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Minnewaska Home Development Foundation
Glossary of Terms
Administrator
The individual appointed by the probate court to handle the estate on a person who died without
leaving a will. An administrator performs the same duties as an executor.
Amendment
A change or addition to a legal document which, when properly signed, has the same legal power
as the original document.
Annuity
1. A legal obligation, in the form of a contract,
to pay specified amounts over a specified period of time to a specified individual(s) in
exchange for cash, securities, or other tangible property. More generally, a series of payments
of set size and frequency, often to a retired person.
2. A sum of money payable yearly or at other regular intervals.
See also: deferred annuity, joint life annuity, life annuity,
qualified joint and survivor annuity, single-life annuity, single-premium deferred annuity.
Appreciated Property
Any property (e.g., real estate or stock) which has increased in value.
Appreciation
The increase in value of an asset.
Asset
Any item of economic value owned by an individual or corporation, which can be converted to
cash. Examples are cash, securities, house, car, and other property.
Beneficiary
1. An individual, institution, trustee, or estate which
receives or may become eligible to receive benefits under a will, trust, or other legal
document to receive an interest in an estate.
2. An individual designated to receive benefits or funds under
a will or other contract, such as an insurance policy, annuity, trust or retirement plan.
See also: contingent beneficiary
Bequest
1. Assets which are transferred to an heir through a will.
2. A direction in a will to pay over or distribute personal
property. Also called a legacy.
3. To give or leave something by will, typically personal
property or assets.
Bypass trust
An irrevocable trust which passes one’s assets to one’s children. A vehicle used to reduce one’s
estate taxes.
Capital gain
The amount by which the selling price of an asset exceeds its initial purchase price. Capital
gains may be realized (an asset has been sold at a profit) or unrealized (the future sale of an
asset will result in a profit).
Charitable Gift Annuity
An agreement through which one transfers cash or other assets to a charitable organization in
exchange for its promise to pay the recipient an annuity for life or for a specified term of
years.
Charitable lead trust
An arrangement in which income from property or investment passes to a charity while the donor is
living but upon his/her death the principal will pass to other designated parties.
Charitable remainder trust
An arrangement in which property or money is donated to a charity, but the donor continues either
to use the property and/or receive income from it while living. The charity receives the
principal after a specified period of time. CRTs come in three types: charitable remainder
annuity trust (which pays a fixed dollar amount annually), a charitable remainder unitrust
(which pays a fixed percentage of the trust's value annually), and a charitable pooled income
fund (which is set up by the charity, enabling many donors to contribute).
Charitable Trust
A trust having a charitable organization as a beneficiary.
Codicil
A legal amendment which modifies a will.
Contingent beneficiary
The individual entitled to receive the benefits of an insurance policy if the primary beneficiary
dies.
Corporate Fiduciary
An institution that acts for the benefit of another. Examples are a bank acting as a trustee,
administrator, executor, or guardian.
Cost Basis
The original value of an asset. Often this is the purchase price.
Decedent
An individual who has died.
Deferred annuity
An annuity that delays income payments until a specified time when the holder chooses to
receive them.
Distribution
The handing out of assets to beneficiaries from an estate.
Donor
A person who makes a gift through a trust or a charitable contribution.
Durable Power of Attorney
A legal document that enables an individual to designate another person, called the
attorney-in-fact, to act on his/her behalf, even in the event the individual becomes disabled or
incapacitated.
Estate
The sum of all assets owned by an individual at death, which are distributed according to the
individual's will (or a court ruling if there is no will).
Estate Tax
A tax imposed at one’s death on the transfer of most types of property to one’s heirs, legatees,
or devisees.
Executor (or Personal Representative)
An individual or institution named in a will and/or appointed by a court to settle the estate of
a deceased. This person collects the property, pays any debt, and distributes the property or
assets.
Fiduciary
An individual or institution holding assets for another party, often with the legal authority
and duty to make decisions regarding financial matters on behalf of the other party. Examples
include trustees, executors, and administrators.
Generation-Skipping Transfer
A trust or similar arrangement in which the beneficiary is two or more generations younger than
the donor. This arrangement is usually made for tax purposes. Often the skipped generation is
still able to receive income from the trust while they are alive.
