An estate planning vehicle established for the benefit of a young person, becoming absolutely entitled to the trust property on or before their 25th birthday, with specific inheritance tax implications.
An accumulation and maintenance trust is a type of discretionary trust designed to allow for the accumulation of income until certain beneficiaries reach a specified age, at which point the income is applied for their maintenance, education, or benefit.
Advancement refers to a payment made by a parent to a child during the parent's lifetime, intended to go towards what the child would receive as a beneficiary or heir upon the parent's death.
An inheritance tax relief available on the transfer of agricultural property under specified conditions, with relief rates at 50% or 100% depending on possession status and leasing history.
The Alternate Valuation Date is a date six months after the date of a person's death. For estate tax purposes, the executor may choose to place a value on the estate either as of the date of death or on the alternate valuation date. To use the alternative valuation date, the estate value and tax must be less than on the date of death.
Avoiding probate involves using various estate planning techniques to eliminate assets from the legal probate process. Methods include jointly held property, living trusts, and lifetime gifting. It's important to note that avoiding probate does not exempt assets from federal estate or gift taxes.
A specialized division within a bank engaged in settling estates, administering trusts and guardianships, and performing various agency services, known for a conservative investment philosophy.
A beneficiary is a person or entity who is designated to receive benefits or assets from trusts, wills, insurance policies, or other financial instruments.
The act of passing on personal property through a last will and testament.
A bequest is a gift made through a will, which dictates the transfer of property or assets from a deceased individual to beneficiaries.
Business Property Relief (BPR) is a form of inheritance tax relief available on certain types of business property, designed to protect family businesses from the burden of inheritance tax upon the death of an owner.
A bypass trust, also known as a credit shelter trust or an exemption trust, is an irrevocable trust that allows parents to pass assets to their children while reducing or eliminating estate taxes.
A professional certification conferred by the International Board of Standards and Practices for Certified Financial Planners. It requires passing national examinations in various financial planning disciplines and substantial professional experience.
A Charitable Remainder Trust is an irrevocable trust that pays income to one or more individuals until the grantor's death or for a specified number of years, after which the remaining assets pass to a designated charity.
A charitable trust is a type of trust that is established to provide financial support to one or more charitable organizations, aimed at fulfilling philanthropic goals and benefiting the public.
Chartered Financial Consultant (ChFC) is a professional designation awarded by The American College in Bryn Mawr, Pennsylvania, recognizing individuals for their expertise and proficiency in financial planning.
Professional designation conferred by The American College, signifying expertise in insurance planning, investments, taxation, and related areas.
A Close Corporation Plan consists of a pre-arrangement that ensures surviving stockholders can purchase the shares of a deceased stockholder based on a pre-determined formula, thereby maintaining control of the corporation within the existing shareholder group.
A codicil is a supplement to a will intended to add to, subtract from, or alter the provisions of the original will.
A provision in a will or insurance policy that states how property should be distributed if both the insured (or will-maker) and their beneficiary die in the same event or within a short period of each other.
The term 'Commorientes' refers to individuals who die at the same time, or in circumstances where it is uncertain who died first. In legal terms, this is significant for the purposes of property devolution and inheritance.
A complex trust is a type of trust that can either distribute or retain income according to its governing instrument or state law, or has a charitable beneficiary. It is entitled to only a $100 exemption.
A contingent beneficiary is an individual or entity entitled to receive the proceeds or benefits of a trust or estate only when a specified event occurs, such as the death of a named beneficiary.
The term 'Corpus' refers to the principal or res of an estate, trust, devise, or bequest from which income is derived, consisting of funds, real estate, or other tangible or intangible property. In civil law, it refers to a positive fact, as distinguished from a possibility.
The specific date when the donor's full control and ownership of a property or asset is relinquished to the recipient.
A comprehensive guide to understanding death duty, also known as estate duty, a tax levied on the estate of a deceased person.
