Topics & Glossary

The process during which the executor or personal representative collects the decedent’s assets, pays all debts and claims, and distributes the residue of the estate according to the will or the state law intestacy rules (when there is no will).

The individual or corporate fiduciary appointed by the court to manage an estate if no executor or personal representative has been appointed or if the named executor or personal representative is unable or unwilling to serve.

See Advance Directives

A person who is given authority, in a document called a power of attorney, to act on behalf of another as a fiduciary. Related concepts are Durable Power of Attorney, Durable Financial Power of Attorney, and Durable Healthcare Power of Attorney.

A person or organization named to receive a testator’s assets if the primary beneficiary named in the testator’s will or trust passes away before the testator. If an alternate beneficiary is not selected and the primary beneficiary passes away before the testator, the default rules of each state will establish who receives the assets.

The amount an individual may give annually to each of an unlimited number of recipients free of federal gift or other transfer taxes and without any IRS reporting requirements. In addition, these gifts do not use any of an individual’s federal gift tax exemption amount. The annual exclusion is indexed for inflation and is $14,000 per donee for 2013. Payments made directly to providers of education or medical care services also are tax-free and do not count against the annual exclusion or gift tax exemption amounts.

Another name for the estate tax exemption amount (formerly called the unified credit), which shelters a certain value of assets from the federal estate and gift tax. This amount is $5 million and is inflation adjusted annually.

To value property or assets by the estimate of an authorized person.

A standard, usually relating to an individual’s health, education, support, or maintenance, that defines the permissible reasons for making a distribution from a trust. Use of an ascertainable standard prevents distributions from being included in a trustee/beneficiary’s gross estate for federal estate tax purposes. Depending on state law, the use of an ascertainable standard may provide less protection for a beneficiary from creditors. If the risk of a lawsuit or divorce concerns you, you should discuss distribution standards with your attorney.

The person named as agent under a power of attorney to handle the financial affairs of another.

The adjustment of the tax basis of inherited property to its fair market value at the time of the owner’s death.

A person who will receive the benefit of property from an estate or trust through the right to receive a bequest or to receive income or trust principal over a period of time.

For assets with designated beneficiaries, such as life insurance policies, retirement accounts, and payable-on-death (POD) bank accounts, the beneficiaries will need to file claims and provide necessary documentation to receive their inheritances.

A family structure resulting from remarriage, where one or both spouses have children from previous relationships.

See A-B Trust

The estate’s executor or administrator will file a final accounting with the court, and, once approved, the estate will be closed, and any remaining funds will be distributed to beneficiaries.

Creditors may file claims against the estate to seek repayment of outstanding debts. The estate’s executor or administrator is responsible for reviewing and approving or denying these claims.

A custody order is a legal document issued by a court that outlines the arrangements for the custody and care of a child or children in the context of divorce, separation, or other legal proceedings involving parents or guardians. The order typically specifies which parent or guardian will have physical custody (the child’s primary residence) and legal custody (the right to make decisions about the child’s upbringing, education, healthcare, etc.).

Custody orders aim to ensure the well-being and best interests of the child. They may include details about visitation schedules, holidays, and special arrangements. The terms of a custody order can be agreed upon by the parties involved or determined by a judge if the parents cannot reach a mutual agreement. These orders are legally binding, and violations can lead to legal consequences.

Legal document transferring ownership of property from one person to another, often used for gifting.

A legal refusal to accept an inheritance, allowing the disclaimed assets to pass to the next designated beneficiary.

Once all debts, taxes, and administrative expenses have been settled, the remaining estate assets are distributed to the beneficiaries as per the will or state law.

Statutory share of a deceased spouse’s estate that a surviving spouse may claim.

A strategy to lock in the current value of an estate for tax purposes, often used to minimize capital gains tax.

A detailed list of the deceased’s assets and liabilities.

The ability of an estate to cover its debts and expenses with liquid assets.

The process of arranging for the orderly transfer of one’s assets upon death to minimize taxes and ensure the desired distribution of assets.

The ability of a surviving spouse to use their deceased spouse’s unused estate tax exemption.

Depending on the size of the estate and applicable tax laws, an estate tax return may be required at the federal and/or state level. An accountant or tax professional can assist with this process.

Property that is not considered part of the estate if the decedent leaves a surviving spouse and/ or children. The property is passed directly to the surviving spouse and/or children and are not subject to the probate process and therefore are shielded from property taxes and creditors. The specific property that qualifies varies greatly state-by-state.

A person you appoint who is responsible for carrying out the legal and financial wishes stated in your will, including the payment of debts, sale of assets, and distributions to beneficiaries. This person plays the same role as an administrator if you pass away without a valid will.

A person or institution who is legally responsible to act in the best interest of the person for whom they are or it is serving.

The deceased person’s final income tax return, covering the period up to their death, must be filed. If the estate generates income, an estate income tax return may also be necessary.

See Durable Power of Attorney for Finances

Legal authority granted to a person to make decisions on behalf of an incapacitated individual.

Techniques used to transfer assets to heirs during the donor’s lifetime, often with tax benefits.

A person who creates a trust.

A person who inherits property through the laws of intestacy or under a will.

