Estate Planning and Elder Care Glossary
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
A
A-B Trust
A-B Trust: refers to the split between the spouse’s share (A) and the share of the decedent (B), which passes to a Bypass Trust. An A-B-C Trust adds a marital deduction trust, which is generally a QTIP Trust, when the deceased spouse’s share of the estate exceeds the tax-free allowance that can go in the Bypass Trust.
Accounting
Accounting: a periodic report by an executor, trustee or administrator as to the financial activity of the trust or estate for the relevant period.
Administration
Administration: the process of handling the affairs of a deceased person’s estate or trust.
Administrator
Administrator: the person or financial institution that is appointed to take care of the estate of a deceased person who died without a will, or who failed to name an executor or a backup when the named executor cannot serve.
Adult
Adult: in Texas, a person who is 18 years of age or older is legally an adult (although some special laws may limit certain rights until age 21).
Advanced Directive
Advanced Directive: (see living will)
Ancillary Administration
Ancillary Administration: probate proceeding in another state undertaken when the deceased person owned real estate in a state other than the state of domicile, if needed to clear title into a new owner.
Assets Subject to Administration
Assets Subject to Administration: typically, assets that are subject to administration in the probate court., meaning those assets that were in the name of the deceased person and remain in the estate because the asset had no pay on death beneficiary or survivor named. Accounts bearing another name for convenience (without a specific statement that such person(s) take by survivorship on death), are still part of the estate. The interest of a spouse in community property held solely in the name of the survivor is part of the deceased spouse’s estate. Sometimes the assets subject to administration are referred to collectively as the “estate” or the “probate estate.” Assets owned jointly with a surviving joint owner, life insurance proceeds, and retirement plan proceeds payable to a named beneficiary other than the estate are normally not part of the estate because they are not subject to administration. Living Trust assets are not part of the estate. Some assets that are not part of the estate for probate purposes may still be part of the taxable estate for estate tax purposes only.
B
Beneficiary
Beneficiary: a term that usually refers to a person or entity that is entitled to receive something at death, for example, a beneficiary of an estate or trust, or a beneficiary of life insurance or retirement benefits. A beneficiary may be able to take those assets without necessity of probate, if the instrument establishing the beneficial right so provides. This is common for a living trust, life insurance, retirement, and certain types of back accounts.
Bypass Trust
Bypass Trust: (also Credit Shelter Exemption Trust or AB Trust) a separate trust, representing the assets of the deceased spouse that is split off after the first death under a will or living trust. The amount passing to this trust is typically limited to the amount that can pass (other than to a spouse or charity) tax-free at death. Generally the surviving spouse is beneficiary of this trust for life, and then other beneficiaries take. The assets in this trust will not be taxed at the second death. The primary purpose of this trust is to assure that the couple receives the benefit of both estate tax exemptions.
C
Charitable Remainder Trust
Charitable Remainder Trust: a gift to a trust when the donor retains the income for a term of years or life and the charity receives the asset at death. This asset will not be taxed at death, even though the donor kept the income stream. The donor can take an income tax deduction on making the gift to the trust for the present value of the gift, meaning the value of the asset less the value of the retained income stream.
Claim
Claim: refers to any obligation of the estate to third parties, whether incurred before or as a result of death. Examples would be funeral expenses, the debts of a deceased person, and expenses of administration.
Community Property
Community Property: typically the assets earned and accumulated during the marriage, excluding assets gifted to or inherited by a spouse or assets otherwise defined by law as separate property.
Codicil
Codicil: a written amendment to a will.
Conservator
Conservator: a term that is used in some states to mean the guardian of a minor or incapacitated person.
Credit Shelter Exemption Trust
Credit Shelter Exemption Trust: see Bypass Trust.
Crummey Withdrawal Right
Crummey Withdrawal Right: the right of a beneficiary to withdraw an annual gift to a trust for that beneficiary. Generally this right is available for 30 days, and if not exercised the funds stay in the trust under the Trustor’s control. It is common to routinely waive the right to withdraw annual gifts, because in the long run the benefits from the trust will be greater.
