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ABATEMENT
Decedent's debts, taxes, and other costs of administration are required to be paid before any gifts may be distributed.  If the estate contains insufficient assets to pay such debts, taxes, and costs, then the priority order in which estate assets are used to pay such expenses is known as "abatement" and, in Washington (RCW 11.10.010), is as follows:

Intestate property;

Residuary gifts;

General gifts; and

Specific gifts.

ADEMPTION
The effective revocation of a specific gift in a will as a result of it's not being in the testator's estate at death.

Ademption by Extinction occurs if the gift has been transferred to a third party, eg, by sale.

Ademption by Satisfaction occurs if the gift has been advanced.

ADVANCE DIRECTIVE
See HEALTH CARE DIRECTIVE.

ADJUSTED BASIS
At first blush, the amount of one's ongoing monetary "long-term investment" in an item of property for income tax purposes.  Following the acquisition of an item of property, its initial (or "cost") basis over time and from time to time is:

A. Increased by costs such as:

Improvements having a useful life of more than a year;

Rehabilitation expenses;

Extension of utility lines to the property;

Impact fees;

Legal fees (such as for defending or perfecting title or for decreasing its property tax assessment);

Local improvements;

Restoration of property following casualty and theft losses; and

Zoning costs; and

B. Decreased by such things as:

Depreciation taken on the property;

Investment credits taken; and

Insurance reimbursements received as a result of casualty or theft loss;

to yield its "adjusted basis."  Adjusted basis is important as the income tax resulting from the sale of property will generally depend on its gain on sale = amount realized - adjusted basis.  See AMOUNT REALIZED; BASIS; GAIN.

ADMINISTRATION
The management of a decedent’s estate.

ADMINISTRATOR
A person appointed by a court to administer the estate of a decedent and who was not nominated by the decedent as his/her personal representative, usually because the decedent died intestate.  Compare: ADMINISTRATRIX.  Contrast: EXECUTOR.

Ancillary Administrator: An administrator appointed to administer the estate of a decedent in a foreign state.  Contrast: DOMICILIARY ADMINISTRATOR.

Administrator of Undistributed Assets (aka Administrator de bonis non): An administrator appointed to replace a personal representative who has not completed the settlement of an estate due to incapacitation, death, or removal by the court.

Administrator With the Will Annexed (aka Administrator cum testamento annexo or as Administrator CTA): An administrator appointed to administer the estate of a decedent who died with a will but without having nominated as his/her personal representative the person appointed by the court.

Special or Temporary Administrator: An administrator appointed to initiate the management of a decedent's estate until the appointment of the personal representative, often appointed to perform some immediate act, such as to open a safe deposit box thought to contain decedent's will or to collect and preserve decedent's assets and dispose of any that are perishable.  In Washington, see RCW 11.32.101.

ADMINISTRATRIX
A female administrator.

ADVANCEMENT
The satisfaction of a testamentary gift prior to the testator's death.  See RCW 11.04.041 regarding advancement in Washington.

AFFIDAVIT
A statement in writing sworn to or affirmed before an official (usually a notary) who has authority to administer an oath or affirmation.

AFFINITY
Relationship by marriage.  Contrast: CONSANGUINITY.

AFTER-BORN CHILDREN
Those born to a testator after he/she has executed a will.

AGENT (aka ATTORNEY IN FACT)
The person appointed by, and authorized to act on behalf of, the principal in a power of attorney.

ALTERNATE VALUATION DATE
Estate assets are usually valued as of date of death for estate tax purposes.  The personal representative may elect, however, to value all assets in the estate for estate tax purposes as of six months after date of death, known as the "alternate valuation date."

ALLOWABLE DEDUCTIONS
Payments made from the estate that may be used to reduce decedent's gross estate for estate tax purposes.  The federal estate tax return (Form 706) lists the relevant schedules for allowable deductions as follows:

Schedule J: Funeral Expenses & Expenses Incurred in Administering Property Subject to Claims

Schedule K: Debts of the Decedent & Mortgages and Liens

Schedule L: Net Losses During Administration & Expenses Incurred in Administering Property Not Subject to Claims

Schedule M: Bequests etc. to Surviving Spouse (Marital Deduction)

Schedule O: Charitable, Public, and Similar Gifts and Bequests (Charitable Deduction)

Schedule T: Qualified Family-Owned Business Interest Deduction

Total Allowable Deductions = Sum of the Above

AKA
Also known as.