Gift Tax
A graduated tax assessed against a person who gives money or assets to another person, without
receiving fair compensation. A significant amount of each gift is tax-free and there are no
exclusion limits on gifts given to a spouse (unless the spouse is not a U.S. citizen). The
recipient of the gift does not report income unless the gift is property or stock, but the
recipient will have to pay taxes if he/she makes a profit from the gift.
(Gift-Tax) Annual Exclusion
The maximum amount that a person is allowed to give another person without incurring Federal gift
tax, currently set at $11,000 per year, per recipient. There is no limit on the number of gifts
one can make to different people in a year. To qualify, the gift must be of a
"present interest." This means the recipient is entitled to use the gift immediately
and the donor has no control over the gift after it is given.
Grant
To give a right to.
Grantor
1. One who creates a trust or other legal instrument.
2. One who transfers assets into a trust for the benefit of
another.
Gross Estate
The total value of an individual’s estate, before any deductions are made for taxes, funeral
expenses, attorney's fees or administration costs.
Guardian
An individual legally appointed to manage the rights and/or property of a person incapable of
taking care of his or her own affairs, usually a minor.
Individual policy pension trust
A type of pension plan frequently used for small groups. Trustees administer these plans and are
authorized to purchase individual level premium insurance policies or annuity contracts for each
member of the plan. The policies usually provide both life insurance and retirement benefits.
Heir
An individual who will receive assets upon the death of another.
Inheritance
Part of an estate, given to an heir.
Instrument
A document containing some legal right or obligation. Examples include notes, agreements,
contracts, wills.
Insurance Trust
A trust consisting of life insurance policies or proceeds. These may be funded
(property is transferred to the trust to be used, with the income, for the payment of premiums)
or unfunded (a trust which contains no fund for payment of premiums).
Inter vivos trust
A type of trust created during one’s lifetime to hold property for the benefit of another person.
Interest
Partial or total rights or ownership in property.
Intestate
The term applied when an individual dies without a legal will. A probate court oversees
distribution of the estate.
Institution
An organization which is in the business of holding assets. Examples include banks, insurance
and investment companies.
Intangible asset
Something of value that cannot be physically touched, such as goodwill.
Irrevocable Trust
A trust that cannot be changed, dissolved, or cancelled once it is set up, without the consent of
the beneficiary. The grantor cannot remove contributions from the trust.
Joint life annuity
An annuity issued on two individuals under which payments continue, in whole or in part, until
both individuals die. Also called “joint and survivor annuity”.
Joint Ownership
A situation in which two or more people share ownership of property or securities, usually
with the right of survivorship.
Legacy
A disposition of personal property by a Will.
Legatee
The recipient of a legacy.
Letters testamentary
Documents issued by the court of proper jurisdiction, indicating what individual or organization
has been appointed as executor or administrator of an estate.
Life annuity
An annuity that continues to pay out as long as the annuitant is alive.
Life Estate
Gift of property in which the donor retains the right to use the property for life.
Life Income Agreement
A gift of a principal sum, property, or securities which stipulates a life income be paid to the
donor or another person for his or her lifetime(s).
Life Income Trust
A plan whereby gift assets are placed in trust for the lifetime benefit of an income beneficiary,
with the remainder going to another beneficiary.
Life Insurance Trust
A trust that has the proceeds of an individual’s life insurance policy as its principle.
Living Trust
A revocable trust established by a grantor during his or her lifetime in which the grantor
transfers some or all of his or her property into the trust.
Living Will
A document in which one specifies which life-prolonging measures one does, and does not,
want to be taken if one becomes terminally ill or incapacitated.
Marital Deduction
The tax provision which allows one spouse to transfer, upon death, an unlimited amount of
property to his/her spouse without incurring estate or gift tax.
Net estate
That part of an estate remaining after all deductions for administering the estate have been
made; the portion of the estate which is actually distributed to the beneficiaries.
per stirpes
The term for the method of distributing the estate of an individual who dies without a will, in
which the greatest benefits are given to those closest in relation to the deceased.
Personal Property
Also called chattel. Property, other than real estate, owned by an individual. Personal property
may be tangible (e.g., jewelry, artwork, antiques, clothing) or intangible (stocks, bonds, notes,
patents).
Personal Representative
An individual or organization authorized to act on behalf of another, such as an executor
or a trustee.
Power of Attorney
A written legal document that gives an individual the authority to act for another as long as
the individual does not become disabled or incapacitated.