Custodian
Custodian: one who has possession of assets, often used to describe the company that holds an IRA, or the person that manages an UGMA or UTMA account.
D
Dependent Administration
Dependent Administration: a proceeding for the administration of a deceased person’s estate in which there is considerable court involvement. There are papers that have to be filed with the court and various types of hearings before the probate judge. Typically used on estates where there is no will, or where the will does not specifically provide for independent administrator. Also used in all guardianship proceedings.
Devise
Devise: to dispose of real or personal property by will.
Devisee
Devisee: a person or entity designated in a will to receive a devise.
Directive to Physicians
Directive to Physicians: an instrument that sets out instructions for dealing with life support decisions.
Disclaimer
Disclaimer: the process of legally declining a gift or devise, in which case the asset passes to the descendants of the person that disclaimed, or to others, depending on the law of the state, the relationship of the person disclaiming to the original owner, and the terms of the instrument setting up the gift. Disclaimers generally must be made within nine months of the death or gift to be valid.
Domicile
Domicile: the home or permanent residence. The laws of the state of a person’s domicile determine what happens to that person’s property at death.
Donee
Donee: the recipient of a gift.
Donor
Donor: a person who makes a gift.
E
Escheat
Escheat: assigning property to the state when a person dies with no known beneficiaries under a will and no known heirs if there is no will.
Estate
Estate: this word has a number of meanings depending on the context in which it is used. For federal estate tax purposes, it refers to all of a deceased person’s assets that are included in that person’s estate for tax purposes (usually everything, including non-probate assets). It is also used to refer to those items of property that are subject to administration in the probate court. For example, life insurance owned by the decedent and payable to a named beneficiary such as a surviving spouse is not part of the deceased person’s estate that is subject to administration in the probate court, but it is included in the deceased person’s estate for federal estate tax purposes.
Estate Planning
Estate Planning: the process of arranging one’s personal and financial affairs in a manner that minimizes taxes and offers disposal of property in a manner consistent with the original owner’s wishes.
Executor
Executor: the person or financial institution that is appointed to administer the estate of a deceased person who died with a will, naming such person to serve. The Executor will be supervised by the Court, and make periodic accountings to the Court unless you have provided in your will that this person will serve as an Independent Executor.
Exempt Property
Exempt Property: in Texas this refers to the home, personal effects and certain other property that are exempt from creditors. In a probate context these assets may be set aside in favor of a surviving spouse or dependent child. Otherwise the homestead protections end at death. A surviving spouse is also entitled to a homestead allowance and a family allowance.
F
Family Allowance
Family Allowance: an allowance that a surviving spouse is entitled to from his or her deceased spouse’s estate that is subject to administration for a period of one year during the period of administration of the estate. This is not a set amount but is to be a reasonable amount payable to the surviving spouse and minor children.
Family Limited Partnership (FLP)
Family Limited Partnership (FLP): a limited partnership created to act as a closely held business for administering family investments, and designed to provide continuity for management or winding up, a method for lifetime gifting, and better tax treatment on assets still owned at death.
Fiduciary
Fiduciary: comes from a Latin word meaning trust and confidence. This is a generic term used to refer to a person (or entity) that serves in a representative capacity. An executor, administrator, trustee, guardian, and agents under powers of attorney are all fiduciaries. A fiduciary stands in a position of confidence and trust with respect to each heir, devisee, and/or beneficiary.
G
Geriatric Care Manager
Geriatric Care Manager: This professional is trained to assess a person’s total-care needs and to arrange necessary services in home, in the hospital, assisted living, nursing home. Care managers typically evaluate the older person’s situation, make recommendations, arrange appropriate services and keep family members informed.
