's death. Typically up to $1,500,000 (year 2004 & 2005) is placed in this type of trust on the first spouse's death. The surviving spouse receives the income earned on the assets for life. The trustee is also directed to pay principal to meet the surviving spouse's need for health, education, support, and maintenance during the surviving spouse's lifetime. On the surviving spouse's death, the remaining assets are distributed to the beneficiaries selected by the grantor, often his or her children.
Federal estate taxes. Taxes imposed by the United States Government on the value of a person's estate upon his or her death. To be over simplistic, the federal estate tax for individual citizens begins at a 37% rate on amounts in excess of $1,500,000. The rate quickly increases as the size of the estate increases, and goes as high as 50%.
Funded trust. A trust to which assets have been transferred. A trust usually serves no purpose without assets.
Gift. A gratuitous and voluntary transfer of property from the donor to the donee. A completed gift requires an intent by the donor to make a gift and delivery of the gifted property to the donee.
Grantor. A person who transfers property by deed or instrument. A person who creates and transfers property to an inter vivos trust.
Grantor trust. A trust over which the grantor retains sufficient control over the trust property that the property and the income is taxable to the grantor.
Gross estate. The total value of a decedent's property for federal estate tax purposes.
Heir. A person who inherits assets.
Income beneficiary. A beneficiary of a trust who is entitled to receive income earned by the trust property.
Inter vivos trust. A trust created by a person during his or her lifetime.
Intestacy. The state or condition of dying without a valid will.
Intestate succession. The passing of property under the state intestate laws upon the death of a person who dies without a valid will.
Irrevocable trust. A trust which by its terms cannot be revoked, terminated, or amended by the person who created or funded it.
Issue. All persons who have descended from a common ancestor. See descendents.
Joint tenancy. The holding of property by two or more persons in such a manner that upon the death of a joint owner his or her interest in the jointly-owned property passes by operation of law to the surviving joint tenants or joint tenant and not to the deceased joint owner's heirs or estate.
Kiddie tax. An income tax imposed upon the unearned income of children under the age of fourteen who have at least one living parent whereby dividends, interest, and gains paid to the child, beyond a certain limit, are taxed at the parent's marginal income tax rate.
Life estate. An estate in property for the duration of the estate holder's life or for the duration of the life of some other person.
Living trust. A written legal document established during a person's lifetime into which he/she places property. The living trust contains instructions for management and distribution of the trust property during his/her lifetime as well as upon his/her death or disability. A living trust is typically revocable, enabling the person to change it at any time, so long as the person remains legally competent to enter into contracts.
Living will. A document that defines the circumstances - such as if the person is suffering from a terminal illness with no expectation of recovery - under which healthcare professionals should withhold or remove artificial life support, or refrain from using heroic measures, if the person is unable to give informed consent due to incapacity. Missouri has a specific law which governs living wills.
Marital deduction. The value of property passing to the decedent's surviving spouse that may be deducted from the taxable estate of the decedent for federal estate tax purposes. The value of property transferred to the donor's spouse during the donor's lifetime that is not subject to the federal gift tax.
Minor. A person under the age of eighteen.
Per capita. A means by which a grantor can distribute his/her estate so that each of the surviving descendants will share equally, regardless of generation. Compare with per stirpes.
Per stirpes. A method of dividing an estate into equal shares among one's surviving descendants with the division being made at the generation closest to the grantor, usually children. Each survivor receives only the amount that his/her immediate ancestor would have received if that ancestor had been alive at the time of the grantor's death. The following example may make this clearer. Assume a person has four children, three sons and one daughter, each of whom survive, and leaves everything to "The children or their survivors, per stirpes." In that case, each of the four children would receive 25% of the estate and the grandchildren receive nothing. If one of the three sons and the daughter died, that leaves only two of the sons. If there is also one child of the deceased son ( a grandchild) and two grandchildren from the deceased daughter, under a per stirpes distribution the two sons each get 25%, the one grandchild of the deceased son gets his/her father's share of 25%, and the children of the deceased daughter split her 25% share and receive 12.5% each. Compare with per capita.
Personal effects. Clothing, jewelry, and other goods of a personal nature.
Personal property. All assets other than real estate.
Personal representative. The person appointed by the probate court to administer and settle the estate of a person who dies leaving a valid will. An executor.
Power of appointment. A right given to a person to dispose of property that he or she does not own. A power conferred by one person upon another to appoint (i.e., to select or designate) the person or persons who are to receive specified property after the termination of an existing interest in the property.
