Estate and Trust Definitions

personal property (all property that is not real estate) which is divided into two types: tangible (any property you can touch such as furniture or jewelry) or intangible (property such as stocks, bonds, bank accounts, money other people owe you, insurance in which you have any incidents of ownership, medical insurance refunds due to you but not yet received)

income earned but not yet paid (you get paid for the week every Friday, a dividend is between the ex-dividend date and the payable date, or a bond/bank account that accrues interest daily),

certain transfers made during your life without an adequate and full consideration in money or money’s worth (for example, if you transfer assets to a trust over which you retain certain types of control)

property over which you have a general power of appointment (you can specify who gets the property at your death),

A tax is imposed on the transfer of the taxable estate of every decedent who is a citizen or resident of the United States.

**Tax Rate Schedule**
Taxable Amount Over	Taxable Amount Not Over	Tax on Amount in 1st Column	Rate of Tax on Excess Over Col 1
0	10,000	0	18
10,000	20,000	1,800	20
20,000	40,000	3,800	22
40,000	60,000	8,200	24
60,000	80,000	13,000	26
80,000	100,000	18,200	28
100,000	150,000	23,800	30
150,000	250,000	38,800	32
250,000	500,000	70,800	34
500,000	750,000	155,800	37
750,000	1,000,000	248,300	39
1,000,000	1,250,000	345,800	41
1,250,000	1,500,000	448,300	43
1,500,000	2,000,000	555,800	45
2,000,000	2,500,000	780,800	49
2,500,000	3,000,000	1,025,800	53
3,000,000	and up	1,290,800	55

A credit against Federal Estate Tax which in effect allows you to pass a certain amount of property free of the Federal Estate Tax. The table below shows how much property you can pass tax free if you die during the specified year:

In the case of estates of decedents dying, and gifts made, during:	The applicable exclusion amount is:
1998	$625,000
1999	$650,000
2000 and 2001	$675,000
2002 and 2003	$1,000,000
2004 and 2005	$1,500,000
2006, 2007 and 2008	$2,000,000
2009	$3,500,000
2010	None
2011 and Thereafter (unless the law changes)	$1,000,000

A federal transfer tax imposed on property transfers which skip a generation. It is equal to the maximum estate tax payable if the property had been included in the skipped generation's estate.

For example, Grandma leaves $2,000,000 to granddaughter. Generation skipping tax would impose a 55% (or current maximum estate rate) on the $2,000,000 as if it had been left to daughter first, incurred an estate tax of 55% and then left to granddaughter.

Tax return to calculate the Federal Estate Tax due as imposed by Chapter 11 of the Internal Revenue Code. You must file Form 706 for any gross estate plus adjusted taxable gifts and specific exemption over the applicable credit amount for that year.

For example, if your gross estate is over $675,000 and you die in 2000, your Executor/trix will be required to file Form 706 regardless of if tax is due or not.

A document you write during your life to direct the distribution of your property after your death.

If you die intestate, every state has written a “will” for you which specifies who gets your property. These laws are called intestacy laws and their purpose is to ensure the smooth transfer of property. Unfortunately, because the laws are necessarily very broad, they may neither distribute your property as you would wish nor allow for any tax savings (especially Federal Estate tax).

The process whereby the Probate Court supervises the administration of an Estate to ensure the orderly and correct transfer of property and to protect the rights of creditors.

Some assets do not pass to heirs through probate but through a process called "operation of the law".

For example, life insurance, annuity and IRA proceeds are paid to the beneficiary the owner designated prior to death. A surviving owner of real estate or bank accounts owned with the decedent as joint-tenants-with-right-of-survival automatically becomes the sole owner of the property at the first owner's death.

A person cannot affect the disposition of these assets through her will at death (unless all named beneficiaries for life insurance, an annuity or an IRA predecease) and can only direct their ultimate disposition via the beneficiary designation or form of ownership.

Titles of a person charged by the Probate Court with the responsibility of settling an estate.

Under Treasury Regulations SECTION 301.7701-4(a), a trust is defined as “...In general, the term "trust" as used in the Internal Revenue Code refers to an arrangement created either by a will or by an inter vivos declaration whereby trustees take title to property for the purpose of protecting or conserving it for the beneficiaries under the ordinary rules applied in chancery or probate courts.”

For example, if you set up an inter vivos (or living) trust and put all your assets in the Trust, the Trustee would hold title to and manage the assets in accordance with the directions you give in your Trust for whomever you decide should be the beneficiary(ies) which can include yourself.

A case and statuatory law that a trustee may invest trust funds in any way that a "prudent man" would invest the money of another person.

A trust accounting concept that splits the interest in a trust between beneficiaries who may receive the income earned by the trust and the beneficiaries who ultimately receive the underlying assets (principal) which produce the income.

The beneficiaries who receive the principal (the assets of the trust) after a specified period or event such as the death of the income beneficiary.

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