Amendment A revision or addition to a trust document which either corrects an error, or changes the terms of the trust to coincide with the trustor's wishes.

Annual Exclusion An exclusion from gift taxes for gifts by each donor to each donee, which is available on an annual basis. The annual exclusion is currently $10,000 per donee (and is indexed for inflation), per calendar year. That is, a couple with three children could give $60,000 per year tax free to the next generation. In order to qualify for the annual exclusion, the gift must be a "present interest" i.e., a gift available immediately to the donee as opposed to one not available until the future or one requiring the consent of some other person.

Applicable Credit Amount A credit applicable against gift taxes, and/or estate taxes at the time of the Decedent's death. The Applicable Credit Amount (formerly "Unified Credit") has been at varying levels since 1976, but is now (in 2000) $220,550 and satisfies the gift/estate taxes on aggregate transfers (taxable estate) of $675,000. Each person has an Applicable Credit Amount that can be used to offset his or her estate or gift taxes due. For this reason, most Attorneys draft wills and trusts in such a way as to utilize the Applicable Credit Amounts for both spouses. The result of this is a trust arrangement that divides the estate at the death of the first spouse into two, one for the survivor and one, for the decedent. The decedents' portion is "taxed" at his or her death but the tax is usually fully satisfied by the Applicable Credit Amount. No further tax is due on the decedent's share because it stays in a Bypass Trust and does not become a part of the survivor's estate. The survivor pays no tax on his or her portion until his or her passing. The effective amount that can be passed by using the credit is $675,000 in 2000 and 2001. It is scheduled to increase to $1,000,000 by 2006.

Asset The property of a testator or grantor, whether real or personal, which passes under a will and/or is placed into a trust account.

Asset Allocation Investment assets can be placed into different categories for classification purposes. When an Investment Advisor assigns a percentage of the account investments to each of these categories, he is completing an Asset Allocation. Asset Allocation is an acceptable way for a manager or trustee to diversify risk and increase return in an investment portfolio.

Assignment A document that assigns the interest of one party to another. When a grantor wants to place a contract or lease into a trust, an assignment of the grantor's interest is prepared to transfer the interest to the trust. The Assignor is the one conveying the interest and the Assignee is the one receiving the interest.

Beneficiary A person who is, or will be, a recipient of benefits from a will, an estate, or a trust

Beneficiary Transfer When you name a beneficiary in an insurance policy or in an employee benefit plan and the proceeds pay out to the beneficiary, the result is a beneficiary transfer.

Bequest Historically, to leave (bequeath) personal property to another by Last Will and Testament. The term is not in current use in Utah law.

Bypass Trust A trust which contains property on which Federal Taxes are paid at the death of the first spouse to die, and which typically is not taxed at the second death. Where the optimum marital deduction plan is used, the tax on the property in this trust is paid by the Applicable Credit Amount and it is sometimes referred to as the Credit Shelter Trust.

Codicil To make an addition to a will, or to change, explain, revoke, or add provisions.

Co-Trustee Whenever there are two or more concurrent trustees of a trust, they are called Co-Trustees.

Corporate Trustee If you are the trustee of your own trust you are an individual trustee. When a bank, or trust company is named as the trustee it is known as a Corporate Trustee.

Credit Shelter Amount The amount of property of a decedent on which the tax is essentially paid by the Unified Credit. This amount is $675,000 for 2000 and 2001 and is scheduled to increase to $1,000,000 by 2006.

Crummey Trust An irrevocable life insurance trust that has "Crummey Powers" incorporated into the document. The "Crummey Power" allows you to make a gift of up to $10,000 per donee, per year, (although usually less than this amount) into the trust. The current income beneficiary(s) has the right to withdraw the gifted amount during a specified period of time. If the withdrawal does not take place, the gift amount defaults to the trust, and remains in the trust to pay insurance premiums. By using this type of trust, the proceeds of the insurance policy, when paid to the trustee upon death, do not become a taxable part of the estate of the decedent.

Decedent The person who has died

DOD A common abbreviation for "Date of Death."

Devise To leave property by will. Historically a "devise" only referred to a transfer of real property, not personal property, but Utah law now uses the term for both forms of property.

Elective Share The Elective Share is the share of a Decedent's assets which the surviving spouse can elect to receive, under the State probate code regardless of the provisions of the Decedent's Will or Trust. This share was formerly known as the "Dower" right and was equal to the amount the spouse would have received under the intestate succession statute if there had been no Will. The modern Elective Share was instituted under the Uniform Probate Code, which has been adopted by many states in the United States. The Elective Share allows the surviving spouse to elect to take a formula amount, or value, of assets instead of the amount bequeathed in the will or left to them in trust. The Elective Share primarily applies to "Marital Assets". Separate Property is not usually included in the Elective Share, but Utah's current version of the Elective Share may subject Separate Property to the election under some circumstances.

