Estate Planning & Probate Glossary

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  • ABATEMENT:
    Descendant‘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:

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

  • 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 Descendant‘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 Descendant & 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 Descendant’s estate in a foreign state in which Descendant 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:

    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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  • 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.
      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:

    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 Descendant), 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 TRUSTor as EXEMPTION TRUST or as “B” TRUST IN “A/B TRUST” PLANS)
    A trust that:

    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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  • 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 Descendant‘s estate to the state due to Descendant‘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 Descendant 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.
F
  • 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 Descendant, 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 Descendant‘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.
G
  • 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 Descendant‘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 Descendant‘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. Descendant‘s generation skipping transfer tax information is reported on Schedule R: Generation-Skipping Transfer Tax of Descendant‘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
  • GROSS ESTATE
    All property and interests in property held by a Descendant at death or otherwise imputed to the Descendant under the estate tax law. Contrast: TAXABLE ESTATE.

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

    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.

H
  • 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.

    Compare: DURABLE POWER OF ATTORNEY FOR HEALTH CARE.

  • HEIR APPARENT
    A person who would inherit from a now living ancestor if that ancestor were now to die.
  • HEIRS
    Historically, the class of persons entitled to take or share, in whole or in part, any real property of an intestate Descendant, now generally broadened to include all the property of an intestate Descendant. Contrast: NEXT OF KIN.
  • ‘HEMS”
    The four express ascertainable standards — Health, Education, Maintenance, and Support — provided by the Internal Revenue Service. If a holder of a power of appointment may only exercise the power subject to any one or more of these four specific standards and no others (eg, specifically not any of “comfort” or “welfare” or “happiness”), then the power will be considered to be a limited power of appointment, and the assets subject to the power will not being included in the holder’s estate for estate tax purposes.

    The use of specific words that may or may not define an ascertainable standard has resulted in much litigation. For example, the inclusion of one word, “comfort,” in a trust cost one estate over $700,000 in unnecessary estate tax. Estate of Norman H. Vissering, 96 T.C. 749 (1991). The trust could even have said “comfortable” (as in “comfortable support” — just not “comfort” alone) and that would have been OK.

  • HOLOGRAPHIC WILL
    A will that is written entirely in the testator’s own handwriting, and that is not witnessed.
  • HOLDER
    A person entitled to exercise a right, such as a power of appointment.
I
  • INCIDENT OF OWNERSHIP
    A right regarding a life insurance policy, eg, to change its beneficiaries, such that if it is held within three years of death, the ownership of the policy is imputed to the holder of that right and its proceeds are included in the holder‘s estate for estate tax purposes.
  • INCOME
    • Receipt of property, generally; or, more specifically,
    • Money or other property received in exchange for labor, services, the use of another’s property, or upon the sale or exchange of property.
  • INCOME TAX
    A tax levied on the receipt of property for consideration. Contrast: GIFT TAX.
  • INCOME BENEFICIARY
    A beneficiary of a trust who is entitled to trust income according to the trust‘s terms (eg, all, only so much as is needed for support, or only so much as the trustee determines to be in the beneficiary‘s best interests).
  • INCOME IN RESPECT OF A Descendant (aka IRD)
    Income a Descendant earned but not paid before death. IRD is included in the gross income of its survivor recipient.
  • INCORPORATION BY REFERENCE
    Making one document become part of another document by referring to the former in the latter in such a manner that it is apparent that the former document becomes part of the latter document as if it were fully set forth in it. See RCW 11.12.255 for the requirements for incorporation by reference in Washington.
  • INHERITANCE
  • INHERITANCE TAX
    A tax levied on the right to receive property from a Descendant. Contrast: ESTATE TAX.
  • INSTALLMENT SALE
    A sale in which the seller receives the sales proceeds, and recognizes any gain for income tax purposes, during two or more taxable years.
  • INSURANCE TRUST
    A trust, generally irrevocable, whose assets consist entirely or in large part of life insurance contracts or proceeds.
  • INTANGIBLE PROPERTY
    Property lacking physical substance, eg, notes representing indebtedness or shares of stock representing corporate ownership.
  • INTEREST IN PROPERTY
    A share in or a right to property, whether vested or contingent, personal or real, tangible or intangible, present or future, legal or equitable. A right that the law will protect against infringement by others.
  • IN TERROREM CLAUSE
    See NO CONTEST CLAUSE.
  • INTER-VIVOS
    Literally, “during life,” denoting that the action was taken during the actor’s lifetime.
  • INTER-VIVOS TRUST
    See LIVING TRUST
  • INTESTATE
    Literally, “without a will,” denoting that the Descendant died without having made a valid will. Also, a Descendant who has no will.
  • INVASION OF TRUST
    A withdrawal by a beneficiary or all or a portion of the trust principal according to the trust‘s terms.
  • IRREVOCABLE GIFT
    A gift that cannot be modified or revoked after it is made, eg, resulting in the return of the property to the donor.
  • IRREVOCABLE TRUST
    A trust that cannot be modified or revoked after its creation, eg, resulting in the return of its assets to the trustor.
  • IRREVOCABLE LIFE INSURANCE TRUST (“ILIT”)
    An irrevocable trust:

