Important Terms

A Glossary of Terms Pertaining to Wills, Estates and Trusts

ADEMPTION - The extinction of a devise or bequest made in a will because the asset involved was not found in the estate.

ADJUSTED GROSS INCOME - A taxpayer's gross income minus certain statutorily prescribed adjustments to income.

ADMINISTRATION - The management of a decedent's estate.

ADMINISTRATION EXPENSES - Those necessarily incurred in the administration of the estate, or in the collection of assets, the payment of debts and the distribution of property. Examples include commissions, attorney's fees, costs of funeral and miscellaneous expenses.

ADMINISTRATOR - The person or bank appointed by the Court as personal representative to manage and distribute the personal property of one who dies without a will, who may also handle real property which must be sold in order to pay debts.

ADJUSTED GROSS ESTATE - A decedent's gross estate, as determined for Federal estate tax purposes, minus the total allowable debts, expenses and losses.

ADJUSTED TAXABLE GIFTS - The sum of total post-1976 lifetime gifts made by a decedent in excess of allowable annual exclusions, marital deductions and charitable deductions.

AFTER-BORN CHILDREN - Children born after execution of the will. They generally take an intestate share of the estate if not provided for or mentioned in the will.

ANNUAL EXCLUSION - The continuing right of a donor to make a tax free gift up to $17,000 to each of any number of donees in any year; applies only to gifts of present interest.

ANNUITY - A promise, obligation or arrangement to pay certain amounts at regular specified times. If a trust is involved, the payments may be made from principal if income is insufficient.

ATTESTING WITNESS - One who witnesses a will.

BARGAIN SALE - Sale of property to charity at less than its market value. Also called donative sale.

BENEFICIARY - One named in a will to receive a devise or a legacy or the use of estate assets.

BEQUEST - A direction in a will to pay over or distribute personal property. It is also called a legacy.

COMMON DISASTER - The death of two or more persons at the same time and from the same cause, as in the case of an auto accident.

COMMUNITY PROPERTY - A system prevailing in some states whereby whatever is acquired by the efforts of either spouse constitutes common property in which each have an equal interest.

CORPUS - The principal fund, or capital, upon which income is earned. It is also called principal.

DESCENT AND DISTRIBUTION - The distribution of property to heirs and next of kin as directed by state laws in the absence of a valid disposition by will.

DEVISE - A disposition of real property by will.

DOMICILE - The place where a person has his home, or principal residence, as distinguished from places where he may have living quarters.

DONOR ADVISED FUND (DAF) - An account owned by either a public charity or a private commercial organization, in which the donor has advisory privileges over the investment and charitable distributions of their donated assets within the fund.  The donor is entitled to a charitable tax deduction in the year the donation is made to the DAF.

ESTATE TAX CREDIT - Credit allowable against tentative tax due on estates of decedents sheltering $12,920,000 for 2023, indexed for inflation.

EXECUTOR - The trust company or individual appointed to carry out the terms of the will; also referred to as personal representative.

FEDERAL ESTATE TAX - A tax on the net value of property subject to tax (the taxable estate plus the sum of adjusted table gifts) at the death of a decedent. It is based essentially on the right to transfer or transmit.

FEDERAL GIFT TAX - A tax on the donor of inter vivos gifts (those made during life), based on the right to transfer or transmit, and payable primarily by the donor.

GIFT IN KIND - Gift of property other than cash; (e.g. livestock, crops.)

GIFT TAX CREDIT - Credit allowable against taxable gifts that exempts up to $12,060,000 for 2022.

GROSS ESTATE - Includes everything in which the decedent owned an interest at his death. It embraces such terms as life insurance, full or partial interests in joint property and some transfers made within three (3) years of death.

GUARDIAN - One named to manage the person or the property, or both, of a child during minority.

HEIRS AND NEXT OF KIN - Those entitled under the laws of descent and distribution to the estate of a person dying with a valid will.

INHERITANCE TAX - A state tax on the value of the share passing to the particular heir, devisee or legatee and based essentially on the right to receive.

INSURANCE TRUST - A trust consisting of life insurance policies or proceeds.

FUNDED INSURANCE TRUST- A trust to which other property is also transferred, with the income to be used for the payment of premiums.

UNFUNDED INSURANCE TRUST - A trust which contains no fund for payment of premiums.

IN TERROREM CLAUSE - A testamentary provision for forfeiture of a bequest or devise if the will is contested.

INTANGIBLE PROPERTY - That which cannot be touched, seen, heard, tasted or felt, such as the right to sue on a note or bond.

INTESTATE - Death without a valid will.