Estate Plan The overall plan devised by the estate planning professional with the help of the grantor, to pass the estate of the grantor on to the remainder beneficiaries. This plan usually includes wills, trusts, right to die documents, limited partnerships, limited liability companies, and related documents as drafted by the attorney. There may also be provisions on how to manage the assets of the grantors while they are still alive and capable, or if they should become incapacitated.

Estate Tax Sometimes used synonymously with the Federal Estate Tax. Generically, any tax which is levied upon the estate as a whole, as opposed to being levied upon the takers of the property. (See Inheritance Tax.)

Executor A term that is now in limited usage. Usually this person is now known as the Personal Representative of the Estate. The Executor manages the estate through the probate process and distributes the assets under court supervision, pursuant to the terms of the will.

Fiduciary A person or corporation that takes on a responsibility of trust for another. When a person accepts the duties of trustee, or Personal Representative, they are assuming fiduciary responsibility. Fiduciaries are held to a higher standard of care with regard to the assets than are individuals who are dealing with their own assets. Many states have adopted Prudent Investor Rules, that govern the care which a fiduciary must give in managing assets.

Funding The act of transferring the title to assets into the name of the trustee from the name of the grantor.

Generation Skipping Tax This tax, instituted in 1984, taxes the transfer of wealth from the decedent to generations more remote than his or her children. Each person has an exemption of $1,030,000 from this tax(as indexed for inflation.) Once you have left more than this amount to a grandchild or great-grandchild, etc., a tax is imposed on the transfer at a flat 55% rate. The advent of this tax has curtailed the use of the "Generation Skipping Trust", so that such trusts now are usually the recipient of only the exempt amount, to be held for the benefit of remote beneficiaries.

Gift A gratuitous transfer of property to someone else, without receiving adequate consideration in return.

Gift Program Usually a planned program of making annual gifts to beneficiaries within the amount of the Annual Exclusion.

Grantor In trust usage, the person who creates a trust (also known as trustor, or settlor).

Gross-up Gift taxes If gifts have been made within three years of the year of death on which gift taxes were actually paid, those gift taxes will be added back to the value of the estate for purposes of computing the estate tax. This is called gift tax gross-up.

Heir A person who is to receive assets under the laws of intestacy in the absence of a will. In common usage, however, the term is inaccurately applied to a person who receives benefits as a beneficiary under the terms of a will.

Income Normally, the trust or will designates what is income and what is principal. In the absence of designation language, there is a "Uniform Principal and Income Act" under the "Uniform Probate Code" which would outline what is income and what is principal. If you live in a" Non-Uniform Probate Code" state, than state statute will govern what to designate as income and principal in the absence of governing language in the document.

Income Beneficiary The person who will receive the income from a trust for a specified period of time (e.g., "beneficiary for life").

Inheritance Tax Technically, a death tax which is levied by a State upon each taker of a decedents' property, as opposed to an estate tax which is levied on the estate as a whole. (See Estate Tax.) However, Utah's pick up estate tax is known as the "Utah Inheritance Tax."

Intervivos Trust A trust created by agreement currently during the person's lifetime, as opposed to a Testamentary Trust, created by a Will, and taking effect after death.

Joint Property Property where title is held in Joint Tenancy so that the surviving co-owner[s] own the entire asset by operation of law at the death of any owner. In a marriage, this property usually qualifies as marital property for marital deduction purposes.

Life Insurance Gift Value The value of a life insurance policy which is given to someone else. Normally, this value is very close to the cash surrender value. In most cases the gift value will be less than the face value of the policy. Where the insured is in bad health, and could not obtain new insurance within normal cost limits, the gift value of the policy may be greater that the face value.

Lump Sum Gift Typically, a gift which is made on a one-time basis only, as opposed to a gift program, which is designed to use the annual exclusion on a yearly basis.

Marginal Estate Tax Rate The tax rate at which the top dollars in an estate are taxed.

Marital Deduction A deduction allowed on the Federal Estate Tax Return (form 706) for property passing in a qualifying manner to a surviving spouse. Prior to 1981, there was a maximum limit of marital deduction which could be taken. This maximum was the greater of one-half of the decedent's separate property, or $250,000. From 1982 , an unlimited marital deduction has been allowed for any qualifying property (essentially property which provided the surviving spouse with an effective ownership interest in the asset). ( For an exception, see Qualified Terminable Interest Property.)

Marital Property In general usage, property acquired by a married couple during the marriage from their separate or joint efforts including wages, profits, etc. Marital Property is similar to what would be community property if the couple had resided in a community property state. Marital Property does not include gifts, inheritances or assets acquired prior to marriage. Determination of the Marital Property was formerly a key step in calculating the Elective Share in Utah. The present Elective Share Statute does not directly refer to Marital Property, but the formula it utilizes classifies assets according to Marital Property concepts.

