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Glossary of Terms

Administrator

The person appointed by the court to manage one’s estate when he or she dies without leaving a will. Administrators have the same duties as executors.

Annuity

A sum of money payable yearly or at other regular intervals.

Appreciated Property

Property, such as real estate or stock, which has increased in value.

Beneficiary

An individual designated to receive benefits or funds under a will or other contract, such as an insurance policy, trust or retirement plan.

Bequest

To give or leave something by will, typically personal property or assets.

Charitable Gift Annuity

Typically an agreement in which you transfer cash or other assets to a charitable organization in exchange for its promise to pay you an annuity for life or for a term of years.

Charitable Trust

A trust having a charitable organization as a beneficiary.

Codicil

A legal instrument made to modify an earlier will.

Corporate Fiduciary

An institution that acts for the benefit of another. One example is a bank acting as trustee.

Cost Basis

The original value of an asset, such as stock, before its appreciation or depreciation.

Durable Power of Attorney

A written legal document that lets an individual designate another person to act on his or her behalf, even in the event the individual becomes disabled or incapacitated.

Estate Tax

A tax imposed at one’s death on the transfer of most types of property.

Executor (or Personal Representative)

The person named in a will to manage the estate. This person will collect the property, pay any debt and distribute your property or assets according to the will.

Fiduciary

A person or institution legally responsible for the management, investment and distributions of funds. Examples include trustees, executors and administrators.

Gift Tax

Tax on gifts generally paid by the person making the gift, rather than the recipient.

Gift-Tax Annual Exclusion

The provision in the tax law that exempts the first $14,000 (as adjusted for inflation) in present-interest gifts a person gives to each recipient during a year from federal gift taxes.

Grantor

The person who transfers assets into a trust for the benefit of another.

Gross Estate

The total property or assets held by an individual as defined for federal estate tax purposes.

Guardian

An individual legally appointed to manage the rights and/or property of a person incapable of taking care of his or her own affairs.

Inter vivos

A type of trust created during one’s lifetime to hold property for the benefit of another person.

Interest

Any right or ownership in property.

Intestate

The term applied when an individual dies without a will.

IRS Discount Rate

Also known as the AFR or Applicable Federal Rate, the IRS discount rate is used to determine the charitable deduction for many types of planned gifts, such as charitable remainder trusts and gift annuities. The rate is the annual rate of return that the IRS assumes the gift assets will earn during the gift term. The IRS discount rate is published monthly. It is announced on about the 20th of the month that precedes the month to which the rate will apply. It equals 120% of the annual mid-term rate, rounded to the nearest 0.2%. The annual mid-term rate is the annualized average yield of treasury instruments over the past 30 days that have remaining maturities of 3-9 years. The higher the IRS discount rate, the higher the deduction for charitable remainder trusts and gift annuities, and the lower the deduction for charitable lead trusts and retained life estates. Fluctuations in the IRS discount rate affect unitrust deductions far less than annuity trust and gift annuity deductions. IRS discount rate fluctuations don’t affect pooled income fund deductions. You will find the current available IRS discount rates on the PG Calc web site.

Joint Ownership

The ownership of property by two or more people, usually with the right of survivorship.

Life Insurance Trust

A trust that has the proceeds of an individual’s life insurance policy as its principal.

Living Trust

A revocable trust established by a grantor during his or her lifetime in which the grantor transfers some or all of his or her property into the trust.

Living Will

A legal document directing that the maker’s or signer’s life is not to be artificially supported in the event of a terminal illness or accident.

Marital Deduction

A deduction allowing for the unlimited transfer of any or all property from one spouse to the other generally free of estate and gift tax.

Power of Attorney

A written legal document that gives an individual the authority to act for another.

Powers of Appointment

A right given to another in a written instrument, such as a will or trust that allows the other to decide how to distribute the property. The power of appointment is “general” if it places no restrictions on whom the distributees may be. A power is “limited” or “special” if it limits the eventual distributee.

Probate

The court process for determining the validity of a deceased person’s will.

Testamentary Trust

A trust that is created upon death by the terms of a person’s will.

Testator

An individual who dies leaving a will or testament in force.

Trust

A written legal instrument created by a grantor during his or her lifetime or at death for the benefit of another.

Trustee

The individual or institution entrusted with the duty of managing property placed in the trust. A “co-trustee” serves as trustee with another. A “contingent trustee” becomes trustee upon the occurrence of a specified future event.

Unified Credit

A federal tax credit that offsets gift tax and estate tax liability. For gift tax purposes, the unified credit is $5.45 million in 2016.

Will

A legally executed document that directs how and to whom a person’s property is to be distributed after death.

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