    • Designed to hold one or more policies of life insurance on trustor‘s life, and
    • Shelter the proceeds of the policies from estate tax:
      • At trustor‘s death and, if married at death,
      • At the later death of trustor‘s surviving spouse.

    Policies may be transferred to the trust directly, or funds may be transferred sufficient for the trust itself to purchase the policies.

  • ISSUE
    The class of individuals descending from a common ancestor, ie, children, grandchildren, great-grandchildren, etc. Compare: DESCENDANT.
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  • JOINT AND SURVIVOR
    The right held by two or more individuals to receive property during a time in which any of them is alive.
  • JOINT AND SURVIVOR INSURANCE (aka SECOND-TO-DIE INSURANCE)
    A life insurance policy:

    • On two lives, usually husband and wife, and
    • That pays its proceeds on the death of the second spouse, regardless of order.

    This type of policy is an ideal candidate for the source of funds to pay estate taxes at the second death and as a policy to be held by a married couple’s irrevocable life insurance trust.

  • JOINTLY HELD PROPERTY
    Property that is concurrently owned by more than one person. All co-owners have an equal right to use the property, and no co-owner can exclude another co-owner from the property. Each owner’s fractional interest in the property and the results of his/her attempt to transfer that interest, however, will depend on the form in which the jointly held property is held. See TENANCY BY THE ENTIRETY; TENANCY IN COMMON; JOINT TENANCY; UNDIVIDED INTEREST.
  • JOINT TENANCY
    A form of ownership of jointly held property such that:

    • All co-owners have an equal right to use the property (as is true of all jointly held property in general); and
    • All co-owners also have an equal ownership interest in the property; but
    • Upon the death of any co-owner, his/her interest in the property passes to the surviving co-owners and ultimately to the last of them to survive (ie, “last one takes all”); and
    • Any attempt to transfer the property during life generally will result in the joint tenancy’s being converted as a matter of law to a tenancy in common.

    See: UNDIVIDED INTEREST. Compare: TENANCY BY THE ENTIRETY. Contrast: TENANCY IN COMMON.

  • JOINT WILL
    A single will made by two of more testators covering the passage of property of each testator at his/her respective death, resulting in the same will being offered for probate in more than one proceeding.
  • JURISDICTION
    The power, right, or authority of a Court to interpret, apply, and declare the law, eg, by rendering a decision.
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  • LAPSE
    The effective revocation of a gift in a will as a result of its beneficiary‘s having predeceased the relevant survival period or the testator‘s having outlived the beneficiary. A lapsed bequest, devise, or legacy will pass to its contingent beneficiary so long as one is provided and has survived the relevant survival period, and if not, to the residuary estate. See RCW 11.12.120 regarding lapse in Washington.
  • LAW
    A rule established by a governing authority to institute and maintain orderly coexistence.
  • LEGACY
    A testamentary gift of personal property, traditionally of money. Compare: BEQUEST; DEVISE.
  • LEGAL INTEREST
    The interest held by a trustee of a trust, ie, the right to hold, manage, administer, and distribute property held by the trust.
  • LEGATEE
    The recipient of either a bequest or a legacy. [There is no such creature as a “bequestee” or bequeethee.” All recipients of personal property under a will are called “legatees.”] Compare: DEVISEE.
  • LETTER OF INSTRUCTIONS
    A document that provides specific, detailed, personal instructions regarding any of the following that its maker considers relevant:

    • A list of one’s professional advisors;
    • A list of one’s relatives;
    • One’s preferences and arrangements regarding organ donation, autopsy, funeral, and burial;
    • The location of one’s safe deposit box and any other storage facility;
    • A list of one’s major current assets;
    • A list of major current debts and other liabilities;
    • The location of one’s recent tax returns;
    • The location of one’s bills received, records of payment, and cancelled checks;
    • A list of one’s legal documents;
    • A description of any other relevant circumstance; and
    • One’s desired disposition of tangible personal property to the extent not provided in a will or living trust.

