Glossary of Terms Page 3

Deceased One who has died.
Deed A document that lets you transfer title of your real estate to another person(s). Also see warranty deed and quitclaim deed.
Disclaim To refuse to accept a gift or inheritance so it can go to the recipient who is next in line.
Discretion The full or partial power to make a decision or judgment.
Disinherit To prevent someone from inheriting from you.
Distribution Payment in cash or asset(s) to one who is entitled to receive it.
Durable Power of Attorney for Asset Management A legal document that gives another person full or limited legal authority to sign your name on your behalf in your absence. Valid through incapacity. Ends at death.
Durable Power of Attorney for Health Care A legal document that lets you give someone else the authority to make health care decisions for you in the event you are unable to make them for yourself. Also called a health care proxy or medical power of attorney.
Equity The current market value of an asset less any loan or liability.
Estate Assets and debts left by an individual at death.
Estate Taxes Federal or state taxes on the value of assets left at death. Also called inheritance taxes or death taxes.
Executor Person or institution named in a will to carry out its instructions. Female is executrix. Also called a personal representative.
Federal Estate Tax Exemption Amount of an individual’s estate that is exempt from federal estate taxes. As of 2014, the exemption was set at $10,000,000 (adjusted annually for inflation). The exemption amount is $11,400,000 for 2019.
Fiduciary Person having the legal duty to act primarily for another’s benefit. Implies great confidence and trust, and a high degree of good faith. Usually associated with a trustee.
Funding The process of transferring assets to your living trust.
Gain The difference between what you receive for an asset when it is sold and what you paid for it. Used to determine the amount of capital gains tax due.
Generation Skipping Transfer Tax (GSTT) A steep tax on assets that “skip” a generation and are left directly to grandchildren and younger generations. Under current law, the GST exemption is the same as the federal estate tax exemption (double for a married couple) with a tax rate of 35%.
Gift A transfer from one individual to another without fair compensation.
Gift Tax A federal tax on gifts made while you are living. Currently $15,000 per person per year is exempt from gift tax. Also see “Annual Exclusion.”
Grantor The person who sets up or creates the trust. The person whose trust it is. Also called creator, settlor, trustor, donor or trustmaker.
Gross Estate The value of an estate before debts are paid.
Guardianship See “Conservatorship.”

Glossary of Terms Page 2

C Trust See “QTIP.”
Certificate of Trust A shortened version of a trust that verifies the trust’s existence, explains the powers given to the trustee, and identifies the successor trustee(s). Does not reveal any information about the trust assets, beneficiaries, or their inheritances.
Children’s Trust A trust included in your living trust. If, when you die, a beneficiary is not of legal age, the child’s inheritance will go into this trust. The inheritance will be managed by the trustee you have named until the child reaches the age at which you want him/her to inherit.
Codicil A written change or amendment to a Will.
Co-Grantors Two or more persons who establish one living trust together.
Co-Trustees Two or more individuals who have been named to act together in managing a trust’s assets. A corporate trustee can also be a co-trustee.
Common Trust One living trust established by two or more individuals (usually a married couple).
Community Property Assets a husband and wife acquire by joint effort during marriage if they live in one of the eight community property states. (Wisconsin also has a similar law, but does not use the term “community property.”) Each spouse owns half of the assets in the event of divorce or death.
Conservator One who is legally responsible for the care and well-being of another person. If appointed by a court, the conservator is under the court’s supervision. May also be called a guardian. (Duties and titles can vary by state. For example, in Missouri, there is a guardian of the person and a conservator of the estate.)
Conservatorship A court-controlled program for persons who are unable to manage their own affairs due to mental or physical incapacity. May also be called a guardianship.
Contest To dispute or challenge the terms of a will or trust.
Corporate Trustee An institution, generally a bank or trust company, that specializes in managing trusts.
Credit Shelter Trust Another name for the B Trust in an A-B living trust because this trust “shelters” or preserves the federal estate tax “credit” of the deceased spouse.
Creditor Person or institution to whom money is owed.
Custodian Person named to manage assets left to a minor under the Uniform Transfer to Minors Act. In most states, the minor receives the assets at legal age.

