Definitions

Four Pillars Law Firm is dedicated to helping families protect and preserve all that they hold dear . . . both their loved ones as well as their hard earned assets.

Administrator: An individual appointed to handle the financial affairs and estate of a deceased individual.

Annual exclusion: An exclusion allowing a person to give away a certain amount each year as a “gift” without paying gift taxes. Assets: any item of property with monetary value.

Attorney-in-Fact: An individual designated in a power of attorney document to conduct business and financial affairs on behalf of the person who executed the document.

Beneficiary: A person or entity named to inherit (e.g. receive) income or assets from an individual’s  estate (under a last will and testament), trust, insurance policy, or any instrument in which there is a distribution of income or assets.

Buy-Sell Agreement: Contract among business partners which provides terms for their purchase of a withdrawing partner’s or shareholder’s interest in the business.

Claim Against an Estate: Upon the death of an individual and beginning of the decedent’s estate administration (filing of the last will and testament, etc.), an individual believing s/he is owed money from the decedent (and hence the decedent’s estate) must file a written claim promptly with the estate’s personal representative, who will then approve (in whole or part) or deny the claim.

Clause: A provision in a last will and testament or trust which states that if a prospective beneficiary has pledged to turn over a gift s/he hopes to receive to a third party, the personal representative or trustee shall not honor such a pledge (note: the purpose of such a clause is to prevent a potential gift from being used as security or payment for the debts of the prospective recipient).

Clear Title: Having ownership of real property without any claims by others on the owner’s title that may affect the ownership.

Clerk of Court: An official or employee who handles the business of a court or a system of courts (e.g. maintains files and issues routine court documents).

Close Corporation: A corporation that is permitted by state law to operate more informally than most corporations because it has only a limited number of shareholders.

Co-Trustee: A trustee of a trust when there are more than one trustees serving at the same time, usually with the same powers and obligations.

Codicil: A document which modifies (e.g. adds, subtracts or changes the terms of) the original provisions of a last will and testament that was executed at an earlier date.

Competent: Having the ability to act under the circumstances and make reasonable decisions therein.  To be competent to make a last will and testament, an individual must understand what a will is, what s/he generally owns, and who the relatives are who would normally inherit (e.g. spouse and children).

Co-Tenant: An individual who holds an interest in real property together with at least one other individual.

Decedent/Deceased: An individual who has died.

Dissolution of a Corporation: Termination of the corporation’s existence.

Durable Power of Attorney: A written document in which an individual appoints another individual to make financial and/or health decisions for the individual in the event the individual is no longer able to make such decisions.

Election under a Will: Ability of a surviving spouse to elect to take a certain statutory percentage of a deceased spouse’s estate (instead of a lesser amount that was left to the surviving spouse under the decedent’s last will and testament).

Entity: A general term for any institution, company, corporation, partnership, or other organization that is distinguishable from individuals.

Escheat: The forfeit of property to a state treasury if it appears certain that there are no heirs, descendants, or named beneficiaries to take the property upon the death of the last owner.

Estate: All property that a decedent owns, both real and personal, and any other assets.

Executor/Executrix: An individual appointed to administer the estate of a decedent who died leaving a last will and testament that nominates that person.

Fair Market Value: The amount for which property would sell on the open market in an arm’s length transaction.

Fee Simple: Ownership with absolute title to real property, free of any other claims against the title.

Fiduciary: An individual (or entity) who has the power and obligation to act for another (e.g. the beneficiary) under circumstances which require total trust, good faith and honesty (e.g. a trustee named in a trust instrument or a personal representative named in a last will and testament).

Gift: The voluntary transfer of property (real or personal, including liquid assets) to another individual completely free of payment while both the giver and the gift recipient are alive.

Gift Tax: Federal Tax on large gifts of assets between individuals or entities. Grantee: An individual who receives title to property (e.g. buyer, recipient, donee) from another individual (e.g. seller, giver, grantor).

Grantor: An individual who transfers title in property (e.g. seller, giver) to another individual (e.g. buyer, recipient, donee).

Guardian: An individual who is appointed by a judge to take care of a minor child or incompetent adult (both called “ward”) personally and/or to manage that individual’s financial affairs.

Heir: An individual who receives property upon the death of another individual, based on the statutory rules of descent and distribution (e.g. when a valid last will and testament or trust was not created prior to a decedent’s passing).

Holographic Will: A last will and testament entirely handwritten, dated and signed by the testator (the individual making the will), but may/not be properly witnessed.

Homestead/Homesite: The house and surrounding adjacent real property of a homeowner which the homeowner can declare to be the principal dwelling.

Incapacity: Lacking the ability to understand one’s actions in making a last will and testament, or entering into any other legal document or binding contract.

Incompetent: Reference to an individual who is no longer able to manage his/her personal and/or financial affairs due to mental deficiency.

Inherit: To receive all or a portion of the estate of a decedent (normally a family member or close friend).

Inheritance: Property, real or personal (including liquid assets), that an individual receives upon the passing of a decedent (normally a family member or close friend).

Instrument: A written legal document (e.g. contract, deed, last will and testament or trust).

Intangible Property: property which represents only real value (e.g. bank accounts, promissory note, stock in a corporation).

Inter Vivos: The transfer of property (generally by agreement) between living individuals.

