Glossary

Bypass Trust – An arrangement in which a deceased spouse leaves a portion of his/her assets to a trust naming the surviving spouse as lifetime beneficiary, usually with the remainder going to children at the surviving spouse’s death.

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Charitable Lead Trust – Named charities receive payments from this trust for a period of time, after which the principal of the trust passes to named individuals.

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Charitable Remainder Trust – Named individuals receive payments from this trust for a period of time, such as their lifetimes, after which the principal of the trust passes to named charities.

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Credit Shelter Trust – Similar to a bypass trust, this trust holds assets intended to be “sheltered” from estate taxes by distributing the assets in trust rather than outright to a surviving spouse.

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Estate – a term that can have different meanings depending on the context.  For example, some financial advisors use “estate” to refer to the sum total of an individual’s assets.  In the context of estate taxes, terms such as “Gross Estate” and “Taxable Estate” refer specifically to those assets of a decedent that are subject to estate tax calculations and estate taxation, respectively.  When referring to the probate process, “probate estate” refers to assets subject to probate proceedings in a county court.  Each of the above contexts implies certain rules for determining included assets.

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Intestate – A situation in which a decedent dies with assets passing through probate, but leaves no valid will to direct disposition of those assets.

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Irrevocable Life Insurance Trust (ILIT) – An irrevocable trust created to hold life insurance policies on the life of the grantor, usually created to remove those policies from the grantor’s estate for estate tax calculation purposes.

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Pour-over Trust – A trust established to receive assets after an individual’s death, either from the decedent’s probate estate, from another trust or from assets that name the pour-over trust as a beneficiary (such as life insurance).

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Pour-over Will – A will usually established in conjunction with a revocable living trustthat transfers (“pours over”) any assets passing through one’s probate estate into their revocable living trust after death.

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Probate – A process for handling a decedent’s financial and legal affairs that is administered through the court system of the county in which the decedent resided.  Property passing through probate is distributed according to the terms of decedent’s will.

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QTIP Trust – A trust in which Qualified Terminable Interest Property is transferred for the benefit of a spouse in order to qualify for the estate or gift tax marital deduction.

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Qualified Terminable Interest Property – Property transferred from one spouse for the benefit of the other spouse that qualifies for the gift or estate tax marital deduction and that is subject to certain restrictions.

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Revocable Living Trust – A trust established and often funded during the lifetime of the person setting up the trust (grantor/settlor), that can be revoked or changed during the grantor/settlor’s lifetime.  While revocable living trusts are often established in an effort to avoid probate, they have many potential uses.

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Spendthrift Trust – A trust created for the benefit of a spendthrift who receives income from the trust but cannot obligate the trust or pledge trust assets to creditors to satisfy his/her debts.

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Testamentary Trust – A trust established under the terms of a decedent’s last will and testament, also known as a trust under will.

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Trust – A legal arrangement in which an individual or entity establishing or setting up the trust (settlor/grantor) transfers property to a trustee to manage for the benefit of one or more beneficiaries.

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Will – Also known as a last will and testament, a valid will governs, among other things, distribution of a decedent’s assets passing through the probate process (probate estate).

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