Grantor (also, Settlor or Trustor)
Grantor (also, Settlor or Trustor): in a trust context, this refers to a person that established a trust, including a living trust. The term “Grantor” is also used to refer to one who is transferring real estate in a deed.
Guardian of the Estate
Guardian of the Estate: an adult person or financial institution appointed by a court, who is responsible for a minor child’s or legally incapacitated person’s property until that minor child becomes an adult or the legally incapacitated person becomes competent to be responsible for his or her own property.
Guardian of the Person
Guardian of the Person: an adult person appointed by a court, who is responsible for a minor child or legally incapacitated person’s personal care and nurturing. A designation may be made by a parent in advance as to who should serve for his or her own children. This is often set out in will but can be done in a separate legal document as well. The designation is not mandatory on the Court, but the Court will give the person(s) designated top priority in determining the best interest of the child. The designation by one parent does not nullify the rights of another surviving parent.
H
Health Care Power of Attorney
Health Care Power of Attorney: an instrument that appoints an agent to make general health care decisions in the event of later incapacity. Also known as a Medical Power of Attorney.
Heir
Heir: person, who inherits property from the estate of a deceased person who died without a will, or when the will fails to fully dispose of the subject property.
HIPAA Release
HIPAA Release: Also known as the Health Insurance Portability and Accountability Act, is a document that a person signs giving authorization to primary and secondary providers, health plans, health care clearing houses, emergency services, financial and administrative transactions, psychotherapy treatment, and business associates the right to release any and all medical information to a person they appoint as their power of attorney under said document.
I
Incapacitated Person
Incapacitated Person: a person who has been determined by a court as not capable of handling his or her personal and financial affairs.
Independent Administration
Independent Administration: that portion of the administration of a deceased person’s estate in which the personal representative performs various duties without being supervised by the probate court. For example, the personal representative may pay claims, sell real estate and personal property, and make distributions to the beneficiaries without any court involvement, if the personal representative is acting independently.
Independent Executor
Independent Executor: an Executor who is allowed to act independently of court supervisions after performing certain procedures through the probate proceeding. The will must provide for an independent executor, or all devisees must agree to allow the Executor to serve independently.
Intangible Personal Property
Intangible Personal Property: property that is typically represented by some paper associated with it, such as stocks, bonds, mutual funds, bank accounts, and cash.
Inter Vivos Trust
Inter Vivos Trust: see living trust below.
Intestate
Intestate: refers to dying without a will.
Inventory
Inventory: the formal list of property submitted to the Court by the personal representative in a probate proceeding.
Irrevocable Trust
Irrevocable Trust: a trust that can no longer be amended or revoked by anyone. Most revocable trusts become irrevocable at some time, for example, when the person who established the trust dies. Other trusts may be irrevocable from inception, such as a life insurance trust.
L
Lady Bird Deed
Lady Bird Deed: A “Lady Bird” deed is a nickname for an enhanced life state deed. It is named after Lady Bird Johnson, because allegedly President Johnson once used this type of deed to convey some land to Lady Bird. An enhanced life estate deed is a variation of a quitclaim deed that currently enables an individual to retain their homestead creditor and tax exemption, have the home be exempt from Medicaid claims during their lifetime, while at the same time enable named persons to receive the home upon death, free of Medicaid claims and liens. It is a specially designed instrument that is only available in a few states. Generally, it works like a traditional Life Estate Deed, and there is often no capital gains tax if the property is sold shortly after your death. It goes beyond a life estate deed, because not only does the life tenant get to live there for life, that former owner also reserves more than just a life estate. Also reserved are the rights to sell, commit waste, and almost everything else, except the transfer on death to the “remainderman”.
Letters of Administration
Letters of Administration: the paper that is issued by the probate clerk to an administrator, showing that the administrator has the authority to act on behalf of an estate.
Letters Testamentary
Letters Testamentary: the paper that is issued by the probate clerk to an executor, showing that the executor has the authority to act on behalf of an estate.