Inter Vivos Trust: A trust which is created during the lifetime of the person creating the trust (e.g. grantor, Trustor or settlor), as opposed to a trust created under a decedent’s last will and testament (e.g. testamentary trust) upon the decedent’s death.

Intestate: A situation wherein an individual dies without leaving a valid last will and testament.

Intestate Succession: The statutory distribution scheme, by the laws of descent and distribution) for a decedent’s assets when a decedent dies without leaving a valid last will and testament.

Irrevocable Trust: A trust that cannot be amended or revoked after creation by the trust grantor.

Joint Tenancy: Ownership of real property between at least two individuals which provides that each party owns an undivided interest in the entire parcel, with each party having the right to use all of it.

Joint Tenancy with Rights of Survivorship: Ownership of real property between at least two individuals which provides that each party owns an undivided interest in the entire parcel, with each party having the right to use all of it and the right of survivorship (which means that upon the death of one joint tenant, the remaining parties have title to it all).

Kin: Blood relative.

Lapse: To fail to occur, particularly a specific gift made in a last will and testament.

Last Will and Testament: An individual’s “will.”

Letters of Administration: A document issued by the clerk of court which states the authority of the administrator (or administratrix) of an estate of a decedent when there is no valid last will and testament or no available personal representative (e.g. executor or executrix) named under a valid last will and testament.

Letters Testamentary: A document issued by the clerk of court which states the authority of the personal representative (e.g. executor or executrix) named under a valid last will and testament of a decedent.

Life Estate: The right to use or occupy real property during an individual’s lifetime. Lineal Descendent: An individual who is in direct line to an ancestor (e.g. child, grandchild, great-grandchild, etc.)

Living Trust: An inter vivos trust which is a trust created during the lifetime of the grantor of the trust.

Living Will: A document in which an individual peremptorily makes decisions regarding whether the individual desires for life-supporting measures to be maintained if the individual becomes too ill, is in a coma or is certain to die in the near future.

Marital Deduction: An unlimited estate tax deduction allowed a surviving spouse against the estate and gift tax for transfers made outright or in qualifying trusts to the spouse of the transferor.

Next of Kin: The nearest blood relative of a decedent.

Notary Public: An individual authorized by the state in which the person resides to administer oaths (e.g. swearing to the truth of a statement), take acknowledgements and certify documents.

Personal Representative: An individual who is appointed to administer a decedent’s property (e.g. executor, executrix, administrator, adminstratrix).

Pour-Over Will: A last will and testament of an individual who has already executed a trust in which all property is designated to be distributed or managed upon the death of the person whose possessions are in trust, leaving all property to the trust (e.g. used as a precaution in case not all of the decedent’s property is title in the name of the trust).

Power of Attorney: A written document signed by an individual giving another individual the authority to conduct the individual’s business and financial affairs (including signing papers, checks, title documents, contracts, handling bank account activities, etc.)

Probate: The process of proving a decedent’s last will and testament is valid and thereafter administering the estate of the decedent according to the terms of the decedent’s last will and testament.

Property: Anything that is owned by an individual or entity.

Real Property/Real Estate: All land and structures attached thereto.

Revocable Trust: A trust that can be amended or revoked after it has been created (note: a revocable trust will become irrevocable upon the death of the grantor/creator of the trust).

Sound Mind and Memory: Having an understanding of one’s actions and reasonable knowledge of one’s family, possessions and surroundings.

Tangible Property: Physical articles and items that can be touched and held.

Tenancy By the Entirety: Joint ownership of title of an asset by husband and wife, in which both have the right to the enjoyment of the entire property and, upon the death of one, the surviving spouse has title to the entire property.

Tenancy in Common: Ownership of title of an asset which is held by two or more individuals, in which each has an undivided interest in the property and all parties have an equal right to the enjoyment of the property as a whole (even if the percentage interests are unequal or the living spaces are different sizes).

Testamentary Trust: A trust created by the terms of a decedent’s last will and testament.

Testator/Testatrix: An individual who has written a last will and testament which is in effect at the time of his/her death.

Trustee: An individual (or entity) who holds the assets of a trust for the benefit of the named beneficiaries (in the trust) and manages the trust and its assets under the terms of the trust agreement.

Trustor: The creator/grantor of a trust agreement (who also generally places the initial assets into the trust thereby “funding” the trust).

Undivided Interest: Title to real property held by two or more individuals without specifying the interest of each party by percentage or description of a portion of the real property.

Ward: An individual (usually a minor or incompetent adult) who has a guardian appointed by the court to care for and take responsibility for that individual, whether personally and/or financially.

Will: A written document which leaves the estate of the person who signed the document to named persons or entities, including portions or all of the estate, upon the death of the person who signed the document.

Now that you have reviewed the glossary of legal terms and definitions we have provided above, please contact us with your particular inquiry and see if you qualify for a free initial consultation so that we may discuss your individual concerns and develop an estate plan that meets your needs.

Additionally, please take advantage of any of the other helpful resources we offer to clients as well as visitors to our website.  We hope you find these helpful resources informative. If you would like to learn more about the services we offer, please visit What We Do.

*Information furnished under each Free Resources webpage is designed to provide a general, educational overview regarding the subject matter covered and is not necessarily specific to your situation or state of residence.  Four Pillars Law Firm is not providing any accounting, legal or tax advice specific to your situation.

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