AMOUNT REALIZED
The consideration received upon the sale of property, ie, its sales price.  See ADJUSTED BASIS; GAIN; SALE.

ANCESTOR (aka ASCENDANT)
Any person from whom one is descended; an immediate or more remote parent, eg, a grandparent.  An individual related to an intestate in an ascending lineal line.  Contrast: DESCENDANT.

ANCILLARY ADMINISTRATION
Administration of a decedent’s estate in a foreign state in which decedent owned real property at death.

ANNUAL EXCLUSION AMOUNT
See GIFT TAX ANNUAL EXCLUSION AMOUNT.

ANNUITY
The right to receive a periodic series of payments, generally either for a term of years or until the recipient's death.

ANTE-NUPTIAL AGREEMENT
See PRE-NUPTIAL AGREEMENT.

ANTI-LAPSE STATUTE
A state statute that provides for a gift that fails due to lapse to pass to those survivors provided in the statute.

APPLICABLE CREDIT AMOUNT (was known as UNIFIED CREDIT)
The tax credit, currently $345,800, that is subtracted from a:

Decedent's gross estate tax liability resulting in the net estate tax payable by the estate, or from

Donee's gross gift tax liability resulting in the net gift tax payable by the donor.

The current $345,800 applicable credit amount allows assets valued at up to $1,000,000 to pass estate or gift tax free.

The applicable credit amount is the new name for what used to be called the "unified credit," adopted upon the unification of the estate and gift tax by the Tax Reform Act of 1976.  The Economic Growth and Tax Relief Reconciliation Act of 2001, however, changed the estate and gift tax laws, among many other ways, by "freezing" the unified credit for gift tax purposes at its amount applicable for 2002 and 2003, namely, $345,800, while allowing the unified credit for estate tax purposes to continue to increase in time.  As a result, the unified credit beginning in 2004 will no longer be "unified,"  and the IRS changed the name from the "unified credit" to the "applicable credit amount."

APPLICABLE EXCLUSION AMOUNT (aka ESTATE TAX EXEMPTION AMOUNT)
The aggregate value of assets, currently $1,000,000, that may pass estate or gift tax free --- aggregated over one's life and at one's death, regardless of the number of total transfers or the number of donees.  As a result of the "un-unification" of the unified credit beginning in 2004, the applicable exclusion amount for estate tax purposes will increase over time, the next time being in 2004, to $1,500,000, while the applicable exclusion amount for gift tax purposes will remain at its 2003 amount, $1,000,000.

APPOINT
What a court does to affirm a person's nominee as his/her fiduciary and to authorize that person to act as a fiduciary.  Compare: NOMINATE.

APPRECIATED PROPERTY
Property whose current fair market value is greater than its adjusted basis.  Contrast: DEPRECIATED PROPERTY.

ASCERTAINABLE STANDARD
A limitation placed on the exercise of a power of appointment such that it will not be considered a general power of appointment, resulting in any property that is subject to the power to be included in its holder's estate at death for estate tax purposes.  See "HEMS"; LIMITED POWER OF APPOINTMENT.

ASSESSED VALUATION
The value placed upon real property, generally by a county officer, for property tax purposes.

ATTESTATION CLAUSE
The will clause in which the witnesses state that the testator signed the will.

ATTESTED WILL
1. A written will that is "witnessed" or, more correctly, "attested."

2. The document commonly considered to be a will.

Some states, eg, Washington, do not require that the "witnesses" or, more correctly, the "attestors," witness the testator's actual signing --- only that they state that they have personal knowledge that the testator was the person who signed the will.

ATTORNEY IN FACT
See AGENT.

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BASIS (aka COST BASIS)
The value assigned to an asset so that upon its eventual sale, its gain on sale may be determined for income tax purposes; gain on sale = amount realized - (adjusted) basis.

