Certified Specialist
Estate Planning, Trust & Probate Law
California State Bar
Board of Legal Specialization
Phone: (925) 218-8984
Email:
michele@mm-estateplanning.com
5674 Stoneridge Drive Suite 202
Pleasanton, CA 94588
Estate Planning Definitions
The following is a glossary of some terms to assist in understanding how estate planning can assist you accomplish your estate planning wishes: Download a Printable Glossary (PDF)
Bypass Trust (also called a Credit Shelter Trust or
Exemption Trust or Trust "B"):
An irrevocable trust, used by a Family Trust for a husband and
wife, which is automatically set upon the death of the first
spouse to pass away with the purpose to (1) "bypass" the estate
tax, by using the estate tax exemption amount of the first
spouse to pass away; and (2) preserve the remainder wishes of
the first spouse to pass away.
Community Property (CP):
A form of ownership allowed only between husband and wife, and
allowed only in "community property states". The general rule is
that all property earned during marriage (except by gift of
inheritance as his or her separate property) by either spouse
during marriage is treated as owned one-half by each spouse.
Each spouse has the right to dispose of his or her one-half of
the CP by will or by trust.
Conservator:
An individual appointed by the probate court to manage the
affairs of an incapacitated adult. A conservatorship can be
costly on an ongoing basis. A Durable Power of Attorney can
avoid the need for a conservatorship.
Durable Power of Attorney for Asset Management (DPOA-AM):
A legal document whereby an individual names an agent, also
called an "attorney-in-fact" to act for him or her in the event
that he or she becomes incapacitated. After a person passes
away, this document is VOID.
Durable Power of Attorney for Health Care (DPOA-HC):
A document similar to a DPOA-AM, but names an agent to make
medical decisions, rather than financial decisions. After a
person passes away, this document is VOID.
Estate Tax:
A transfer tax imposed upon the value of property left at death.
The IRS allows each person to transfer a certain amount of
property tax-free, called an estate tax exemption amount.
Estate Tax Return:
IRS Form 706 required to be filed by an individual who passes
away with a gross estate equal to the applicable estate tax
exemption amount. Because of debts and expenses and the marital
deduction, it is possible for a deceased individual to be
required to file and estate tax return, but have no estate tax
liability.
Gift Tax:
A tax imposed upon transfer of property by gift during the
donor's lifetime. Each person has an annual gift tax exemption
amount to give per donee. If an individual's annual gifts do not
fall within this exemption, a gift tax return (IRS Form 709) is
required to be filed.
Guardian:
One who is legally responsible for the care and well-being of a
minor (for California, a child under the age of 18 years). A
guardian is nominated in a Will and appointed by the probate
court.
Heirs-at-Law:
Closest living relative per the California Probate Code.
Intestate:
Having no valid Will. (Conversely, testate means having a valid
Will.)
Pour-Over Will:
A will is a legally binding document directing the disposition
of one's property, which is not operative until death and can be
revoked up to the time of death or until there is a loss of
mental capacity to make a valid will. A pour-over will is used
in conjunction with a revocable family trust to "pour over" any
assets which are not transferred to the trust into the trust. An
EXECUTOR is the agent of the Will. An "amendment" to a Will is
called a CODICIL.
Probate:
A public court process to oversee the identification of
beneficiaries and distribution of assets of a deceased person's
estate. Probate proceedings are typically lengthy, structured
and very formal. It would not be unusual for a "simple probate"
(i.e., home as only asset) to take 9 months to 1 year to
complete.
Revocable Trust (Inter Vivos Trust or Living Trust):
A trust plan that gives the settlor (i.e., creator of the trust)
the power to change the terms or revoke (i.e., destroy) the
trust. To be effective, title to bank accounts and
non-retirement assets must be changed to reflect the trust as
owner. The person who manages the trust is the TRUSTEE.
Settlor:
The person who establishes the revocable trust. Also called a
trustor or grantor.
Trust Administration:
A non-court process which accomplishes the same purpose as
Probate, i.e., to settle estate debts and collect, value and
distribute assets of a deceased person's estate to the rightful
beneficiaries. However, the trust administration is private, and
can be accomplished in a less structured fashion and in most
cases, no court filing fees. The person who manages the trust
administration is the TRUSTEE.
Unlimited Marital Deduction:
A tax deduction which is available for transfers between
spouses, usually from a deceased spouse to a surviving spouse.
In this case, the unlimited marital deduction serves to postpone
the imposition of estate tax until the surviving spouse's
passing.