Glossary

Credit Shelter Trust:

This Trust is created under a Will or a Revocable Living Trust at time of death to be funded with the amount of the Federal Estate Tax Exemption. This Trust is created under a Will or Revocable Living Trust at the time of the first death of a marries couple (both of which are U.S. Citizens). It is then funded with assets valued up to what can pass free from any estate tax. 

Disclaimer Provision:

This provision provides that the surviving spouse has nine (9) months from the date of death to decide whether to create and fund the Credit Shelter Trust or to receive the inheritance outright.

Durable Power of Attorney:

A written document executed by an individual appointing an “attorney-in-fact” to manage his/her financial affairs upon incapacity. More than one person can be appointed to serve and the “power” can be immediate or springing. If the power is springing, it will spring into effect upon some future event (i.e. incapacity certified in writing by two physicians).

Escheat:

Transfer of inheritance to the State in circumstances where there is no identifiable heir to the Estate.

Executor/Executrix:

The person or persons nominated in the Last Will and Testament (the “Will”), and formally appointed by the Surrogate’s Court, to settle the deceased’s estate pursuant to the direction in the Will. The Executor/Executrix works with an attorney to settle the estate by paying any claims, taxes and/or estate related expenses out of the estate’s monies.

Family Limited Partnership:

The estate planning technique by which certain assets can be transferred to family members at discounted values during life, while retaining a certain element of control.

Generation Skipping Tax:

An Irrevocable Trust for a fixed term of years that transfers assets to a beneficiary(ies) (for purposes of Estate Tax mitigation) in such a way that minimizes (by way of potentially very significant Statutory discount) any gift tax impact while also providing a guaranteed income to the Grantor.

Gift:

A transfer of property for which no value is received in return.

Grantor Retained Annuity Trust:

An estate planning instrument which is used to transfer future appreciation on an asset(s) free from gift or estate taxes.

Grantor:

Also known as the “Settlor.” The person who creates the Trust.

Health Care Proxy:

A written document executed by an individual appointing someone to make medical decisions when he/she is unable to do so for themselves.

Intestacy:

A classification for when an individual dies without a valid Will. Estate administration is overseen by the Surrogate’s Court and pursuant to the direction under State Statute.

Joint Tenancy with Rights of Survivorship:

An undivided interest in property whereby upon the death of one individual, the decedent’s interest passes by operation of law to the surviving tenant(s).

Last Will and Testament:

The written declaration to distribute an individual’s property after death.

Letters Testamentary:

Formal authorization certified by the Surrogate’s Court, during a Probate Proceeding, authorizing the named Executor in a Will to act on behalf of the decedent estate and distribute property in the manner directed by the decedent’s Will.

Letters of Administration:

Formal authorization certified by the Surrogate’s Court authorizing a person(s) to act on behalf of the decedent estate and distribute property in the manner directed by the State’s intestacy statute.

Living Will:

Written document directing that no heroic measures be taken to prolong life when the patient is considered in a terminal and vegetative state.

Pour-Over Will:

A Last Will and Testament which directs that the deceased’s estate be settled according to a Revocable Living Trust. Even if there are assets not in the name of the Revocable Living Trust at time of death, the Pour-Over Will “pours” the assets into the Trust for purposes of distribution (in which case there would be a probate proceeding in the Surrogate’s Court).

Probate:

Proceeding (or public record) in the Surrogate’s Court whereby the Last Will and Testament is proved before the Court. The Court reviews the Will and formally appoints the Executor/Executrix to act on behalf of the Estate by issuing “Letters Testamentary.”

Qualified Domestic Trust (“QDOT”):

Created under the Will or Revocable Living Trust when a U.S. citizen is married to the non-U.S. citizen for purposes of retaining the unlimited marital deduction at time of death so that an Estate Tax is avoided.

Qualified Terminable Interest Trust (“QTIP”):

Created under the Last Will and Testament or Revocable Living Trust at time of death to make annual income distributions to the surviving spouse for life. The principle remains in Trust to be distributed upon the death of the surviving spouse in any manor that the Grantor directs. While in Trust, the principal is protected against Creditors and not considered a marital asset should re-marriage occur.

Revocable Living Trust:

Also known as a “will substitute.” This Trust directs the settlement of the deceased’s estate without Surrogate Court intervention when assets are titled in the name of the Trust.

Stretch IRA:

Tax savings technique by which beneficiary designations and life expectancy elections can be used to stretch out the required distributions and maximize the income tax deferral, as well as the life of the asset.

Trustee:

An individual or financial institution carrying out the directions of a Trust; managing and investing assets for the benefit of someone else.

Unlimited Marital Deduction:

U.S. citizen spouses may pass unlimited assets between each other during their lifetimes or upon death without incurring a gift tax or an estate tax.

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