Basis of property depends upon how it is obtained:

1. If by purchase, basis is the cost of purchase plus other amounts paid in its acquisition, such as freight, installation, and testing costs; excise, real estate, and sales taxes; accounting, legal, recording, and  title fees; commissions; etc.

2. If in return for services or in a taxable exchange, basis is the fair market value.

3. If in a non-taxable exchange, such as a like-kind exchange, basis is equal to the basis of the property given up in the exchange (ie, its "carry-over basis" --- in other words, the basis of the property given up "carries over" and becomes the basis of the property received in the exchange).

4. If by gift from a donor (ie, lifetime gift) and the fair market value of the property is equal to or greater than the donor's adjusted basis in the property at the time of the gift, the basis in the donee's hands is the donor's adjusted basis (ie, its carry-over basis --- in other words, the donor's basis "carries over" and becomes the donee's basis) increased by any gift tax paid on the gift.  If the fair market value of the property is less than the donor's adjusted basis in the property, then the donee's basis in the property will ultimately depend on whether a gain or loss is realized upon any subsequent sale.

5. If by gift from a decedent (ie, as a result of death), basis in the donee's hands is the fair market value as of date of death (or, if decedent's personal representative chose to use the alternative valuation date on decedent's estate tax return, as of six months following date of death).  If the fair market value of the property is greater than the decedent's adjusted basis in the property at the time of its valuation, then the basis in the property will be increased ("stepped up" to fair market value) in the donee's hands and will receive what is known as a "step up in basis."  A step up in basis, however, will no longer be available for assets received from a decedent dying after 2009 as a result of the recent repeal of the estate tax scheduled to take effect in 2010.

See ADJUSTED BASIS; AMOUNT REALIZED; CARRY-OVER BASIS; GAIN; STEP UP IN BASIS.

BENEFICIARY
A named donee of a gift.  Contrast: HEIR.

BENEFICIARY DESIGNATION
The document that names a beneficiary of a contract such as an annuity, life insurance policy, or retirement account.

BEQUEST
A testamentary gift of personal property, traditionally of other than money.  Compare: DEVISE; LEGACY.

BOND

1. An insurance contract under which the surety agrees to pay, up to the amount of the face value of the policy, for financial loss caused to the policy holder by specified acts or defaults of a third party; or

2. An interest-bearing security evidencing a long-term debt, issued by a government or corporation, sometimes secured by a lien on property.

BUY-SELL AGREEMENT
An agreement between the owners of a business that provides that the shares owned by any one of them who dies or withdraws from the business shall be sold to, and will be purchased by, the surviving or remaining co-owners or by the entity itself at a value or formula previously agreed upon by the parties and specified in the agreement. Buy-sell agreements are also common between owners and key employees.

BYPASS TRUST
See CREDIT SHELTER TRUST.

BY RIGHT OF REPRESENTATION (aka PER STIRPES DISTRIBUTION)
A distribution of property that passes such that any property that would otherwise pass to a predeceased heir or beneficairy is distributed instead to his/her then living issue, equally if in the same generation.  Contrast: PER CAPITA DISTRIBUTION.

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CAPITAL GAIN
See GAIN.

CARRY-OVER BASIS
See BASIS.

CHARITABLE DEDUCTION
The income, gift, or estate tax deduction allowed for a transfer of property to a qualified charity.

CLASS GIFT
A gift to all members of a named class, eg, one's children, one's partners, etc.

CIVIL LAW

1. A law describing the rights of private citizens; or

2. A system of law having its origin in Roman law, as opposed to common law.
Contrast: COMMON LAW.

CO-ADMINISTRATORS
Two or more administrators jointly appointed by a court.

CODE/NO CODE
An order entered into a patient's medical record specifying whether or not to initiate cardiopulmonary resuscitation ("CPR") if the patient is observed to have his/her heart stopped beating.

CODICIL
A will that modifies or partially revokes an existing or earlier will.

COLLATERAL RELATIVES
Those relatives not in a direct line of succession, eg, brothers, sisters, aunts, uncles, cousins, etc.  Relatives who trace their relationship to an intestate through a common ancestor but who are not in his/her lineal line of ascent or descent.

COMMON DISASTER
An incident that results in the death within a short period of time of two or more individuals (usually husband and wife).