    Regarding one’s tangible personal property, many states have statutes providing for the disposition at death of some types or all of an individual’s tangible personal property (generally not including property used in a trade or business) by a writing, specifying the item and its intended beneficiary and signed and dated by its maker, that does not have to be executed with the formality required of a will. In some states (eg, Washington, see RCW 11.12.260), these informal writings are binding as regards the disposition of the specified property so long as it is not specifically given in one’s will and the will refers to the writing. In other states, these writings are discretionary with one’s personal representative.

  • LETTERS OF ADMINISTRATION
    A certificate of authority granted by a probate court stating that the person named has been appointed as administrator of an intestate Descendant‘s estate and authorizing that person to administer the estate. See: ADMINISTRATOR.
  • LETTERS OF ADMINISTRATION WITH WILL ANNEXED
    A certificate of authority granted by a probate court stating that the person named has been appointed as administrator of an testate Descendant‘s estate (but was not nominated as executor in the will) and authorizing that person to administer the estate according to the terms of the will. See: ADMINISTRATOR.
  • LETTERS TESTAMENTARY
    A certificate of authority granted by a probate court stating that the person named has been appointed as executor of an testate Descendant‘s will and authorizing that person to administer the estate according to the terms of the will. See: ADMINISTRATOR.
  • LIEN
    An interest held by a creditor in property of a debtor as security for a loan. Upon the debtor’s default on the loan, the creditor/lien-holder may take, hold, or sell the property as payment.
  • LIFE ESTATE
    A present interest in property of a duration equal to a specified individual’s lifetime, usually of the individual who holds the present interest; if measured by the lifetime of a different individual, it is called a Life Estate Pur Autre Vie (literally, a life estate “by another’s life”). If the interest is in trust, it is called a Life Interest. Contrast: REMAINDER.
  • LIFE TENANT
    An individual who holds (or may in the future hold) a life estate in property; if the interest is in trust, the individual is known as a Life Beneficiary. For example, if a husband at death left his estate in trust for his wife for her life and upon her death to his children, the husband would be the grantor or trustor, his wife would hold a life interest and be the life beneficiary, and his children would hold a remainder interest and be the remainder beneficiaries. Contrast: REMAINDERMAN.
  • LIMITED POWER OF APPOINTMENT (aka SPECIAL POWER OF APPOINTMENT)
    A power of appointment whose exercise is limited by an ascertainable standard relating to the health, education, maintenance, or support (and expressly not the comfort, welfare, or happiness) of the Descendant. Another way to shelter a power of appointment from its being considered a general power is for it to be held jointly with its donor or any other person having an adverse interest in the property. Contrast: GENERAL POWER OF APPOINTMENT.
  • LIVING TRUST (aka INTER-VIVOS TRUST)
    A trust created during the lifetime of its trustor.
  • LIVING WILL
    See HEALTH CARE DIRECTIVE.
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  • MARITAL DEDUCTION (aka UNLIMITED MARITAL DEDUCTION)
    The federal estate and gift tax deduction that allows qualifying gifts, at death or during life, to one’s U.S.-citizen spouse to pass tax free.
  • MARITAL DEDUCTION GIFT
    A gift to one’s U.S.-citizen spouse, at death or during life, that qualifies for the federal estate or gift tax marital deduction and does not result in the imposition of federal estate or gift tax. Note that it is possible to make a gift to one’s U.S.-citizen spouse that does not qualify for the federal estate or gift tax marital deduction; one example of such a non-qualifying gift would be a gift in trust such that the spouse was entitled to receive as much of the trust income (or principal) as trustee determined.
  • MARITAL TRUST (aka “A” TRUST IN “A/B TRUST” PLANS)
    The likely recipient of a marital deduction gift for a Descendant married at death who desires that it not be made outright. The marital trust is the trust that is the complementary trust to the credit shelter trust in the will or living trust of a married person.
  • MINOR
    An individual who has not attained a specific age, generally either 18 or 21, set by state statute, at which time he/she is accorded full legal rights.
  • MUTUAL WILLS
    See RECIPROCAL WILLS.
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  • NET ESTATE TAX
    The gross estate tax less the applicable credit amount and any other applicable credits (eg, credit for state death taxes, the “pick-up” tax). One’s net estate tax is one’s estate tax liability.
  • NEXT OF KIN (aka DISTRIBUTEE)
    Historically, those persons entitled to take or share, in whole or in part, any personal property of an intestate Descendant, now generally broadened to include all the property of an intestate Descendant. Contrast: HEIRS.
  • NO CONTEST CLAUSE (aka IN TERROREM CLAUSE)
    A will clause providing for the revocation of a gift to any beneficiary who unsuccessfully contests the will.
  • NOMINATE
    What an individual does to name another as his/her fiduciary (eg, personal representative, testamentary trustee, guardian) and whose nomination is subject to approval by a court. An individual nominates — a court appoints. See APPOINT.
  • NONINTERVENTION POWERS
    The powers granted under RCW 11.68, usually upon appointment of a Personal Representative, allowing him/her to administer and close a solvent estate without further interaction with, or supervision by, the Court.
  • NONPROBATE ASSETS
    The assets comprising a Descendant’s nonprobate estate. Compare: PROBATE ASSETS.
  • NONPROBATE ESTATE
    The collection of assets (“nonprobate assets“) held by a Descendant that pass independent of his/her Will, “outside of probate.” A Descendant‘s nonprobate assets include:

