Below are some basic estate and tax planning and trust and estate administration terms and concepts:
Will: A written document that permits an individual to direct the distribution and administration of his or her assets after death. A Will can also allow an individual to name the person who would care for his or her minor children under certain situations and allow an individual to determine who is going to be in charge of the administration of his or her estate.
Codicil: An amendment to a will.
Decedent: A person who has died.
Estate: A decedent’s property.
Beneficiary: A person named in a will, trust, or beneficiary designation for a life insurance policy or retirement account to receive property.
Testator: An individual who makes a will.
Executor: An individual or entity named in a will to be in charge of a decedent’s estate.
Administrator: An individual appointed to be in charge of the estate of a decedent who dies without a will.
Self Proving Affidavit: An affidavit attached to a will, which avoids the necessity of the witnesses to a will to attend probate to produce an oath to show the testator was the signor of the will.
Probate Estate: A decedent’s property passing under his or her will.
Non-Probate Property: Assets that pass at death outside of a decedent’s will by operation of law (joint property) or beneficiary designation (life insurance, retirement account).
Guardian: A person named to manage the affairs or property (or both) of minor child or incapacitated person while a minor or incapacitated.
Intestacy: The consequence of dying without a will.
Trust: An interest in property held by one individual or entity for the benefit of another individual or entity.
Grantor/Settlor: A creator of a trust.
Revocable Trust: A trust which can be revoked or changed by the grantor/settlor. Property held by a revocable trust may not be subject to probate at the death of the grantor/settlor.
Irrevocable Trust: A Trust which cannot be revoked or changed by the grantor/settlor absent court action or its equivalent. Holding property in an irrevocable trust may remove such property from the settlor/grantor’s taxable estate at his or her death. It may also have creditor protection benefits.
Ancillary Probate: A probate proceeding in another jurisdiction in addition to the primary probate of the will, which generally occurs if certain types of property are located in a jurisdiction other than that in which the Will was probated.
Pennsylvania Inheritance Tax: Pennsylvania imposes a tax on inherited property. The rate of tax is based on the relationship between the decedent and the beneficiary. Spouses and charities are taxed at 0%, lineal descendants (children, grandchildren, etc.) and parents are taxed at 4.5% (in most cases), siblings are taxed at 12%, and everyone else is taxed at 15%
Pennsylvania Estate Tax: Pennsylvania does not currently impose an estate tax. It did so historically using a calculation based on a defunct Federal Estate Tax concept; when such concept went away so did the Pennsylvania Estate Tax.
New Jersey Inheritance Tax: A tax which applies to the transfer of all real and tangible personal property located in New Jersey and intangible personal property located anywhere in estates of resident decedents. In estates of nonresident decedents, the tax applies to real property and tangible personal property which is located in New Jersey.
New Jersey Estate Tax: A tax which is imposed in addition to the New Jersey Inheritance Tax on the estates of decedents who are residents of the State of New Jersey. The New Jersey Estate Tax is owed if the amount of New Jersey Inheritance Tax paid to New Jersey is less than the portion of the Federal credit for state death taxes which is attributable to New Jersey property.
Federal Estate Tax: Tax imposed by the Federal government on assets transferred from an individual at his or her death. The amount of tax owed is based upon the size of the decedent’s estate minus deductions. The current maximum rate of tax is 40%.
Unified Credit: Currently, each decedent has a credit which protects $5.25 Million (inflation adjusted each year) against the Federal estate tax, which can be thought of as an amount of the decedent’s estate which is exempt from Federal Estate Tax.
Portability: A Federal Estate Tax concept, which allows the surviving spouse of a decedent to use any unused amount of such decedent spouse’s Unified Credit.
Pennsylvania Fiduciary Income Tax: A tax imposed by Pennsylvania on certain amounts earned by a decedent’s estate, during the administration thereof.
New Jersey Fiduciary Income Tax: A tax imposed by New Jersey on certain amounts earned by a decedent’s estate, during the administration thereof.
Federal Fiduciary Income Tax: A tax imposed by the Federal government on certain amounts earned by a decedent’s estate, during the administration thereof.
Power of Attorney: A written document giving a person or persons the authority to act on behalf of another in specified matters.
Living Will/Advanced Directive: A written statement of a person’s intent as to certain medical treatments for use when such person is no longer able to express his or her opinion.
Agent: A person named in a power of attorney to handle the finances and/or medical affairs of the person granting the power
Register of Wills: In Pennsylvania, the Register of Wills is the office with probate jurisdiction.
Surrogate’s Court: In New Jersey, the Surrogate’s Court is the office with probate jurisdiction.
Will Contest: A challenge to the validity of a Will. Often on the basis of a claim of fraud, undue influence, forgery and/or lack of capacity.
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