COMMON DISASTER CLAUSE (aka SIMULTANEOUS DEATH CLAUSE)
A will clause that specifies the order of death of two or more individuals who die within a stated short period of time, whether or not in a common disaster.  For Washington, see RCW 11.05.010 regarding simultaneous death.

COMMON LAW

1. A law based on a prior court decision; or

2. The system of law originated and developed in England and based on prior court decisions, on the doctrines implicit in those decisions, and on customs and usages rather than codified written law.  Contrast: CIVIL LAW.

COMMON LAW STATE (aka SEPARATE PROPERTY STATE)
The states other than the nine community property states.  In common law states, property acquired during a marriage is historically considered to be owned only by the husband during life and transferable only by the husband at death, subject to the wife's dower and right of election.  Contrast: COMMUNITY PROPERTY STATE.

COMMUNITY PROPERTY
Property acquired other than by gift or inheritance by either or both of a husband and wife during their marriage in a community property state.  Contrast: SEPARATE PROPERTY.

COMMUNITY PROPERTY AGREEMENT
An agreement between spouses that specifies their community property and provides for its disposition upon the death of the first of them to die, generally but not necessarily that all such property will pass to the survivor of them.  A community property agreement is a will substitute, and community property that is the subject of a community property agreement is a nonprobate asset and passes "outside of probate."

COMMUNITY PROPERTY STATE
One of nine states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin) in which all property acquired during marriage (except by gift or inheritance) by either or both of the spouses is considered to be owned equally by them, and with each having the right to transfer his/her one-half share in that property (the "community") freely at death.  Alaska might also be considered as a community property state, because spouses there may elect to treat their property as community property.  Contrast: COMMON LAW STATE.

COMPETENT
Legally qualified to execute a document having legal significance.

CONSANGUINITY
Relationship by blood.  Contrast: AFFINITY.

CONSERVATOR
A person appointed by a court to protect the interests of a legally disabled person (a "ward").

In some states (eg, California), such a person is called:

A conservator if the ward is an adult, and

A guardian if the ward is a minor.

In other states, such a person is called:

A conservator only if he/she is appointed to protect the financial and property interests of a ward regardless of the ward's age (in other words, to effectively be a conservator of the estate of the ward), and

A guardian only if he/she is appointed to protect the personal and health interests of a ward regardless of the ward's age (in other words, to effectively be a guardian of the person of the ward).

See WARD.  Contrast: GUARDIAN.

CONSIDERATION
One of the elements of a legally enforceable contract or agreement; the exchange of values by the parties to the contract. Consideration may be money, promises, property, etc.

CONTINGENT BENEFICIARY
A secondary beneficiary who may receive a gift if its primary beneficiary fails to meet all the requirements placed on its receipt, eg, survive the donor by thirty days.  Contrast: PRIMARY BENEFICIARY.

CONTINGENT INTEREST
An interest in property that depends on an future event that may or may not happen or a present event that may or not stop happening.  Contrast: VESTED.

CORPORATE FIDUCIARY
A bank or trust company that serves as a fiduciary.

CORPUS (aka PRINCIPAL)
The assets of a fund, from which income is derived.

CORPUS OF A TRUST
The assets held by a trust, from which income is derived.

COSTS OF ADMINISTRATION
The actual costs of administering an estate (as opposed to costs of paying the debts of decedent), eg, filing fees, appraiser fees, sales commissions, storage expenses, delivery charges, and the personal representative's commissions and his/her attorney's fees.

CO-TENANT
A tenant of jointly held property.

CO-TRUSTEE
A joint trustee.  It is often useful to have more than one trustee, so that some duties such as investment of estate assets can be handled by one and other duties, such as determination of the amount of discretionary distributions, may be made by the other.

CREDIT SHELTER TRUST (aka BYPASS TRUST or as EXEMPTION TRUST or as "B" TRUST IN "A/B TRUST" PLANS)
A trust that:

Is provided in the will or living trust of the first to die of a married couple,

At whose death will be funded with the maximum amount of property that can pass estate tax free (the "applicable exclusion amount," currently, $1,000,000) in that spouse's estate, and

Also passes estate tax free at the later death of the surviving spouse.

