An Estate-Planning Glossary
A-B or Bypass Trust: A trust created for a married couple to help reduce estate taxes. Bypass trusts (also called marital life estate trusts) put some or all of a deceased spouse’s assets aside for future beneficiaries, typically children, while allowing the surviving spouse to live off the income until death.
Beneficiary: Someone who is legally entitled to receive gifts from a will or trust.
Custodian: Someone who manages money or property, typically for a minor child.
Estate: All the property a person owns, minus debts. In California, an estate includes a person’s share of community property.
Estate taxes: Also called death taxes, these are levied against estates worth more than certain exemption limits. The federal exemption limit for 1998 is $625,000; it is expected to grow to $1 million by 2006. California does not levy estate taxes; states that do include Massachusetts, Mississippi and Ohio.
Executor: The person named in a will to distribute assets, deal with creditors, handle probate and manage other details of settling an estate after death. Also called a personal representative.
Guardian: An adult appointed to care for a minor child.
Inheritance taxes: Same as estate taxes but paid by inheritor rather than estate. Levied by some states but not California.
Living trust: A trust designed to avoid probate. Unlike many other trusts, a living trust is set up while a person is alive and is typically controlled by the person until death.
Living will: A document that outlines what, if any, medical means should be used to prolong a person’s life.
Power of attorney: A legal document authorizing another person to make decisions in case of incapacity or absence.
Probate: The court process after a person’s death that oversees the identification of heirs, the payment of creditors and taxes and the distribution of property. In California, estates must pass through probate if the accumulated property is worth more than $100,000--unless probate-avoidance measures have been taken. Probate-avoidance measures include living trusts, pay-on-death accounts and joint-tenancy ownership of property.
Trust: A legal arrangement in which a person (the “grantor”) gives control of property to a person or institution (the “trustee”) for the benefit of third parties (the “beneficiaries”).
Trustee: Someone who manages a trust. A trustee is different from an executor, who is charged with settling an estate.
Will: A legal document in which a person directs how to distribute property after his or her death.
Source: “Plan Your Estate” by Denis Clifford and Cora Jordan ($24.95, Nolo Press)