Glossary of Terms Page 1

A Trust The surviving spouse’s portion of an A-B trust. Also called marital trust or survivor’s trust.
A-B Trust A trust that includes a tax-planning provision that lets you provide for your surviving spouse and keep control over who will receive your assets after your spouse dies. It also lets both spouses use their federal estate tax exemptions. This can save a substantial amount in estate taxes and leave more money for your beneficiaries.
Administration The court-supervised distribution of an estate during probate. Also used to describe the same process for a trust after the grantor dies.
Administrator Person named by the court to represent a probate estate when there is no will or the will did not name an executor. Female is administratrix. Also called personal representative.
Alternate Beneficiary Person or organization named to receive your assets if the primary beneficiaries named in your Trust die before you do.
Ancillary Administration An additional probate in another state. Typically required when you own real estate in another state that is not titled in the name of your trust.
Annual Exclusion Amount you can give someone each year without having to file a gift tax return or pay a gift tax. Currently $15,000 per recipient ($30,000 if married). The amount of tax-free gifts is tied to inflation and may increase from time to time.
Assets Basically, anything you own, including your home and other real estate, bank accounts, life insurance, investments, furniture, jewelry, art, clothing, and collectibles.
Assignment A short document that transfers your interest in assets from your name to another. Often used when transferring assets to a trust.
B Trust The deceased spouse’s portion of an A-B trust. Also called credit shelter or bypass trust.
Basis What you paid for an asset. The value that is used to determine gain or loss for income tax purposes.
Beneficiaries In a living trust, the persons and/or organizations who receive the trust assets (or benefit from the trust assets) after the death of the trust grantor.
By-Pass Trust Another name for the “B” part of an A-B living trust because the assets in this trust bypass federal estate taxes.

17. What Does The Trustee Do At Death?

• Contacts attorney to review trust and process
• Keeps beneficiaries informed
• Puts together team of advisors
• Inventories assets, determines current values
• Makes partial distributions if needed
• Collects benefits, keeps records, files tax returns
• Pays bills, does final accounting
• Distributes assets to beneficiaries as trust directs


15. What if the responsibilities are too much for me?

Consider hiring an attorney, bookkeeper, accountant or corporate trustee to help you. (A corporate trustee can manage the investments and do the recordkeeping.) If you feel you cannot handle any of the responsibilities due to work, family demands or any other reason, you can resign and let the next successor trustee step in. If no other successor trustee has been named, or none is willing or able to serve, a corporate trustee can usually be named.


13. What do I do when the grantor dies? (Part 2)

Notify the bank, brokerage firm and others of the grantor’s death and that you are now trustee. They will probably want to see a certified death certificate (order at least 12), a certificate of trust and your personal identification.

To finalize the list of assets, you will need exact values as of the date of the grantor’s death. Some assets will need to be appraised. An estate sale may need to be held to dispose of household goods and personal effects.

Keep careful records of final medical and funeral expenses, and file medical claims promptly. Keep a ledger of bills and income received. Contact an accountant and attorney to prepare final income and estate tax returns, if required. Verify and pay all bills and taxes. Make a final accounting of assets and bills paid, and give it to the beneficiaries.

If the assets are to be fully distributed, you will divide the cash and transfer titles according to the instructions in the trust. That’s it…you’re finished and the trust is dissolved.

If the assets are to stay in a trust (for minors, for a surviving spouse, for tax purposes or if the beneficiaries will receive their inheritances in installments), each trust will need a new tax identification number, and proper bookkeeping and reporting procedures will need to be established.


12. What do I do when the grantor dies? (Part 1)

You will have essentially the same duties as an executor named in a will would have. But if all titles and beneficiary designations have been changed to the grantor’s trust, the probate court will not be involved. That means you will be able to act on your schedule instead of the court’s.

The trustee is responsible for seeing that everything is done properly and in a timely manner. You may be able to do much of this yourself, but an attorney, corporate trustee and/or accountant can give you valuable guidance and assistance. Here’s an overview of what needs to be done.

Inform the family of your position and offer to assist with the funeral. Read the trust document and look for specific instructions. Notify a co-trustee as soon as possible.

Make an appointment with an attorney to go over the trust document, trust assets and your responsibilities as soon as possible. Do not sell or distribute any assets before you meet with the attorney.

Before the meeting, make a preliminary list of the assets and their estimated values. You’ll need exact values later, but this will help the attorney know if an estate tax return will need to be filed (due no later than nine months after the grantor’s death). If there is a surviving spouse or if the trust has a tax planning provision, the attorney may need to do some tax planning right away. The trust may also need its own tax identification number.

Collect all death benefits (social security, life insurance, retirement plans, associations) and put them in an interest bearing account until assets are distributed. If the surviving spouse or other beneficiary needs money to live on, you can probably make some partial distributions. But do not make any distributions until after you have determined there is enough money to pay all expenses, including taxes.