See  DISCLAIMER TRUST; MARITAL DEDUCTION GIFT; MARITAL TRUST.

CROSS PURCHASE BUY-SELL AGREEMENT
A buy-sell agreement in which the surviving or remaining owners (rather than the business itself) agree to buy the deceased or departing owner's business interests.

CRUMMEY TRUST
A trust in which its beneficiary has a non-cumulative power to withdraw a specified amount of principal, usually limited to the gift tax annual exclusion amount, only during a limited period of time each year, usually no more than a week or two following the donor's transfer of the gift to the trust.

In order to qualify for the gift tax annual exclusion amount, a gift has to be of a present interest, so assets transferred to a trust for the benefit of another usually fail to qualify for the gift tax annual exclusion amount and are taxable.  In order to qualify an asset transferred to a trust for another's benefit for the gift tax annual exclusion amount, what Mr. Crummy (the taxpayer whose case established the use of trusts that now bear his name) did was to provide that his beneficiary have the power to withdraw, for only a short period of time after its making, any asset that he transferred to the trust for the beneficiary's benefit.  The beneficiary must then elect:

To exercise his/her power of withdrawal, in which case the donor's annual gift program, at least as regards that beneficiary, will likely stop; or

To do nothing, allowing his/her power of withdrawal to lapse, in which case the donor's annual gift program will likely continue for years to come.

CURTESY
A surviving husband’s right in separate property states to use property, usually all of the real property, of his deceased wife for the rest of his life so long as there were children of the marriage.  Dower and curtesy have been abolished in Washington.  RCW 11.04.060  Compare: DOWER.

CUSTODIAN
A person named by a donor or personal representative to hold and manage property on behalf of a minor, generally under a statute (eg, the Uniform Transfers to Minors Act) of the donor's or representative's resident state.  A custodianship is similar to a trust for a minor beneficiary, although a custodianship, as specified by the law in most states, ends when the minor attains the age of majority, while a trust continues according to its terms.

CY PRES DOCTRINE
A historic equitable doctrine that provides that upon the failure of a charitable gift (eg, a gift to a non-existent charity, such as the "Salvation Navy" or the "Untied Way"), the court may substitute an appropriate charity or charitable purpose that most closely approximates the testator's intention.

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DEAD PERSON STATUTE
A historic rule of evidence, still valid in many states, that prohibits any interested person from testifying concerning conversations or transactions with a decedent if the testimony could affect his or her interest. The rule is founded on the principle that it is against public policy to allow an interested witness to testify as to such matters when such testimony, if untrue, cannot be contradicted.

DEATH TAX
An estate tax or inheritance tax.

DECEDENT
An individual who has died.

DEDUCTION
A legislatively-granted privilege to subtract from a taxpayer's income or the value of his/her gift or estate, a certain amount specified under the income, gift, or estate tax law.

DEMONSTRATIVE GIFT
A general gift that is designated to be made from a particular fund in the estate.  As a general gift, if the subject property is not part of the estate, the personal representative is required to use other assets of the estate to acquire it so the gift can be made.  For example, "I give 100 shares of Microsoft stock from my account at Merrill Lynch to the United Way" is a demonstrative gift and is required to be made regardless of either the account's or the estate's ownership of Microsoft stock at decedent's death.  See GENERAL GIFT.  Contrast: SPECIFIC GIFT.

DEPRECIATED PROPERTY
Property whose current fair market value is less than its adjusted basis.  Contrast: APPRECIATED PROPERTY.

DESCENDANT (aka, collectively, ISSUE)
A person descended from another; an immediate or more remote offspring, eg, a child or grandchild.  An individual related to an intestate in a descending lineal line.  Contrast: ANCESTOR.

DESCENT
Succession to real property.

DEVISE
A testamentary gift of real property.

DEVISEE
The recipient of a devise.  Compare: LEGATEE.

DIRECTIVE TO PHYSICIANS
See HEALTH CARE DIRECTIVE.