Powers of Appointment
A right given to in a written instrument such as a will or trust, allowing another individual
to decide how to distribute one’s property. It is called “general” if no restrictions are
placed on who the distributees may be; otherwise it is called “limited” or “special.”
Probate
1. The review or testing of a will before a court of law
to ensure that the will is authentic.
2. The process by which an executor (if there is a will) or
a court-appointed administrator (if there is not a will) manages and distributes a decedent's
property.
Property
That which an individual or entity legally owns.
Qualified joint and survivor annuity
An annuity issued on two individuals under which payments continue in whole or in part until both
individuals die. Also called a “joint and survivor annuity.”
Real Property
A piece of land, including the air above it and the ground below it, and any buildings or
structures on it. Also called real estate or realty.
Remainder
The amount left in an estate or trust after income payments to prior beneficiaries and expenses
have been paid.
Revisionary trust
An irrevocable trust that becomes revocable after a specified period of time or upon the death
of the grantor.
Revocable Trust
A trust that can be changed or cancelled by its grantor at any time.
Securities
Plural of security - An investment instrument, other than an insurance policy or fixed annuity,
issued by a corporation, government, or other organization which offers evidence of debt or
equity.
The official definition, from the Securities Exchange Act of 1934, is: "Any note, stock,
treasury stock, bond, debenture, certificate of interest or participation in any profit-sharing
agreement or in any oil, gas, or other mineral royalty or lease, any collateral trust certificate,
preorganization certificate or subscription, transferable share, investment contract, voting-trust
certificate, certificate of deposit, for a security, any put, call, straddle, option, or privilege
on any security, certificate of deposit, or group or index of securities (including any interest
therein or based on the value thereof), or any put, call, straddle, option, or privilege entered
into on a national securities exchange relating to foreign currency, or in general, any instrument
commonly known as a 'security'; or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, or warrant or right to subscribe to or purchase, any of the
foregoing; but shall not include currency or any note, draft, bill of exchange, or banker's
acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive
of days of grace, or any renewal thereof the maturity of which is likewise limited."
Settle
To distribute the assets of an estate.
Settlor
Person who creates an inter vivos trust.
Single-life annuity
An annuity that provides income benefits for one person only.
Single-premium deferred annuity
A tax-deferred investment plan to which an individual makes a single payment to a mutual fund
or insurance company. This is similar to an IRA, but has no annual contribution limit.
Spousal remainder trust
A trust into which the grantor places income-producing property. The income is distributed to
the beneficiary over a specified time period and at the end of the term, the property reverts
to the grantor or the grantor's spouse.
Tangible asset
Assets having a physical existence, such as cash, equipment, or real estate.
Testament
A legally enforceable declaration directing the disposal of a decedent's property. Also called
a will.
Testamentary Trust
A trust created within a will which does not take effect until the death of the grantor.
Testate
The term applied when an individual dies with a legally valid will.
Testator
An individual who dies leaving a legally valid will or testament in force.
Trust
1. A legal arrangement in which an individual gives fiduciary
control of property to another person or institution for the benefit of beneficiaries.
2. A written legal instrument created by a grantor during
his/her lifetime or at death for the benefit of another.
See also: bypass trust, revocable trust, irrevocable trust,
charitable remainder trust, charitable lead trust, inter vivos trust, individual policy pension
trust, revisionary trust, testamentary trust.
Trustee
The party (an individual or organization) legally responsible for carrying out the terms and
performance of a trust and managing the property placed in the trust. There may be “co-trustees”
(where more than one trustee serves with another) and “contingent trustees” (individual(s)/
organization(s) named to become trustee upon the occurrence of a specified future event).
Trustor
The individual who sets up or creates a trust. Also called a grantor.
Unified Tax Credit or Unified Credit
A federal tax credit that may be applied against gift tax, estate tax, and sometimes Generation-
Skipping Transfer tax. For gift tax purposes, the unified credit remains at $345,800 through
2009 (equivalent to an applicable exclusion amount of $1 million). For estate tax purposes,
the unified credit is being gradually increased from $345,800 in 2003 to $1,455,800 in 2009
(equivalent to an applicable exclusion amount of $1 million and $3.5 million, respectively).
Will
A legally enforceable declaration directing the disposal of a decedent's property. Also called
a testament.
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