Unable to make decisions or manage one’s affairs due to physical or mental impairment.

A type of probate available in many states that is intended to simplify the probate process by requiring fewer court appearances and less court supervision.

A type of irrevocable trust created to own life insurance on a person or couple and designed to exclude the proceeds of the policy from the insured’s gross estate when they pass away.

A trust designed to own a life insurance policy, excluding the death benefit from the insured’s taxable estate.

A trust that cannot be modified or revoked once it is established, providing potential tax benefits.

A form of property ownership where each owner has an equal share, and the surviving owner inherits the deceased owner’s share.

A tax-deferred pension plan available to self-employed individuals or unincorporated businesses for retirement purposes.

Letters of testamentary, sometimes called a “Letter of Administration” or “Letter of Representation”, are court-issued documents that grant you the legal authority to act as executor of a will. A letter of testamentary gives you the official go-ahead to settle your loved one’s affairs and distribute their property according to their wishes, including accessing and managing their assets. Obtaining a Letter of Testamentary can take several weeks, assuming the will is not being challenged. If probate is contested then the process may take much longer.

A legal arrangement that gives an individual the right to use a property for the duration of their life.

A type of trust created by a living grantor, transferring the assets to a trustee who holds and distributes property and/or income for a beneficiary or beneficiaries, in accordance to the grantor’s instructions.

The act of making an inventory of all of the assets.

A neutral third party who helps resolve disputes between heirs or beneficiaries.

The value of an estate after all debts have been paid. For example, federal estate taxes are based on the net estate. A related concept is Gross Estate.

A clause in a will or trust that a beneficiary who challenges the terms of a will forfeits any bequests they have in the existing document. Therefore, a no-contest clause is generally used to discourage will contests. These clauses are not enforced in all instances or states. For the states that do enforce no-contest clauses, the majority will enforce no-contest clauses unless there was good cause to initiate the challenge. An example of a “good cause” in this context is that a beneficiary finds a newer, but unexecuted version of the will. Other states will enforce no-contest clauses without regard to good cause to initiating the challenge. Currently, no-contest clauses are unenforceable in Florida.

A document that lists specific bequests of personal property separate from the will.

An agreement between spouses made after marriage to dictate the distribution of assets in the event

A court-supervised process that determines whether a will is valid and supervises the executor in carrying out the testator’s legal and financial wishes. Usually this includes a court hearing to establish the testator’s passing and residency, the genuineness of the will, its conformance with statutory requirements for its execution, and the competency of the testator at the time the will was made. During probate, the court will also decide on whether any valid challenges to the will exist.

When the deceased had a will or died without a will, the estate may need to go through the probate process. Probate court involves various legal documents, including petitions for appointment of an executor or administrator, inventories of assets, and an accounting of estate assets and liabilities.

A subset of a person’s estate that goes through probate when the testator passes away. Usually the probate estate does not include assets under joint ownership, payable on death accounts, retirement plans such as 401Ks & IRAs, insurance policies with specified beneficiaries, and any assets in a trust.

Fees that are paid when an estate goes through probate. Usually these include legal, executor, and appraisal fees as well as court costs. The fees are typically paid from the assets in the probate estate before the assets are fully distributed to the heirs.

A trust that allows non-citizen spouses to qualify for the marital deduction in estate tax.

A trust allowing an individual to transfer a residence to an irrevocable trust while retaining the right to live in it for a specified period.

A trust that allows a surviving spouse to receive income from the trust while preserving the principal for other beneficiaries.

The portion of the estate remaining after specific bequests and debts are settled.

The legal act of refusing an inheritance.

A type of trust that can be changed or terminated during the grantor’s lifetime. This is in contrast to an irrevocable trust.

The process of handling the final affairs after a person passes away. This usually includes the valuation (or appraisal) of assets, payment of debts and taxes, and distribution of assets to beneficiaries.

The readjustment of the value of appreciated assets for tax purposes upon inheritance.

A spouse who outlives their partner (usually by at least a set period of 120 hours).

The value assigned to an asset for tax purposes.

A type of trust that is created when the person passes away, usually by the terms of a will. Unlike living trusts, testamentary trusts must go through probate before the trust is created, since, for example, the genuineness and validity of the will, and appointment of an executor still need to be established before the creation of the trust. Although a testamentary trust does not avoid probate, it may serve some of the common desired functionalities of a trust, for example, establishing a trust to leave assets to minor children.

The person who creates a will.

Real estate and vehicle titles may need to be transferred to heirs or beneficiaries. This process may involve legal deeds or affidavits of heirship, depending on local laws.

A bank account held in trust for a beneficiary, payable upon the depositor’s death.

If the deceased person had set up one or more trusts, the trust documents will govern the distribution of trust assets. A successor trustee may need to step in to manage the trust’s affairs.

A person or institution who is responsible for managing any property or assets a grantor transfers into and titles in the name of the trust. The trustee has duties to be loyal, be prudent, be impartial, and to inform the beneficiaries of the trust. The trustee can be the grantor and/ or a beneficiary of a trust in addition to the trustee role.

A trust designed to maximize the use of both spouses’ estate tax exemptions.

A law determining the order of deaths when it cannot be established who died first.

See Last Will & Testament.