DISCLAIMER (aka RENUNCIATION)
The renunciation of a gift of either property, an interest in property, or a right by the donee of the gift before or upon (but not after) its transfer to the donee.  Gifts that have been accepted cannot be disclaimed or renounced, a critical consideration for estate or gift tax purposes, as the disclaimer of a gift is not considered a taxable event, while the acceptance of a gift and its return to its donor or its transfer to a third party would be considered to be two successive taxable events.

DISCLAIMER TRUST
A credit shelter trust provided in a decedent's will or living trust as the contingent beneficiary of the applicable exclusion amount and with its primary beneficiary being the surviving spouse, who can then elect:

To keep all or part of decedent's gift of the applicable exclusion amount, with the understanding that it will be subject to estate tax at the surviving spouse's later death, or

To disclaim all or a part of the gift, in which case, the disclaimed assets will pass to decedent's contingent beneficiary, his/her credit shelter trust, which won't be subject to estate tax at the surviving spouse's later death.

DISCRETIONARY TRUST (aka Sprinkling trust)
A trust that allows its trustee to pay as much trust income or principal or both to the beneficiary as the trustee sees fit or according to more defined terms specified in the trust (eg, for his/her health, education, maintenance, and support).

DISINHERITANCE CLAUSE
A will clause providing that the testator specifically intends not to provide for a present or future spouse or a present or after-born child who would otherwise be an heir at his/her death.  To read an interesting saga regarding the absence of a disinheritance clause, see Tycoon's Defective Will.

DISTRIBUTION
Succession to personal property.

DISTRIBUTEE
See NEXT OF KIN.

DNR
An abbreviation for "Do Not Resuscitate."  The same as a "No Code" order.  See CODE/NO CODE.

DOMICILE
See RESIDENCE.

DOMICILIARY ADMINISTRATOR
The administrator of a decedent’s estate in decedent's resident state.

DONEE
The recipient of a gift.

DONOR
A person who makes a gift, generally during his/her lifetime.

DOWER
A surviving wife’s right in common law states to use property, usually one-third of the real property, of her deceased husband for the rest of her life.  Dower and curtesy have been abolished in Washington.  RCW 11.04.060  Contrast: CURTESY.

DURABLE POWER OF ATTORNEY
A power of attorney such that the agent's authority survives any loss of disability by the principal after its grant or execution.

DURABLE POWER OF ATTORNEY FOR ASSETS (aka FINANCIAL DURABLE POWER OF ATTORNEY)
A durable power of attorney that grants to the agent decision-making powers related to the principal's financial, property, and estate planning matters.

DURABLE POWER OF ATTORNEY FOR HEALTH CARE
A durable power of attorney that grants to the agent decision-making powers related to the principal's health care.  These powers generally include the ability to make informed consent to health care decisions, to receive and inspect medical records, to have the principal moved or discharged, etc.

DURESS
The use of physical force on a testator to make a will, thus making it invalid.  See undue influence.

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ENCUMBRANCE
A lien or claim, such as a mortgage, on property.

EQUITABLE INTEREST
The interest held by a beneficiary of a trust, ie, the right to use or receive property held by the trust according to its terms.

ESCHEAT
The transfer of property from a decedent's estate to the state due to decedent's having no known beneficiaries or heirs.  For Washington, see RCW 11.08.140 regarding escheat.

ESTATE
The aggregate of all property and interests in property owned by an individual.

ESTATE ADMINISTRATION
The collection and management of an individual's property, the payment of his/her debts, the determination and settlement of any taxes due, and the distribution of his/her assets following his/her death.

ESTATE FREEZE
A transaction in which a senior family member transfers property with substantial appreciation potential to younger family members at insignificant tax cost and retains an interest in the property, generally with substantial control power but with little potential for appreciation.

ESTATE OR GIFT TAX
A tax levied on any property or interest in property transferred to another without consideration.

ESTATE PLAN
A plan that provides the legal mechanism for:

Transferring property upon death in a way that recognizes one's wishes and the needs of one's survivors;

Minimizing any taxes that may be imposed on that transfer;

Planning for the handling of affairs in case of disability; and

Considering the deeply personal medical choices to be made as life nears its end.

ESTATE TAX
A tax levied on any property or interest in property held by a decedent at death.

