Trust and Will Terms Defined

Applicable exclusion amount – Another name for the unified credit that shelters a certain amount from the federal estate and gift tax.

By-pass trust – The “B Trust” in A-B trust planning that is sheltered from the federal estate tax by the unified credit exclusion amount and thereby “bypassing” the estate tax at the deaths of both spouses.

Charitable lead trust – A trust created during lifetime or at death that distributes an annuity or unitrust amount to charity for life or a term of years, with the trust assets passing to designated beneficiaries upon termination of the trust.

Charitable remainder trust – A tax-exempt trust created during lifetime or at death that distributes an annuity or unitrust amount to one or more designated beneficiaries for life or a term of years, with the trust assets passing to charity upon termination of the trust.

Crummey trust – An irrevocable trust that grants a beneficiary the power to withdraw all or a portion of assets that are contributed to the trust. The typical purpose of a Crummey trust is to enable the contributions to the trust to qualify for the annual exclusion.

GST exemption – The federal tax exclusion that allows a certain level of generation-skipping transfers to be made without incurring a generation-skipping tax. The exemption amount is $5 million for 2011 and 2012.

Per stirpes – A Latin phrase meaning “per branch” and is a method for distributing property according to the family tree whereby descendants take the share their deceased ancestor would have taken if the ancestor were living. Each branch of the named person’s family is to receive an equal share of the estate. If all children are living, each child would receive a share, but if a child is not living, that child’s share would be divided equally among the child’s children.

Transfer on death designation – A beneficiary designation on a financial account (and in some states, on real estate) that automatically passes title to the assets at death to a named person or revocable trust without probate delays and expenses. Frequently referred to as TOD or POD (payable on death) designations.

Unified credit – A credit against the federal gift and estate tax otherwise payable by an individual or estate. Frequently referred to as the estate tax exemption amount, the exemption equivalent, or applicable exclusion amount. The exemption amount is $5 million for 2011 and 2012.

By | 2018-08-19T19:08:40+00:00 July 22nd, 2018|Categories: Estate Plans|

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