    • Joint tenancy property (but not property held as a tenancy-in-common), which passes to the surviving joint tenants;
    • Joint bank accounts with right of survivorship, which pass to the surviving joint tenants;
    • Payable-on-death (ie, “in trust for, ‘Totten trust‘”) bank accounts, which pass to the designated payable-on-death beneficiaries;
    • Transferable-on-death securities and securities accounts, which pass to the designated transferable-on-death beneficiaries;
    • Property whose title Descendant has transferred but whose possession Descendant has retained until his/her death (ie, retained life estates), which passes to the remainder beneficiaries according to the Deed or other conveyance document;
    • Property Descendant has transferred to a revocable living trust for his/her benefit, which continue to be held by the trust, now for the benefit of the successor beneficiaries;
    • Property subject to a community property agreement, which passes to Descendant’s surviving spouse;
    • Life insurance policies on Descendant’s life, whose proceeds pass to the designated beneficiaries;
    • Property held in Descendant’s individual retirement accounts, which passes to the designated beneficiaries;
    • Property in Descendant’s employee benefit plans, which passes to the designated beneficiaries;

    Compare: PROBATE ESTATE.

  • NOTARY (aka NOTARY PUBLIC)
    An individual authorized by a state to administer oaths and attest to the authenticity of signatures.
  • NUNCUPATIVE WILL
    An unwritten will that is spoken by the testator during his/her last illness to at least two witnesses. Washington law recognizes nuncupative wills under very limited circumstances. RCW 11.12.025
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  • OMITTED HEIR (aka PRETERMITTED HEIR)
    A spouse or child of a testator, which spouse or child is neither named nor provided for in the will. An omitted heir is usually entitled to receive from Descendant‘s estate, despite the will, whatever he/she would have received as an heir had the testator died intestate. In Washington, see RCW 11.12.091 regarding an omitted child and RCW 11.12.095 regarding an omitted spouse.
  • OUTRIGHT
    Free of any restrictions, such as being subject to a trust.
  • OUTRIGHT GIFT
    A gift that is made outright.
  • OUTRIGHT MARITAL GIFT
    An outright gift of the marital deduction gift to the surviving spouse.
  • OWNER
    A holder of the right to ownership of property.
  • OWNERSHIP
    Not only the right to use and possess property (a “tenancy“) but also to exclude others from it and to transfer it, during life or at death, to another (effectively, the exclusive right to use and possess it for eternity).
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  • PAYABLE-ON-DEATH (aka TRANSFER-ON-DEATH or as a “TOTTEN” TRUST)
    A form of ownership provided by some state statutes for holding those assets specified by the statute, generally, bank accounts, certificates of deposit, savings bonds, and securities. Upon the death of an owner of property held as payable-on-death, the named “in trust for ” beneficiary or “payee” automatically succeeds to the property.
  • PECUNIARY GIFT
    A gift of money, by will or otherwise.
  • PER CAPITA DISTRIBUTION
    Literally, “by head.” A distribution of property by per capita distribution passes in equal shares to all its recipients.
  • PERSON
    Either an individual or an organization, such as a corporation or a charity.
  • PERSONAL PROPERTY (aka PERSONALTY)
    All property that is not real property, generally either tangible personal property (having physical presence, such as cars, clothing, furniture, books, jewelry, etc.) or intangible personal property (representing an ownership right, such as notes of indebtedness or securities, and including a contract interest in real property, such as a lease).
  • PERSONAL REPRESENTATIVE
    One of more persons appointed by a court to administer a Descendant‘s estate. See Executor/trix and Administrator/trix.
  • PERSONALTY
    See PERSONAL PROPERTY.
  • PER STIRPES DISTRIBUTION
    Literally, “by stirrups,” relating to the up-side-down-“Y”-shaped appearance of a genealogical chart. See BY RIGHT OF REPRESENTATION.
  • PICK-UP TAX
    The estate tax, imposed by some states, equal to the maximum allowable federal estate tax credit for estate taxes paid to a state. The pick-up tax is designed by a state’s legislature to divert to Descendant‘s resident state, at no effective cost to Descendant, tax that would otherwise have been paid to the federal government.