Life Estate
Life Estate: A life estate is a concept used in common law and statutory law to designate the ownership of land for the duration of a person’s life. In legal terms it is an estate in real property that ends at death. The owner of the life estate is called a “life tenant”.
Life Insurance Trust
Life Insurance Trust: an irrevocable trust created to hold life insurance policies in such a way that the policies will not be treated as the part of the insured’s taxable estate upon the death of the insured. This may also be called an ILIT (Irrevocable Life Insurance Trust).
Living Trust (also revocable living trust or intervivos trust)
Living Trust (also revocable living trust or intervivos trust): a trust that is established during life to hold assets so they will not pass under a will. The trust is established by a written trust agreement. This type of trust is typically self managed during life, it is still treated as if the Grantor owns the trust assets during life, thus it does not file separate tax returns during the Grantor’s lifetime. At death, however, assets held under the living trust avoid probate and can make settlement faster and simpler.
Living Will
Living Will: A legal document that deals with end of life medical issues in cases of terminal illness, vegetative states and comas. The document states the client’s wishes in regard to continuing or ceasing life-sustaining medical treatment. A type of advance directive in which an individual documents his or her wishes about medical treatment should he or she be at the end of life and unable to communicate. It may also be called a “directive to physicians,” “healthcare declaration,” or “advanced directive.”
M
Marital Property Agreement
Marital Property Agreement: a contract between spouses which may be entered into before or during marriage to alter their rights in property under the default laws in Texas as to community property and separate property.
Marital Deduction
Marital Deduction: the tax code allows a deduction for gifts to a spouse or to a special type of trust for a spouse. In this manner the estate tax can be fully deferred until the second death.
Medicaid Look Back Period
Medicaid Look Back Period: The Deficit Reduction Act (DRA) enacted in 2006 made several important changes to the Medicaid asset-transfer rules. The look-back period for asset transfers was extended from 3 years to 5 years and the start of the penalty period or ineligibility period for transferred assets was changed from the date of the transfer of assets to the date when the elderly person applies for Medicaid and is otherwise qualified for Medicaid, generally at the time he or she enters a nursing home. Simply put, one of the key requirements for Medicaid eligibility is that the elderly person lacks assets, meaning he or she cannot afford to pay for nursing home care. However, Medicaid will look back 5 years to see if the elderly person transferred any assets for less than fair market value, and if so, will deny Medicaid benefits for a period of time (the ineligibility period) based on the amount of assets transferred.
Miller Trust
Miller Trust: A “Miller Trust” can be used to qualify a Medicaid applicant with income in excess of the eligibility limit (not imposed in all states) for long-term care assistance from Medicaid. Such a trust is not really a “special needs” trust at all; it is not funded with the beneficiary’s assets. The Miller trust can be named as recipient of the individual’s income, from a pension plan, Social Security, or other source. The Miller trust takes its name from the Colorado case of Miller v. Ibarra, 746 F. Supp. 19 (D. Colo. 1990), and is specifically sanctioned by 42 U.S.C. § 1396p(d)(4)(B). As with a self-settled special needs trust , upon the death of the beneficiary, the State Medicaid agency must be paid back for its medical assistance from any remaining assets in the Miller trust.
Minor
Minor: in Texas, a person who is under the age of 18, although some special laws may limit certain rights until age 21.
Muniment of Title
Muniment of Title: a simplified proceeding in probate to admit a will to probate without opening an estate administration. This is allowed only when there are no debts and no need to administer (sell or divide) assets.
P
Pay on Death (POD)
Pay on Death (POD): an account set up to pay to a beneficiary at death, without giving that person account access prior to death.
Personal Representative
Personal Representative: a generic reference to the person or financial institution appointed by the court to administer a person’s estate, either as administrator, executor or guardian.
Power of Attorney
Power of Attorney: a document that grants to an agent the right to deal with the assets of another party until the death of the true owner. In order for the right to continue during the incapacity of the owner, it must specifically so provide, in which case it is a “durable” power of attorney.