ISSUE - Children, grandchildren and others directly descending from a common ancestor. An adopted child is not issue, technically speaking.

LEGACY - A disposition in a will of personal property.

DEMONSTRATIVE - A legacy payable primarily of a specific fund, but chargeable against the general estate if the primary source or payment is inadequate.

GENERAL - A pecuniary legacy payable out of the general estate.

SPECIFIC - A legacy of a particular article or specified part of the estate.

LETTERS OF ADMINISTRATION - Documents issued as proof of authority of trust company or individual to act as administrator.

LETTERS TESTAMENTARY - Documents issued as proof of authority of trust company or individual to act as executor or personal representative.

LIFE ESTATE - An interest in property for life.

LIFE INCOME AGREEMENT - A gift of a principal sum or property or securities with a stipulated life income paid to the donor, through a gift annuity program or pooled income fund of the issuing institution.

LIFE INCOME TRUST - A plan whereby gift property is placed in trust for the lifetime benefit of an income beneficiary with remainder to another beneficiary.

MARITAL DEDUCTION, ESTATE TAX - A deduction for Federal estate tax purposes from the gross estate of property passing to a surviving spouse in a manner conforming to the law.

MARITAL DEDUCTION, GIFT TAX - Unlimited deduction allowed for the lifetime gift to the spouse.

PERPETUITIES, RULE AGAINST - A rule against the tying up of property, as by prohibiting its alienation (or in trust) for longer than a given time, usually lives in being plus 21 years. This rule generally does not apply to gifts in trust for the sole benefit of charities.

PERSONAL REPRESENTATIVE - The executor or administrator of an estate.

POWER OF APPOINTMENT - The right to direct the disposition of property one does not own, such as the right of a trust income beneficiary to designate the person to receive the trust principal upon his death.

GENERAL POWER - A power exercisable in favor of the holder of the power, of his estate or of his creditors or the creditors of his estate.

LIMITED OR NON-GENERAL POWER - A power not exercisable in favor of the holder of the power or his estate, or his creditors, or the creditors of his estate.

PRECATORY PROVISION - A desire or request, stated in the will, that something be done by a legatee with his legacy. Such a provision is not legally binding.

REMAINDER - What remains in a trust after life interests have ended.

REMAINDERMAN - The one entitled to receive the principal upon termination of the trust. A remainder is vested when payable to a designated beneficiary or class of beneficiaries whether or not living at the termination of the trust. It is contingent when dependent on some occurrence or event to take place in the future.

RESIDUARY CLAUSE - A testamentary provision disposing of property remaining in the estate after all other legacies and devises.

RESIDUARY ESTATE - What remains after all devises and bequests have been distributed or paid, and debts and expenses have been paid.

TAXABLE ESTATE - The gross estate less allowable deductions.

TENANCY - An interest in lands.

TENANCY BY ENTIRETIES - The owning of lands by either spouse, with the survivor taking all, and with interest generally non-separable during life of both.

TENANCY IN COMMON - The owning of lands by several persons, with the share of the one dying passing under his will or under the intestacy laws to his heirs, and not to the survivors.

TENTATIVE TAX (ESTATE) - The Federal estate tax tentatively due on the sum of a decedent's taxable estate and adjusted taxable gifts and calculated under the estate tax rate table. Such tax is before gift tax credit and credit for estate tax on prior transfers, and credit for foreign federal estate taxes.

TENTATIVE TAX (GIFT) - The Federal gift tax tentatively due on lifetime-gifts made by a donor in any calendar year, as calculated under the gift tax rate table. Such tax is before allowance of available unified credit.

TESTAMENTARY CAPACITY - The legal and mental ability to make a will.

TESTATE - Dying with a valid will.

TESTATOR - The person who makes a will.

TRANSFERS DURING LIFE - This general term refers to a variety of lifetime transfers of property or property interests which are ineffective for Federal estate tax purposes though valid in other respects. Examples include a transfer with income or possession retained, and certain transfers made within three years of death. In such cases the transferred property is included in the gross estate of the transferor.

TRUST - An arrangement whereby property is held by a trust company or individual for the benefit of others.

IRREVOCABLE - A trust which cannot be ended by the person creating it.

INTER VIVOS, OR LIVING TRUST - A trust set up and becoming effective during the lifetime of the person creating it.

REVOCABLE TRUST - A trust which may be ended by the person creating it.

SPENDTHRIFT TRUST - A trust protecting the beneficiary from creditors or his own improvidence.

TESTAMENTARY TRUST - A trust created by will.

TRUSTEE - The one holding trust property for the benefits of others.

WILL - An instrument disposing of property at death.