Estate Planning

Periodically our partners and estate planning professionals provide us with articles on current estate planning topics.

FAMILY WEALTH COUNSELING – Consider ALL the Aspects by Doyle E. Richardson "Creative estate planning practitioners have long been able to design financially eye-popping solutions for the efficient transfer of wealth. Yet, despite their ability to make the numbers “fly off the page,” financial solutions have proven to be no guarantee that a plan will be implemented or, if implemented, that the accumulated wealth will be retained by the next generation." Click on icon to download the entire article.
USING YOUR IRA TO “LEAVE A LEGACY®®” By Robin Hicks-Connors, CFRE "For many individuals, the IRA assets they accumulated under favorable market conditions have exceeded their expectations – and needs – and have become less necessary for their retirement. These funds could be used, at least in part, for charitable giving." Click on icon to download the entire article.

Additional Information

For additional information on planned giving and making charitable gifts through wills and estate plans, contact the following websites:
LEAVE A LEGACY® National Website
www.leavealegacy.org
National Council on Planned Giving
www.ncpg.org

Glossary of Terms

Administrator The person appointed by the court to manage one's estate when he or she dies without leaving a will. Administrators have the same duties as executors.

Annuity A sum of money payable yearly or at other regular intervals.

Annuitant An individual who receives or is qualified to receive an annuity.

Appreciated Assets Assets that have a higher market value than their basis or tax purpose value. Sale of such assets may generate a taxable capital gain (either long-term or short-term depending on the holding period).

Appreciated Property Property, such as real estate or stock, which has increased in value.

Attorney - or lawyer - The person licensed by the state to practice law and assist the executor, trustee, and guardian. It is conceivable that each could hire a separate attorney, but usually one attorney represents all three.

Basis The tax purpose value of the property or asset used in establishing the potential capital gains amount.

Beneficiary An individual designated to receive benefits or funds under a will or other contract, such as an insurance policy, trust or retirement plan.

Bequest To give or leave something by will, typically personal property or assets.

Bypass Trust Trust set up to avoid or bypass the surviving spouse's estate, which enables each spouse to use the federal estate tax exemption.

Charitable Gift Annuity Typically an agreement in which you transfer cash or other assets to a charitable organization in exchange for its promise to pay you an annuity for life or for a term of years.

Charitable Trust A trust having a charitable organization as a beneficiary.

Charitable Lead Trust During the term or life of the charitable lead trust, an annuity or unitrust income interest is distributed each year to the designated charitable beneficiary and the assets are eventually transferred to the trustor's or grantor's designated non-charitable beneficiary(ies).

Charitable Remainder Annuity Trust A trust which is set up to pay a return or fixed annual percentage of 5 percent (or more) of the net fair market value of the assets placed in the trust. The trust assets are valued initially, at the time the property is placed in the trust. The trust assets are never revalued.

Charitable Remainder Unitrust A trust which is set up to pay a return or fixed annual percentage of 5 percent (or more) of the net fair market value of the assets placed in the trust. The trust assets are revalued annually.

Codicil A legal instrument made to modify an earlier will.

Corporate Fiduciary An institution that acts for the benefit of another. One example is a bank acting as trustee.

Cost Basis The original value of an asset, such as stock, before its appreciation or depreciation.

Durable Power of Attorney A written legal document that lets an individual designate another person to act on his or her behalf, even in the event the individual becomes disabled or incapacitated.

Estate Tax A tax imposed at one's death on the transfer of most types of property.

Executor (or Personal Representative) The person named in a will to manage the estate. This person will collect the property, pay any debt and distribute your property or assets according to the will.

Fiduciary A person or institution legally responsible for the management, investment and distributions of funds. Examples include trustees, executors and administrators.

Gift Tax Tax on gifts generally paid by the person making the gift, rather than the recipient.

Gift-Tax Annual Exclusion The provision in the tax law that exempts the first $11,000 (2002 and 2003) in present-interest gifts a person gives to each recipient during a year from federal gift taxes. Therefore, you generally can give up to $11,000 each to any number of people in 2002 and 2003 and none of the gifts will be taxable.