A deathbed gift, also known as a gift in contemplation of death, refers to a transfer of property or assets by an individual who is facing imminent death. This transfer is made with the understanding that ownership will only take effect upon the death of the donor. It differs significantly from inter vivos gifts made during one's lifetime.
A decedent is a term used in law and in financial contexts to refer to a person who has died. It is most commonly used in the context of estates, taxes, and legal proceedings.
A deed by which the beneficiary under a will or an intestacy redirects the gift to some other person (who may or may not be a beneficiary of the estate). Provided this is done within two years of the deceased's death and statutory requirements are complied with, the redirection is not treated as a gift for inheritance tax or capital gains tax purposes.
A devisee is an individual who inherits real estate through a will, typically designated in the will of the deceased.
A Discretionary Trust is a type of trust where the shares of each beneficiary are not fixed by the settlor but can be varied at the discretion of the trustees or another appointed person.
Distribution refers to various processes including the payment of dividends, the final settlement of a company's assets upon winding up, allocation of a person's property, and the channeling of goods to consumers.
A donor is an individual or entity that provides a gift or transfers a power, right, or interest, often in the context of creating a trust or other legal arrangement.
Dower is a statutory provision in a common-law state that directs a certain portion of a deceased individual's estate (often one-third) to the surviving spouse. The term 'curtesy' is used if the surviving spouse is the husband.
Explore estate duty, a type of tax levied on estates of deceased individuals before inheritance taxes. Understand its impact, calculation, examples, and frequently asked questions.
An Estate For Life, also known as a Life Estate, is a type of property ownership typically used in estate planning to allow someone to use and live in a property for the duration of their life.
An estate in reversion is a type of estate left by the grantor for themselves, beginning after the termination of a specific estate granted by them. For example, a landlord has an estate in reversion that becomes theirs to possess when the lease expires.
Estate planning involves the orderly handling, disposition, and administration of an estate when the owner dies, including drawing up wills, setting up trusts, and minimizing taxes.
Estate planning distribution involves the management and allocation of a person's assets during their lifetime and after their death, ensuring a systematic transfer of property to beneficiaries.
An executor is a person appointed in a will to administer the estate of a deceased person, ensuring that assets are distributed and liabilities are paid as per the instructions in the will.
An exit charge is the tax imposed under inheritance tax regulations when an asset is removed from a discretionary trust.
A Family Limited Partnership (FLP) is a type of limited partnership where the majority of interests are held by members of the same family. It can provide tax benefits, such as reducing gift and estate taxes, but has limitations regarding ownership and transferability.
A federal tax imposed on the transfer of wealth through estates and gifts, calculated based on the value of a decedent's estate and lifetime gifts.
A professional adviser providing financial counsel in various domains, such as investing, insurance, estate planning, and taxes. Financial advisers can be fee-based, commission-based, or both.
A financial planner is a professional who analyzes personal financial circumstances and prepares a program to meet financial needs and objectives, equipped with knowledge in several domains including estate planning, retirement planning, and investments.
Future Interest refers to an individual’s legal right to possess or enjoy property or assets in the future, usually upon the occurrence of a specified event or the fulfillment of certain conditions.
A general power of appointment allows holders the right to dispose of property in their favor or that of their estate, creditors, or the creditors of their estate. It impacts how a grantor is taxed on the trust income.
A General Power of Attorney grants broad authority to a designated individual, known as the attorney-in-fact or agent, to act on behalf of the principal in all matters.
A Generation-Skipping Transfer (GST) involves the transfer of financial assets or property to a recipient who is more than a single generation removed from the transferor, potentially incurring the generation-skipping tax (GSTT).
A gift is a voluntary transfer of property or assets from one individual to another without receiving anything of value in return. This can have implications for both the donor and the recipient under tax laws.
Gift causa mortis is a transfer of property made by a person facing impending death to a donee, which becomes effective upon the donor's death but can be revoked if the donor survives.
A gift inter vivos refers to the transfer of property from a donor to a donee during the donor's lifetime, made without any consideration or compensation. The donor thereby relinquishes all control or ownership over the gifted property.