Net Tax Generally, the actual amount of tax which is payable in a given situation, after all deductions, credits, and other adjustments have been made.

Optimum Marital Deduction The technique by which the most favorably aggregate estate Tax calculation is to be applied to two spouses' estates at their respective deaths. When one spouse may survive the other for an extended period, this usually means that no more and no less than the amount of a decedent's estate not "sheltered" by the decedent's Unified Credit, passes under the marital deduction to the surviving spouse.

Per Stirpes A term used in a will or trust which designates that property will pass to descendants "by branches" so that a Decedent's children divide equally the same share the Decedent would have taken at each level of descent.

Personal Representative The person who manages the assets of an estate, using the will, if any, as a guide, through the probate process. This person was formerly known as the Executor or Executrix.

Pickup State A state, like Utah, which does not impose an independently calculated estate tax or inheritance tax, but does "pick up" an estate tax equal to the Federal State Death Tax Credit.

Power of Attorney A person may designate another to act for him or her in limited situations (Limited Power of Attorney), or generally (General Power of Attorney). The person accepting this appointment is known as the Attorney in Fact. The Attorney in Fact may act for the principle in any area designated in the document. In Utah, a power of attorney may be made "durable" so it remains in effect after the person who granted it becomes incapacitated or incompetent.

Probate The Court process by which a will is proven and/or assets in the name of a decedent are legally transferred to the decedent's rightful heirs or beneficiaries. The court does not supervise the administration of the estate in Utah, unless some interested party petitions the Court for a supervised administration. The personal representative transfers assets to the beneficiaries after claims are settled and creditors have been paid. .

QTIP Trust Although most limited, or terminable interests in property (such as life estates), do not qualify for the marital deduction in 1981 laws were enacted to allow an elective marital deduction for such interests if all of the income were payable to the surviving spouse during the survivor's lifetime. This type of property is known as "Qualified Terminable Interest Property" (QTIP), and a trust holding this property is known as a "QTIP" trust.

Remaindermen Those who will receive the assets from a trust after the death of the current income beneficiary or beneficiaries, or the expiration or termination of the trust.

Separate Property In general usage, property which is not "Marital Property". Utah is not a community property state but has borrowed community property concepts for purposes of defining Marital Property and Separate Property in calculating the Elective Share. In community property jurisdictions, separate property is property received by inheritance, gift, or personal injury settlement, together with income generated therefrom. It may also be designated property that was held by either party in a marriage prior to the current marriage. Once this property has been added to a joint account or co-mingled with other joint assets, it is normally not considered separate property.

Stock or Bond Power An assignment document separate from the stock or bond itself, which is used to transfer title to the asset. This document, along with the certificate, is sent to the transfer agent so that the certificate can be re- issued in the new owners name.

Successor Trustee The person designated in the document or named later who assumes the duties of trustee after the death, incapacity, or resignation of the original trustee.

Survivor Usually referring to the surviving spouse in a marriage.

Tentative Tax The gross amount of the Federal Estate Tax calculated on a Decedent's estate, prior to application of the Unified Credit, and the credit for Gift Taxes paid after 1976 (and any other applicable credits).

Testamentary Trust A trust created under the terms of a person's Last Will and Testament. (see also Intervivos Trust)

Testator/Testatrix A person who makes a will.

Trust A legal entity which must have four components, i.e.:
1. A grantor (also known as the trustor, or settlor);
2. A beneficiary (the person who benefits from the property being held);
3. Corpus, or assets, which are held in the trust;
4. A trustee, or the person who holds legal title to, and manages, the property which is held in the trust.
A trust is generally used as an alternative to giving legal ownership of property outright to a beneficiary, and may permit tax avoidance, or deferral. A trust document may also provide investment guidance or protection for the beneficiaries, particularly minor or younger children.

Trustconsult A sole proprietorship established to provide services to trustees of self-trusteed trusts and their legal counsel. (Phone # (888)560-4343. Internet access at: http://www.ilithelp.com)

Unified Credit See "Applicable Credit Amount" above.

Will A formal testamentary document which outlines the wishes of the Testator or maker of the will. This document will normally outline who the beneficiaries are, and what assets are to be distributed to them. It will also name a "Personal Representative" (formerly known as an Executor) to manage the assets through the probate process. When a person dies, the will is admitted to probate and the personal representative is authorized to administer the estate. The court assures that the document is valid as the Last Will and Testament of the Testator. See "Probate" above.

Witness A term used to describe those who attest to the validity of a will or trust. A will must be witnessed to be valid in most states. Witnesses should not have a beneficial interest in the will, and should be of sound mind and legal age.