Glossary of Common Estate Planning Terms

Serving Clients on Cape Cod, Plymouth and Southeastern Massachusetts

Annual exclusion – Under the federal gift tax, a deduction, up to $15,000, from gross gifts for gifts by any donor to each donee in a given year.
Buy-Sell Agreement – An agreement between one or more owners of a business and one or more other persons that obligates a purchase of business interest upon a specific occurrence, such as death or permanent disability.
Estate Tax a/k/a Death Tax – A tax on property owned or transferred by the decedent at death. Massachusetts has its own estate [death] tax in addition to the Federal estate tax.
Disclaimer – An unqualified refusal to accept a gift. In estate planning, a valid disclaimer must meet the requirements of both local law and IRC Section 2518.
Donee – A person who is receiving or will receive a gift of a beneficial interest in property.
Donor – A person making a gift.
Durable Power of Attorney – A document appointing someone else to make financial decisions for an incapacitated person. Unlike a limited power of attorney, it does not become legally invalid at the onset of the principal’s incapacity.
Health Care Proxy – A document granting to the health care agent the power to make medical decisions on behalf of the principal.
Estate Planning – Planning for the conservation and efficient transfer of an individual’s wealth, often for tax advantages and avoidance of probate proceedings and special circumstances.
Fiduciary – A person in a position of trust and confidence; one who has a legal duty to act for the benefit of another. Examples include personal representative, trustee, attorney-in-fact and custodian.
Gift – A completed lifetime or deathtime transfer of property by an individual in exchange for any amount that is less than full consideration.
Gift Tax – A tax on a completed lifetime transfer of property for less than full consideration.
Guardian – A court-appointed fiduciary responsible for the person or property of a minor or, in some cases, an incompetent adult, or both.
Inter Vivos Trust – A trust taking effect during the life of the trustor. Also called a “living trust”.
Intestate – Dying without a Will.
Life Estate – An interest in property that ceases upon someone’s death.
Living Trust – A trust taking effect during the lifetime of a trustor. Also called an inter vivos trust.
Marital Deduction – In federal gift and estate taxation, the deduction for certain transfers to a spouse.
Per stirpes – A scheme of distribution from a will or trust requiring that certain issue of a decedent, as a group, inherit the share of an estate that their immediate ancestor would have inherited if he or she had been living.
Pour-Over Will – A will that distributes, at the testator’s death, probate assets to a trust that had been created during the testator’s lifetime.
Probate – The court administered process of transferring an estate of a decedent.
Settlor – The person who creates the trust and whose property usually winds up in it. Also called grantor or trustor.
Step-Up In Basis – Also known as an “Adjusted Cost Basis”. In income tax law, the upward adjustment in basis resulting from the acquisition of property from a decedent. Differs from carry-over basis.
Taxable Gift – In federal gift tax law, for a given year, total gross gifts reduced by total deductions and exclusions.
Trust – A legal arrangement between a Settlor and a Trustee that divides legal and beneficial interests in property. Frequently used to avoid probate court administration, pass assets immediately to beneficiaries, realize tax advantages, address estate/death taxation, manage money for minors and protect special needs individuals.

For more estate planning key terms and definitions, McManus Estate Planning LLC recommends the Estate Planning Glossary provided by EstatePlanning.com.