Grantor The person who transfers assets into a trust for the benefit of another.

Gross Estate The total property or assets held by an individual as defined for federal estate tax purposes.

Guardian An individual legally appointed to manage the rights and/or property of a person incapable of taking care of his or her own affairs.

Inter vivos A type of trust created during one's lifetime to hold property for the benefit of another person.

Interest Any right or ownership in property.

Intestate The term applied when an individual dies without a will.

Joint Ownership The ownership of property by two or more people, usually with the right of survivorship.

Joint Tenancy A type of ownership where any two or more persons, related or not, may hold (own) property and the property passes to the survivor or survivors on the death of one. This passing is not automatic, as some think, and the procedure for passing will depend on local law. But, this form of ownership does have the advantage of allowing property to pass to the survivor without delays of probate and court administration costs.

Life Insurance Trust A trust that has the proceeds of an individual's life insurance policy as its principal.

Living Trust A revocable trust established by a grantor during his or her lifetime in which the grantor transfers some or all of his or her property into the trust.

Living Will A legal document directing that the maker's or signer's life is not to be artificially supported in the event of a terminal illness or accident.

Marital Deduction A deduction allowing for the unlimited transfer of any or all property from one spouse to the other generally free of estate and gift tax.

Pooled Income Fund - also a Charitable Remainder Pooled Income Fund - is an investment fund much like a mutual fund. It is made up of transfers by many persons to the fund who receive life income interest in exchange for their transfers, based on the value of the transfer into the fund and based on the income earned by the fund.

Power of Attorney A written legal document that gives an individual the authority to act for another.

Powers of Appointment A right given to another in a written instrument, such as a will or trust that allows the other to decide how to distribute the property. The power of appointment is "general" if it places no restrictions on whom the distributees may be. A power is "limited" or "special" if it limits the eventual distributee.

Probate The court process for determining the validity of a deceased person's will.

Qualified Terminal Interest Property Trust (QTIP) A trust often set up to avoid transfer tax on the first spouse's death. The deceased spouse establishes the ultimate disposition of the property, rather than the surviving spouse including the property in their estate. During their lifetime, the surviving spouse receives all income from the principal and, in some cases, has access to the principal.

Retained Life Estate A gift plan defined by federal tax law allowing the donation of a personal residence (to include a vacation home) or farm with the donor retaining the right to life enjoyment. A life estate may be retained for one or more lives or it may be retained for a term of years. All routine expenses - maintenance fees, property taxes, repairs, etc. - are the responsibility of the donor. The donor receives income tax benefits in the year of the gift (the property is irrevocably deeded to the charity) and estate tax benefits.

Tenants in Common A property ownership arrangement in which two or more persons own property jointly. It is not necessary that the ownership consist of equal shares or percentages of the property. Generally there is no right of survivorship when a co-owner dies. The share of the property belonging to the deceased co-owner passes to his or her heirs and the shares of the remaining original co-owners do not change.

Testamentary Trust A trust that is created upon death by the terms of a person's will.

Testator An individual who dies leaving a will or testament in force.

Trust A written legal instrument created by a grantor during his or her lifetime or at death for the benefit of another.

Trustee The individual or institution entrusted with the duty of managing property placed in the trust. A "co-trustee" serves as trustee with another. A "contingent trustee" becomes trustee upon the occurrence of a specified future event.

Trustor The individual who establishes the trust. Also referred to as the Grantor and/or Settlor.

Unified Credit A federal tax credit that offsets gift-tax and estate-tax liability. The unified credit is being increased gradually

Decedent dying in:

Exclusion amount:

2003	$1,000,000
2004 and 2005	$1,500,000
2006, 2007 and 2008	$2,000,000
2009	$3,500,000

A unified credit of $202,050 is available to offset both estate and gift taxes. Any part of the credit used to offset gift taxes is not available to offset estate taxes. As a result, although they are still taxable as gifts, lifetime taxable transfers no longer cushion the impact of progressive estate tax rates. Lifetime transfers and transfers made at death are combined for estate tax rate purposes.

Will A legally executed document that directs how and to whom a person's property is to be distributed after death.