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Trusts & Estates
45 flashcards
A will is a legal document that outlines how a person wants their assets and property to be distributed after their death.
A trust is a legal arrangement where a third party (trustee) holds and manages assets for the benefit of another person or entity (beneficiary).
Estate planning is the process of making arrangements for the management and distribution of one's estate during life and after death.
Probate is the legal process of proving a will's validity and settling an estate according to the will's provisions.
A testator is the person who makes and executes a will.
An executor is the person named in a will to carry out the instructions and wishes of the testator after their death.
A living trust is a trust created during the grantor's lifetime, designed to hold and manage assets for their benefit and later transfer to beneficiaries.
A revocable trust can be modified or terminated by the grantor, while an irrevocable trust cannot be changed or revoked once established.
A pour-over will is a will that transfers any remaining assets to a previously established trust after death.
Intestate succession refers to the process by which a person's assets are distributed according to state laws if they die without a valid will.
A power of attorney is a legal document that authorizes someone to act on behalf of another person in legal and financial matters.
A healthcare proxy, also known as a medical power of attorney, allows someone to make medical decisions on behalf of another person if they become incapacitated.
A beneficiary designation is a provision in a will, trust, or other legal document that names the person or entity who will receive assets or property.
A holographic will is a will that is handwritten, signed, and dated entirely in the testator's handwriting, and may be valid without witnesses in some states.
A self-proving will is a will signed by the testator and witnesses, and the signatures are notarized at the time of execution to avoid the need for witness testimony during probate.
A living will, also known as an advance directive, outlines a person's preferences for end-of-life medical treatment in case they become incapacitated.
A trustee is the person or entity responsible for managing and administering a trust according to its terms and in the best interests of the beneficiaries.
A spendthrift trust is a type of trust designed to protect the beneficiary's assets from creditors and their own potential mismanagement or irresponsible spending.
A charitable trust is a type of trust established for charitable purposes, such as supporting a specific cause or organization.
Probate avoidance refers to strategies and legal arrangements, such as trusts, joint ownership, and beneficiary designations, used to transfer assets outside of probate.
A generation-skipping transfer tax is a tax imposed on assets transferred to beneficiaries who are more than one generation removed from the transferor, such as grandchildren.
A will only takes effect after death, while a living trust can be used to manage assets during the grantor's lifetime and avoid probate.
A durable power of attorney remains in effect even if the grantor becomes incapacitated, allowing the designated agent to manage their affairs.
A personal representative or administrator is appointed by the court to manage and distribute the assets of an estate according to the will or state law.
A life estate is a type of ownership that grants someone the right to use and benefit from property during their lifetime, with the remainder interest passing to others upon their death.
A revocable life insurance trust can be changed or terminated by the grantor, while an irrevocable life insurance trust cannot be modified after it is established.
A crummey trust is a type of irrevocable trust designed to allow gift tax exclusions for contributions made to the trust for the benefit of beneficiaries.
A guardian ad litem is appointed by the court to represent the interests of a minor or incapacitated person in legal proceedings, such as trust or estate matters.
A QPRT is an irrevocable trust designed to remove a personal residence from the grantor's taxable estate while allowing them to continue living in the home for a specified period.
A per stirpes distribution divides assets among beneficiaries by branch or representation, while a per capita distribution is an equal division among individual beneficiaries.
A special needs trust is designed to provide financial support for a beneficiary with disabilities without disqualifying them from government assistance programs.
A conservator or guardian is appointed by the court to manage the financial affairs and personal care of an incapacitated individual.
A QTIP trust is designed to provide income and other benefits to a surviving spouse while allowing the remainder to pass to other beneficiaries upon the spouse's death.
A simple trust is required to distribute all income annually, while a complex trust can accumulate income and is subject to different tax rules.
A GRAT is an irrevocable trust designed to transfer assets to beneficiaries with minimal gift tax consequences by retaining an annuity interest for the grantor.
A step-up in basis refers to the adjustment of an asset's cost basis to its fair market value at the time of the owner's death, potentially reducing capital gains taxes for beneficiaries.
A trust protector is an individual or entity appointed to oversee the administration of a trust and make certain decisions on behalf of the grantor or beneficiaries.
An FLP is a type of partnership designed to transfer assets to family members while potentially reducing estate and gift taxes.
A QDOT is a type of trust used to transfer assets to a non-citizen spouse while deferring estate taxes until the spouse's death or the assets are distributed.
A dynasty trust is designed to preserve wealth and assets for multiple generations by avoiding transfer taxes as assets pass from one generation to the next.
A pet trust is a legal arrangement that provides for the care and financial support of a pet after the owner's death or incapacity.
A digital asset refers to electronic records and information, such as online accounts, emails, and digital files, that should be addressed in estate planning.
An ethical will or legacy letter is a non-binding document that allows someone to share their values, life lessons, and personal stories with loved ones.
A corporate trustee is a bank, trust company, or other institutional entity that serves as the trustee for a trust, providing professional management and oversight.
A bypass trust, also known as a credit shelter trust, is designed to utilize both spouses' estate tax exemptions and minimize estate taxes.