Probate Proceeding
Probate Proceeding: a proceeding usually started by a petition or motion and culminating in a hearing before a probate judge after notice to interested persons to determine whether a will should be admitted to probate. Typically a second phase then begins, which is the administration of the probate estate.
Q
QTIP Trust
QTIP Trust: a trust that splits off under the will or living trust to hold assets of a deceased spouse that exceed the tax-free amount. Assets in this trust are not taxed until the second death, and then only if not covered by the survivor’s tax exemption.
R
Revocable Living Trus
Revocable Living Trust: a living trust or inter vivos trust that can be amended and revoked, usually by the person who established the trust. This trust may become irrevocable and unamendable when the only person who can amend or revoke the trust dies or becomes incompetent.
S
Separate Property
Separate Property: typically assets owned prior to marriage (including proceeds and reinvestment thereof), and assets received by gift or inheritance during a marriage. In Texas, income from separate property is considered community property, unless a valid Marital Property Agreement provides otherwise.
Settlor
Settlor: a person who established a trust.
Small Estates Proceeding
Small Estates Proceeding: a proceeding that allows for distribution of an estate with assets valued at less than $50,000 and no real estate other than a home.
Special Needs Trust
Special Needs Trust: Supplemental or Special Needs Trusts are frequently used to receive an inheritance or personal injury litigation proceeds on behalf of a disabled person in order to allow the person to qualify for Medicaid or other Government benefits. This type of trust is irrevocable in that the beneficiary of the trust has no control of how the trust is managed or assets are distributed.
Spousal Allowance
Spousal Allowance: see family allowance above.
Successor Trustee
Successor Trustee: an adult individual or financial institution that is designated as an alternate administrator of the trust. There can be more than one trustee (co-trustees), and an individual and a financial institution may server as co-trustees, if designated.
T
Tangible Personal Property
Tangible Personal Property: personal assets that you can touch, such as furnishings, cars, dishes, jewelry, tools, and sporting equipment.
Testamentary Trust
Testamentary Trust: a trust that is created by direction set out in a person’s will.
Testate
Testate: refers to dying with a will.
Testator
Testator: a person who makes a will.
Trust
Trust: an arrangement, usually established by a written document, to provide for the management and disposition of assets. It normally involves three parties: the person who establishes the trust (sometimes called a grantor, settlor, or trustor), a trustee, and one or more beneficiaries.
Trustee (primary)
Trustee (primary): an adult individual or financial institution that is designated to be responsible for the administration of a trust that is appointed by the (Settlor aka Trustor). There may be more than one trustee (co-trustees), and an individual and a financial institution may serve as co-trustees.
Trustor
Trustor: see settlor above.
U
UGMA (TUGMA in Texas)
UGMA (TUGMA in Texas): accounts held under the Uniform Gifts to Minors Act for a minor until age 18. The newer version of this statute is the UTMA.
UTMA (TUTMA in Texas)
UTMA (TUTMA in Texas): accounts held under the Uniform Transfers to Minors Act for a minor until the minor reaches age 21. This newer version of the statute extends the terminage to life insurance and allows greater flexibility in what investments may be made with the funds.
V
Veterans “Aid & Attendance” Benefits
Veterans “Aid & Attendance” Benefits: “Aid and attendance” is a commonly used term for a little-known veterans’ disability income. The official title of this benefit is “Pension.” The reason for using “aid and attendance” to refer to Pension is that many veterans or their single surviving spouses can become eligible if they have a regular need for the aid and attendance of a caregiver or if they are housebound. Evidence of this need for care must be certified by VA as a “rating.” With a rating, certain veterans or their surviving spouses can now qualify for Pension. Pension is also available to low income veteran households without a rating, but it is a lesser dollar amount.
W
Will
Will: a written document which disposes of one’s property at death. It may also name executors and trustees and designate a guardian for a minor or legally incapacitated adult child.