Gift splitting is a tax strategy that allows a married couple to combine their individual annual gift tax exclusions and unified estate and gift tax credits, enabling them to give a larger gift to a recipient without incurring gift tax liability.
A gift with reservation is a type of gift where the donor retains some benefit from the asset despite having transferred ownership to another party. This concept is pertinent in taxation and estate planning.
Gross estate refers to the total value of a person's assets before liabilities such as debts and taxes are deducted. It includes all types of property and accounts that the deceased owned or had an interest in.
A grossed-up gift is the result of adding the gift tax paid by the decedent of the estate back to the gift when it is included in the gross estate.
Inherit the estate by statutory law if the ancestor dies without a will (intestate). In a broader sense, those who inherit by will, deed, or operation of law.
The term 'heirs and assigns' is often found in deeds and wills and is used to grant a fee simple estate, indicating that the property being transferred is granted to the heirs and designated assigns of the recipient.
Incident of ownership refers to an element of ownership or degree of control over property, which can impact the tax treatment of transferred property, especially in the context of estate taxes.
Income in Respect of a Decedent (IRD) refers to income that was due to a deceased person at the time of their death but was not received until after their passing. This type of income retains its character as it passes to the decedent’s estate or beneficiaries.
Inheritance refers to the process of acquiring property, assets, or obligations from an individual who passed away, often via a will or through legal operation.
Inheritance Tax (IHT) is a tax on the estate, such as money, property, and possessions, of someone who has died. IHT is often seen as significant, as it can substantially reduce the value that beneficiaries receive from an estate.
Inheritance Tax (IHT) is a tax introduced in the Budget of 1986, charged on the estate of a deceased individual domiciled in the UK or on UK property owned by a non-domiciled individual. It applies retrospectively on certain lifetime gifts and includes exemptions and potential allowances.
An inter vivos transfer refers to the transfer of property or an interest in property during a person's lifetime. This term is derived from Latin, meaning 'between the living.' It is commonly used in estate planning and tax contexts to differentiate such transfers from those occurring after death.
An Inter Vivos Trust, also known as a living trust, is a legal arrangement established during the lifetime of the grantor, typically for the benefit of another person, such as a child. This differs from a Testamentary Trust, which becomes effective upon the death of the trust creator.
An interest-in-possession trust ensures that the income generated by the trust's assets goes to a specific beneficiary or beneficiaries for a fixed period or until the life tenants' death. Subsequently, the capital passes to the remainderman.
A person who dies without having made a will. The estate, in these circumstances, is divided according to the rules of intestacy. The division depends on the personal circumstances of the deceased.
An irrevocable trust is a type of trust that cannot be altered, amended, or terminated without the consent of the beneficiary or beneficiaries. It is typically set up to provide asset protection and tax benefits.
An issue can refer to securities sold by a corporation, the process of selling new securities, descendants in estate planning, or a point of dispute in legal practice.
Joint Tenancy refers to the ownership of an asset by two or more persons, each with an undivided interest in the asset and the right of survivorship, which results in the entire value passing to the surviving tenants upon the death of one tenant.
The term 'legacy' refers to the disposition of personal property by will. This is a legal term often used in estate planning to describe a person’s wishes for distributing their tangible and intangible valuables after their death.
A legatee is an individual or entity that receives property or assets through the terms stipulated in a last will and testament.
A life beneficiary is a party entitled to the use of or income from property during their lifetime. Upon their death, the property's benefits typically pass to another individual, often referred to as a remainder person.
A life estate is an interest in property that lasts for the duration of a person's life, providing certain rights and responsibilities for the life tenant.
A life tenant is an individual who has the right to use and occupy property for the duration of their life or the life of another designated person.
The lifetime exemption pertains to the total amount of gifts and estate transfers one can make without incurring federal gift or estate taxes.
