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