ESTATE TAX EXEMPTION AMOUNT
See APPLICABLE EXCLUSION AMOUNT.

EXECUTOR
A person named in a will to administer the testator's estate upon his/her death.  Compare: EXECUTRIX.  Contrast:  ADMINISTRATOR.

EXECUTRIX
A female executor.

EXEMPTION TRUST
See BYPASS TRUST.

EXONERATION
The satisfaction of all indebtedness on a specific gift prior to its transfer to its beneficiary.

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FAIR MARKET VALUE
The price at which a willing buyer would buy, and a willing seller would sell, an item or a collection of property, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.

FAMILY PARTNERSHIP
A partnership in which family members act as the partners, generally splitting partnership income among them and allocating some business income to lower income tax brackets.

FAMILY POT TRUST (aka POT TRUST)
A trust that allows its trustee to pay as much trust income or principal or both to one or more of a class of beneficiaries (not necessarily equally) as the trustee sees fit or according to more defined terms specified in the trust (eg, for his/her health, education, maintenance, and support).

FIDUCIARY
A person responsible for taking certain actions on behalf of another, eg, the agent of a principal, the conservator or guardian of a ward, the personal representative of a decedent, and the trustee of a trustor.

FIVE AND FIVE POWER
An express IRS exception to the general power of appointment rules. If provided in the trust, a trust beneficiary may have the power to withdraw annually up to the greater of $5,000 or five percent of the trust principal without that power's being considered a general power of appointment and causing all of the trust principal to be included in his/her estate at death for estate tax purposes.

"FLOWER" BONDS
Certain U.S. bonds that may be redeemed at face value in payment of estate tax.  They are known as "flower" bonds, as they are usually available for purchase on the secondary market at a substantial discount, and their value can "flower" appreciably if they are used to pay estate tax.

FOREIGN STATE
A state other than decedent's resident state.

FUND

1. As a noun: A sum of money or other assets set aside for a particular purpose.

2. As a verb: To transfer assets from one owner or account to another, eg, from a trustor to a trustee following the creation of a living trust or from a living trust to a marital trust within the living trust upon the trustor's death.

FUTURE INTEREST
An interest in property that will come into being at some future point in time, eg, at some specified date or upon the occurrence or non-occurrence of some event, such as upon the death of someone now living.

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GAIN (aka CAPITAL GAIN)
The "profit" realized upon the sale of property for income tax purposes, generally equal in amount to the amount realized upon sale less the adjusted basis of the property sold.  See ADJUSTED BASIS; AMOUNT REALIZED; BASIS.

GENERAL GIFT
A testamentary gift that is required to be made regardless of whether the property is part of decedent's estate.  If the subject property is not part of the estate, the personal representative is required to use other assets of the estate to acquire it so the gift can be made.  For example, "I give 100 shares of Microsoft stock to the United Way" is a general gift and is required to be made regardless of the estate's ownership of Microsoft stock at decedent's death.  Contrast: SPECIFIC GIFT.

GENERAL POWER OF APPOINTMENT
A right held by one person to dispose of another's property without any limitation as to its recipient, specifically, that the holder may exercise the right in his/her favor.  Any property subject to a general power of appointment is includible in the estate of its holder for estate tax purposes, and the exercise (or release, other than by disclaimer) of any such power constitutes a gift for gift tax purposes.  Contrast: LIMITED POWER OF APPOINTMENT.

GENERATION SKIPPING TRANSFER
A transfer of property, whether during life or at death and whether outright or in trust, to an individual (eg, a grandchild) who is two or more generations younger than the donor.

GENERATION SKIPPING TRANSFER TAX ("GST TAX")
A tax (currently 50%) levied on all generation skipping transfers to the extent that the cumulative value of all such transfers exceeds the generation skipping transfer tax exemption amount, currently $1,100,000.  Decedent's generation skipping transfer tax information is reported on Schedule R: Generation-Skipping Transfer Tax of decedent's federal estate tax return (Form 706).

GENERATION SKIPPING TRANSFER TAX EXEMPTION
The cumulative value of all generation skipping transfers, currently $1,100,000, that may pass generation skipping transfer tax free --- aggregated over one's life and at one's death, regardless of the number of transfers or donees.  The exemption will increase next in 2004, to $1,500,000.