Lifetime gifts are a strategic and effective vehicle for transfer in estate planning. They eliminate all probate and administration expenses on the property transferred, providing financial benefits and simplicity for estate management.
A living trust, also known as an inter vivos trust, is a legal document created and operational during the lifetime of the settlor to manage their assets and streamline the transfer of those assets after their death, thereby avoiding probate.
A legal document that permits an individual to declare his/her desires concerning the use of life-sustaining treatment when death is imminent and the individual no longer has control of his/her faculties.
The Marital Deduction is a provision in U.S. federal estate and gift tax laws allowing a surviving spouse to inherit the decedent's estate or receive gifts from the spouse tax-free, thereby deferring estate taxes until the property is transferred to the next generation.
Net Estate is the portion of a decedent's estate that is subject to estate tax after all allowable deductions such as debts, funeral expenses, and administration costs have been subtracted from the gross estate.
The first portion of a chargeable transfer or the estate on death that is subject to a nil rate of inheritance tax. For 2016-17, the nil-rate band is £325,000. From April 2008, it became possible for spouses and civil partners to transfer their nil-rate band to the surviving partner on death, thereby effectively raising the threshold at which tax becomes payable to £650,000.
A nuncupative will, also known as an oral will, is a testamentary disposition made verbally in the presence of witnesses, and is seldom valid in most jurisdictions.
Circumstances that arise if a will covers only part of the estate of the deceased, leading to a mix of estate distribution based on the will and the rules of intestacy.
A pecuniary bequest is a specific sum of money given to an heir as stated in a decedent's will.
Per stirpes is a method of estate distribution that ensures the descendants of a deceased heir receive their portion of the estate.
A Potentially Exempt Transfer (PET) refers to a gift that may not be immediately subject to inheritance tax, provided the donor survives for a period of seven years after making the transfer. PETs play a significant role in estate planning and gift tax strategies.
A potentially exempt transfer (PET) is a lifetime gift by an individual that becomes exempt from inheritance tax if they survive seven years beyond the date of the gift. If the donor passes away within seven years, inheritance tax liability may arise.
A power of appointment is a legal authority granted to an individual (the appointor) allowing them to designate who will receive certain property or interests, typically within the contexts of trusts and estates.
Powers of appointment refer to the authority granted to an individual, referred to as the donee or appointee, to designate the distribution of certain property or assets, either held in a trust or as part of an estate. This power can affect estate planning significantly.
A primary beneficiary is the individual or entity first in line to receive benefits from a trust, retirement account, or life insurance policy upon the policyholder's death.
Probate assets are those assets within an estate that are subject to probate and court disposition, and thus become part of public records.
A probate estate includes all property that passes under a will or by state intestate succession laws from a decedent to their heirs or other beneficiaries. It is distinct from the gross estate.
A Qualified Terminable Interest Property (Q-TIP) Trust is an estate planning tool that ensures the surviving spouse receives income from the trust's assets while retaining control for the deceased spouse over the distribution of the assets upon the surviving spouse's death.
A QTIP trust allows a grantor to provide income for their surviving spouse and designate other beneficiaries for the remaining trust assets after the surviving spouse's death.
Quick-succession relief is designed to prevent the severe double taxation of inheritance tax on the same property within a short timeline — specifically when two related individuals pass away within five years of each other.
A relevant property trust is defined for inheritance tax purposes and involves taxation upon creation, distribution, and every tenth anniversary. It excludes interest-in-possession trusts, 18--25 trusts, or trusts for bereaved minors.
A remainder is a future interest in an estate that takes effect upon the expiration or termination of a prior estate without reverting back to the original grantor.
Remainder interest refers to the future interest in an estate that becomes possessory when a preceding life estate or similar limited estate terminates. The holder of this interest is called the remainderman.
A remainderman is the beneficiary entitled to the remainder or residue of an estate once expenses, specific legacies, and inheritance taxes have been satisfied. This term often comes into play in the context of trusts and will estates, designating who receives property after the preceding estate benefits or interest.
