Glossary

Estate Planning Glossary

A-B Trust

A kind of living trust that, upon the death of the first spouse, divides into two distinct trusts: the Marital/Survivor’s Trust and the Credit Shelter/Bypass Trust.

Credit Shelter Trust (aka Bypass Trust)

An estate planning tool whereby part of a deceased spouse’s estate passes to a trust rather than to the surviving spouse, thereby reducing the likelihood that the surviving spouse’s subsequent estate will exceed the estate tax threshold.

Estate Planning

The process of arranging a person’s property and estate, taking into account the laws of wills, taxes, insurance, property and trusts so as to gain the maximum benefit of all laws while carrying out the person’s own wishes for the disposition of his property upon his death.

Estate Tax

A tax imposed on the right to transfer property at death. The Estate Tax is levied on the decedent’s estate, and not on the heir receiving the property.

Gross Estate

All property owned by a decedent that will be subject to the Federal estate tax. It includes all assets over which the decedent exercises Dominion and Control.

Intestacy

The state or condition of dying without having made a valid will, or without having disposed by will of a part of his property. The intestacy process is much similar to probate, except that the State of California shall determine (by statute) where your assets will go, and who shall be guardian of your minor children.

Marital Trust (aka Survivor’s Trust)

The trust over which the surviving spouse exercises complete control and ownership. Assets placed into the marital trust will be taxed upon the surviving spouse’s death should they exceed the estate tax threshold.

Power of Attorney

A legal instrument whereby you, as principal, can appoint another person as your agent and confer authority on the agent to perform certain specified acts on your behalf. Common powers of attorney include those for finance, and for health care. “Springing” powers of attorney only become valid upon the occurrence of a given event, such as your incapacity or inability to make decisions for yourself.

Probate

A court procedure by which a will is proved to be valid or invalid; also refers to the legal process wherein the estate of a decedent is administered. This process involves: collecting a decedent’s assets, liquidating liabilities, paying necessary taxes, and distributing process to heirs. These activities are carried out by the executor or administrator of the estate, under the supervision of the probate court.

Trust

A legal entity which is created by a Grantor for the benefit of other(s) (called – beneficiaries). Assets placed into a valid trust shall not pass through probate, but through the trust administration process (see Trust Administration).

Trust Administration

The process of administering the estate of a decedent who dies with a valid living trust in place. In the typical A-B Trust, this process involves determining which assets shall belong to the surviving spouse, and which assets shall go into the credit shelter trust.

Unified Credit Amount

The amount of your gross estate that is not subject to the current Federal estate tax.

Will

A legal instrument by which a person, called the “Testator”, determines what shall happen to their property after their death. In addition, a will may determine who shall be the legal guardian(s) of the decedent’s minor children. When a person dies with a will, their estate goes through the probate process (see Probate).

See also, Black's Law Dictionary, Sixth Edition.