GENERATION SKIPPING TRUST
Any trust having a beneficiary who is two or more generations younger than the trustor.

GIFT
A voluntary transfer of property from one person (the "donor") to another (the "donee") without full consideration.  A gift also arises in a transaction in which the donee does pay some consideration to the donor, although in an amount both parties agree to be less than the property's fair market value.  In such a transaction, known as "bargain sale," the amount of the gift equals the property's fair market value less the consideration paid.  Contrast: SALE.

GIFT SPLITTING
The ability of one married person to use his/her spouse's gift tax annual exclusion amount in order to effectively double the amount of a tax-free gift that may be made to a donee in any particular calendar year.  Gift splitting is especially useful if one spouse has substantial assets, and the other spouse has few, so that the spouse having greater capability of making gifts is able to use the gift tax annual exclusion amount of the other spouse in order to make twice the amount of tax-free gifts that he/she would otherwise be able to make.

GIFT TAX
A tax levied on the transfer of property by a donor during his/her lifetime.  Contrast: ESTATE TAX.

GIFT TAX ANNUAL EXCLUSION AMOUNT
The maximum amount of a gift (of a present interest) that can be made to any donee annually without incurring any gift tax liability, currently, $11,000.  There is no limit to the number of such gifts that can be made to different donees, and spouses may combine their gifts to a single donee.  Consequently in one calendar year, a married couple who has two adult children, each of whom is married and has two children of their own, could give $22,000 to each child, spouse, and grandchild, for a total of 8 X $22,000 = $176,000 of annual tax-free gifts.

In addition, any payment of any amount on behalf of any donee for school tuition or medical expenses is completely exempt from gift tax as long as the payment is made directly to the school, doctor, hospital, medical facility, etc. and not to the donee.

Lastly, if a donor desires to take advantage of the gift tax annual exclusion amount but is reluctant to make an outright gift to a donee, then other alternates are available, such as a gift to a crummey trust (named for the taxpayer whose tax case validated its use).  See CRUMMEY TRUST.

GRANTOR
1. The transferor of real property, or

2. A TRUSTOR.

GROSS ESTATE
All property and interests in property held by a decedent at death or otherwise imputed to the decedent under the estate tax law.  Contrast: TAXABLE ESTATE.

A decedent's gross estate is inventoried in the relevant schedules of his/her federal estate tax return (Form 706) as follows:

A: Real Estate

B: Stocks and Bonds

C: Mortgages, Notes, and Cash

D: Insurance on the Decedent's Life

E: Jointly Owned Property

F: Other Miscellaneous Property

G: Transfers During Decedent's Life

H: Powers of Appointment

I:  Annuities

Total Gross Estate = Sum of the Above

GROSS ESTATE TAX
The estate tax calculated on the taxable estate, before the application of the applicable credit amount and other credits.

GUARDIAN
A person appointed by a court upon its finding of disability of another (the "ward") and who is granted the legal authority and who assumes the legal responsibility to care for the ward.  If the disability is personal, ie, it goes to the ward's inability to provide for his/her food, shelter, and health care, the appointment is of a guardian of the person.  If the disability is financial, ie, it goes to the ward's inability to provide for the management of his/her property or to resist fraud or undue influence in such management, the appointment is of a guardian of the estate.  If the disability goes to both, the appointment is of a guardian of the person and estate.

In some states, eg, California, a guardian is the title of the person appointed only for a minor, in which case the person appointed to care for a disabled person who has attained the age of majority is known as a conservator.  Also, in some states, eg, California, a guardian or conservator may be appointed who has only limited duties that the court specifically finds are needed for the care of the ward (eg, housing or health care or management of a specific asset), in which case the appointee is known as a limited guardian or conservator.

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HEALTH CARE DIRECTIVE
A document that contains a directive relating to the health care of the individual making the directive and that is to take effect when that individual is no longer able to make decisions about his/her own health care.  It generally often:

Specifies medical treatment the individual either desires to receive or refuses to receive, and

Includes the appointment of another individual to make such decisions for the individual making the directive when he/she is unable to make such decisions for him/herself.