Power of attorney. A written document wherein one person, called the principal, authorizes another person, called the agent, to act and perform functions on the principal's behalf.
Principal. The property that comprises the corpus of a trust. A person who authorizes another to act on his or her behalf under a power of attorney.
Probate. The system of administering estates whereby a court takes control of the assets of the estate, determines the validity of a will, and appoints a legal representative to manage the estate subject to the approval of the court.
Qualified terminable interest property (QTIP). An interest in property passed from one spouse to anotherthat qualifies for a federal estate tax marital deduction only if the surviving spouse is a U.S. citizen and will receive all of the income from the property for the duration of his or her life and no one else has the power to appoint the property to anyone other than the surviving spouse.
Real Property. Land and buildings affixed to land. Real estate.
Remainder. A future estate, usually in real property, that will become an estate in being upon the termination of a prior or existing estate, often a life estate, in the property that was created in the same instrument as the future estate.
Residuary devise. A gift made in a will of the property remaining after the satisfaction of all specific, demonstrative, and general devises. A devise of the residue of the testator's estate.
Revocable trust. A trust which by its terms may be revoked, terminated, or amended by the person who created or funded it.
Rule against Perpetuities. A common law rule whereunder an interest in property is void if it is so remote in time that it will not take effect or vest within a period measured by a life or lives in being at the time the interest was created plus 21 years.
Spendthrift clause. A provision in a trust instrument or will which prohibits or limits the right of beneficiary to dispose of his or her interest in the trust or will prior to receiving the asset and limits the ability of creditors to seize the beneficiary's trust assets.
Springing power of attorney. A power of attorney that becomes effective only when a defined contingency occurs, such as if two physicians find that the principal is unable to manage his/her own affairs. See power of attorney.
Sprinkling trust. A trust wherein the trustee has the discretionary authority to distribute income or principal from a single trust among several beneficiaries.
Statute of Wills. A statute adopted in Missouri which provides that property may not be devised upon death except in a written document duly signed by the testator and attested by two qualified witnesses.
Stepped-up basis. The revaluation (for tax purposes) of property upon a person's death. For example, if a person bought a home in 1965 for $25,000 and at the time of his/her death the home was worth $200,000, his/her heirs would have a tax basis of $200,000 in that property. The importance of a stepped-up basis is that no income tax is paid on the $175,000 increase in value should the heirs sell the home for $200,000.
Sucessor trustee. The person or institution named in the trust agreement who will assume control of the trust if the original trustee dies, resigns, or becomes unable or unwilling to act.
Tenancy by the entirety. A common law concept followed in Missouri by which a husband and wife are considered as one person and neither can dispose of any part of their co-owned real property without the consent of the other. Upon the death of a spouse, the deceased spouse's interest in the property passes to the surviving spouse.
Tenancy in common. The holding of property by two or more persons in such a manner that upon the death of a co-owner, his or her interest in the co-owned property passes to his or her heirs or estate and not to the other co-owners.
Testamentary. Pertaining to the transfer of property at death. A will is the most common testamentary instrument. However, a trust, gift, or other method of transfer can also be testamentary if it serves to transfer property upon the death of the property owner.
Testamentary trust. A trust created in a will. A testamentary trust, once created, is irrevocable and comes into legal existence when the will is probated.
Testate. The condition of having died leaving a will.
Trust. An arrangement whereby a person transfers property to another person or to himself or herself in trust, with the intention that the property be used by the trustee of the trust for the benefit of one or more other persons.
Trustee. The person who holds title to the trust property for the benefit of one or more other persons, who are called the beneficiaries of the trust.
Trust estate. The property of a trust. All property that has been transferred to the trustee of a trust.
Trust Instrument. A writing under which a trust is created. A trust instrument may be a declaration of trust, a trust agreement, or a will.
Undue influence. The term generally used to describe the degree of influence which a person must exert over the maker of a will in order to prevent the maker of the will from exercising his or her own free will.
Unfunded trust. A trust that has been created under a trust instrument to which no property has been transferred.
Unified estate and gift tax credit. A tax credit which may be applied to a federal gift or estate tax liability by any person. The amount of the unified credit has the equivalent of a $1,500,000 gift and estate tax exemption in 2004-2005.
Will. A legally enforceable written declaration of a person's wishes regarding the
passing of his or her property upon death and other matters to be attended to after his or her death. A will is inoperative until the person's death, is revocable or amendable by means of a codicil up to the time of the person's death, and is applicable to the situation which exists at the time of his or her death.
