APPRECIATED ASSETS
are assets that have a higher market value than their basis or tax
purpose value. Such assets would, if sold by an individual or non-
charitable organization at a price higher than their basis,
potentially generate a taxable capital gain (either long-term or
short-term depending on the holding period).
The ATTORNEY
is the person licensed by the state to practice law and assist the
executor, trustee, and guardian. It is conceivable that each could
hire a separate attorney, but usually one attorney represents all
three.
The BASIS is
the tax purpose value of the property or asset used in establishing
the potential capital gain amount.
A BENEFICIARY
is the person and/or organization that receives the benefits
(usually assets or income) of the trust.
A BEQUEST is
a gift of property or assets to a beneficiary as defined in a will.
A BYPASS TRUST
is set up to avoid or bypass the surviving spouse's estate, which
enables each spouse to use the federal estate tax exemption.
The CHARITABLE
GIFT ANNUITY offered through a charity is used by many to
provide income for the annuitant and a second beneficiary, if any.
The annuitant (the person providing funds to the charity) receives a
contract or agreement from the charity which states that the charity
will pay the annuitant a fixed income for life (lives) with payments
to start immediately or at some set future time. Probate or court
involvement is avoided on these funds. The income paid under the
annuity is secured by the assets of the charity. Not all charities
offer charitable gift annuities.
A CHARITABLE
LEAD TRUST is almost the opposite of a charitable remainder
trust. During the term or life of the charitable lead trust, an
annuity or unitrust income interest is distributed each year to the
designated charitable beneficiary and the assets are eventually
transferred to the trustor's or grantor's designated non-charitable
beneficiary(ies).
A CHARITABLE
REMAINDER ANNUITY TRUST is a trust which is set up to pay a
return or fixed annual percentage of 5 percent (or more) of the net
fair market value of the assets placed in the trust. The trust
assets are valued initially, at the time the property is placed in
the trust. The trust assets are never revalued.
A CHARITABLE
REMAINDER UNITRUST is a trust which is set up to pay a return or
fixed annual percentage of 5 percent (or more) of the net fair
market value of the assets placed in the trust. The trust assets are
revalued annually.
A CODICIL is
a written change or amendment made to a will.
The GUARDIAN
is the person who is appointed by the Court to care for the person
and/or estate of a minor child or incompetent person. One can
nominate a guardian in a will, and though normally the court will
honor that nomination, the Court has the right to agree or disagree.
JOINT TENANCY
is a type of ownership where any two or more persons, related or
not, may hold (own) property and the property passes to the survivor
or survivors on the death of one. This passing is not automatic, as
some think, and the procedure for passing will depend on local law.
But, this form of ownership does have the advantage of allowing
property to pass to the survivor without delays of probate and court
administration costs.
A LIFE INSURANCE
TRUST is usually set up for the purpose of excluding the
proceeds of life insurance from the insured's and the spouse of the
insured's estate for death tax purposes. It is an irrevocable trust.
A LIVING TRUST
is a trust set up to operate during the life (and can operate after
the death) of the one setting up the trust. It can be revocable, or,
in other words, you can change your mind and have some or all of the
trust property returned to you during your life. An irrevocable
trust cannot be changed except in certain legal circumstances
(fraud, unlawful agreements, merger of interests, decision of the
Court). See Living Trust - Advantages/Disadvantages.
POOLED INCOME
FUND - also called a Charitable Remainder Pooled Income Fund- is
an investment fund much like a mutual fund. It is made up of
transfers by many persons to the fund who receive life income
interest in exchange for their transfers, based on the value of the
transfer into the fund and based on the income earned by the fund.
.
A QUALIFIED
TERMINABLE INTEREST PROPERTY TRUST (QTIP) is a trust often set
up to avoid transfer tax on the first spouse's death. The deceased
spouse establishes the ultimate disposition of the property, rather
than the surviving spouse including the property in their estate.
During their lifetime, the surviving spouse receives all income from
the principal and, in some cases, has access to the principal.
A RETAINED LIFE
ESTATE is a gift plan defined by federal tax law allowing the
donation of a personal residence (to include a vacation home) or
farm with the donor retaining the right to life enjoyment. A life
estate may be retained for one or more lives or it may be retained
for a term of years. All routine expenses - maintenance fees,
property taxes, repairs, etc. - are the responsibility of the donor.
The donor receives an income tax deduction for a significant portion
of the value of the contributed property (the property is
irrevocably deeded to the charity) and estate tax benefits.
TENANTS IN
COMMON is a property ownership arrangement in which two or more
persons own property jointly. It is not necessary that the ownership
consist of equal shares or percentages of the property. Generally
there is no right of survivorship when a co-owner dies. The share of
the property belonging to the deceased co-owner passes to his or her
heirs and the shares of the remaining original co-owners do not
change.
TESTAMENTARY
TRUST - A will can have a trust written into it, called a
Testamentary Trust, which is set into motion by the Court after the
will reaches a certain point of execution, and is used only after
the death of the person whose estate it represents.
A TRUST is
defined as any arrangement where property is to be held and
administered by a trustee for the benefit of those for whom the
trust was created. Depending on the type and how it is established,
a trust may be revocable (changeable) or irrevocable (not
changeable).
The TRUSTEE
is the person or institution named by a person making the trust, or
appointed by the court, to carry out the terms of the trust.
Assuming a trust has been set up through a will, when the executor's
job is finished, the trustee's job begins.
A TRUSTOR is
the individual who establishes the trust. Also referred to as the
GRANTOR and/or SETTLOR.