Estate Planning Definitions

Annual Gift Tax Exclusion:

Technique to allow gifts without the imposition of estate or gift taxes.

Children's or Grandchildren's Irrevocable Education Trust:

A Trust used by parents and grandparents for a child's or grandchild's education.

Charitable Remainder Interest Trust:

A trust whereby donors transfer property to a charitable Trust and retain an income stream from the property transferred. The donor receives a charitable contribution income tax deduction, and avoids a capital gains tax on transferred property.

Family Limited Partnership:

An entity used to:

  1. Provide asset protection for partnership property from the creditors of a partner
  2. Provide protection for limited partners from creditors
  3. Enable gifts to children and parents maintaining management control
  4. Reduce transfer tax value of property.

Fractional Interest Gift:

Allows a donor to transfer partial interests in real property to donees and obtain fractional interest discounts for estate and gift tax purposes.


Is the process that entails transferring assets you own as an individual into the name of your Trust.

Generation Skipping Tax:

This is a tax levied on assets that are given to individuals who are more than one generation away from the donor. An example would be a grandparent giving an asset to a grandchild either during the grandparent's life or at death.


Is a court-supervised proceeding which names an individual or entity to manage the affairs of an incapacitated person. A guardianship may also include the duty to care for the incapacitated person.

Health Care Power of Attorney:

Instrument used to allow a person you name to make health care decisions for you should you become incapacitated.

Irrevocable Life Insurance Trust:

A Trust used to prevent estate taxes on insurance proceeds received at the death of an insured.

Joint Tenancy:

When property is held in joint tenancy with rights of survivorship by two or more people, upon the death of one of the owners, all of his or her interest in the property is transferred immediately to the surviving owners.

Living Will:

sometimes called a physician's directive, is a document in which you give directions for life sustaining treatment should you become unable to communicate your wishes. Some states have combined this into the advanced health care directive.

Pour Over Will:

is used first to name a guardian for minor children. Second, it protects against intestacy in the event any assets have not been transferred into the Trust at the death of the Trustor/Owner. Its function is to "pour" any assets left out of the Trust into it so they are ultimately distributed according to the terms of the Trust.

Private Foundation:

An entity used by higher wealth families to receive any otherwise taxable property so as to eliminate estate taxes on the death of a surviving spouse.


Is the court procedure used to change title to assets from the name of an individual who has passed away into the name of the living beneficiaries. It is also where all creditors of a decedent file claims to collect their debts and where interested parties who have a complaint regarding the deceased can file their complaint (a Will contest). An individual who passes away with a Will or no estate plan will go through this process.

Property Power of Attorney:

Instrument used to allow an agent you name to manage your property if you become incapacitated.

Revocable Living Trust:

A device used to avoid probate and provide management of your property, during life and after death.

Step-up in Basis:

A step-up — or step-down — in basis is an adjustment for tax purposes to an asset's fair market value at the date of the death of the owner of the asset. For example, if you bought a share of stock for $100 that increased in value to $500 at the time of your death, your tax basis was $100 but increases to $500 at the time of death.


While you are alive, you may act as Trustee. For married couples, either one or both spouses may act as Trustee or co-Trustees. The successor Trustee is an individual or corporation fiduciary whom you designate to be in charge of your Trust in the event of disability or upon death.


A legally enforceable declaration of how a person wishes his or her property to be distributed after death. In a will, a person can also recommend a guardian for his or her children.

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