  • POSTHUMOUS HEIR
    An heir conceived before, but born after, Descendant‘s death.
  • POST-NUPTIAL AGREEMENT
    An agreement between a married couple in which agreement they determine the property rights and interests each shall have upon termination of their marriage, by dissolution or death. Compare: PRE-NUPTIAL AGREEMENT.
  • POT TRUST
    See FAMILY POT TRUST.
  • POUR-OVER WILL
    A will in which the testator gives his/her residuary estate to the trustee of a trust, usually his/her revocable living trust.
  • POWER OF APPOINTMENT
    A right held by one person (the “holder‘) to dispose of property owned by another.
  • POWER OF ATTORNEY
    1. The authority granted by one person (the “principal“) to another (the “agent” or “attorney-in-fact”) to act for the principal. By law, the agent‘s authority terminates upon the subsequent disability or death of the principal, hence the need for a power of attorney that survives at least the principal‘s subsequent disability: a DURABLE POWER OF ATTORNEY.
    2. The document in which such authority is granted.
  • PRECATORY LANGUAGE
    Words of intent or desire but having no legal effect, eg, “I would like, I hope, I wish, etc.”
  • PRE-NUPTIAL AGREEMENT (aka ANTE-NUPTIAL AGREEMENT)
    An agreement between a couple in expectation, and possibly in consideration, of their marriage to each other, in which agreement they determine the property rights and interests each shall have if they wed. Compare: POST-NUPTIAL AGREEMENT.
  • PRESENT INTEREST
    An unrestricted right to the immediate use, possession, or enjoyment of property or the income from property. Contrast: FUTURE INTEREST.
  • PRETERMITTED HEIR
    See OMITTED HEIR.
  • PRIMARY BENEFICIARY
    The beneficiary who, if the beneficial right has vested, is first entitled to receive the benefit. Compare: CONTINGENT BENEFICIARY.
  • PRINCIPAL
    1. A person who appoints an agent in a power of attorney; or
    2. The corpus of a fund.
  • PROBATE
    Literally, “to prove.” The primary purpose of a probate proceeding is to prove before a competent judicial authority that an offered document is the valid will of a Descendant.
  • PROBATE ASSETS
    The assets comprising a Descendant‘s probate estate. Compare: NONPROBATE ASSETS.
  • PROBATE ESTATE
    The collection of assets (“probate assets“) held by a Descendant that pass according to the terms of his/her Will (or according the the laws of intestate succession in the absence of a Will). A Descendant‘s probate assets are generally those held in his/her name alone and, if married, held in the names of the couple as their community property and not subject to a community property agreement. Compare: NONPROBATE ESTATE.
  • PROPERTY
    Anything which may be the subject of ownership, such that its owner has the exclusive right to possess, to use, to exclude others from it, and to transfer it to another.
  • PRUDENT-PERSON RULE (originally known as PRUDENT-MAN RULE)
    The investment standard for a fiduciary, based on the 1830 Massachusetts case Harvard College vs. Amory:

    • “In acquiring, investing, reinvesting, exchanging, retaining, selling and managing property for the benefit of another, a fiduciary shall exercise the judgment and care, under the circumstances then prevailing, which men of prudence, discretion and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of their capital.”

    The Prudent Person Rule emphasizes caution, conservation, but most of all preservation of capital.

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  • WAIVER
    The intentional relinquishment of a right, privilege, or claim; a document evidencing such relinquishment.
  • WARD
    The individual who is the subject of a guardianship or conservatorship.
  • WILL
    A legal declaration that names one or more persons to manage one’s estate and provides for the transfer of one’s property at death, historically, of only one’s real property. Contrast: TESTAMENT.
  • WILL SUBSTITUTE
    A device used instead of a will to transfer property (ie, nonprobate assets) at death, eg, a trust, a community property agreement, a life insurance policy, a retirement plan, etc.
  • WITNESS
    1. As a noun: One who, being physically present, personally perceives a relevant object or action that has legal significance and is able to testify in court as to his/her perception; or
    2. As a verb: The act of such perceiving.

    See RCW 11.12.020 for the witnessing requirements for wills in Washington.

  • WRONGFUL DEATH
    A death caused by the willful or negligent act of another.