Glossary of Terms
Administrator
The person appointed by the court to manage one’s estate when he or she dies without a will. Administrators have the same duties as executors.
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.
Capital Gain or Loss
The profit or loss resulting from the sale or other disposition of a capital asset. If the property was held for more than 12 months, the gain or loss is long-term. If the property was held for 12 months or less, the gain or loss is short-term. Capital loss—either long-term or short-term—may be used to offset capital gain or to reduce ordinary income only to the extent of $3,000 per year with the option to carry over losses in excess of $3,000 in future tax years.
Cash Value
The loan value or surrender value of certain types of life insurance policies.
Charitable Deduction
The deduction allowed for gifts made to qualified charities. If the gift is cash, the income tax deduction is limited to 50 percent of the donor’s contribution base. If the gift exceeds the limitation, the donor may deduct the excess in the following year or years for up to five years. There are no limitations on the charitable deductions allowable for gift or estate tax purposes.
Charitable Remainder Trust
A donor creates a trust, and income from the trust is paid to specified beneficiaries. Beneficiaries receive income for life for a specified number of years, and at the end of the trust the assets of the trust pass to the charity.
Codicil
A legal instrument made to modify an earlier will.
Cost Basis
The original value of an asset, such as stock, before its appreciation or depreciation.
Deferred Gift
Any arrangement whereby money or property is set aside for the future use of a charity.
Durable Power of Attorney
A legal document that lets an individual designate another person to act on his or her behalf, even in the event the individual becomes incapacitated.
Estate Tax
A tax imposed at one’s death on the transfer of most types of property.
Executor
The person or entity (often a bank) named in a will to manage an estate and carry out the terms of the will.
Fair Market Value
The price at which a fully informed seller who is not being forced to sell would be willing to sell an asset to a fully informed buyer who is not being forced to buy.
Fiduciary
A person or institution legally responsible for the management, investment, and distribution of funds. Examples include trustees, executors, and administrators.
Gift Tax
A tax on the transfer (during the donor’s lifetime) of property worth more than $11,000 per year to another person, payable primarily by the donor.
Gift Tax Annual Exclusion
The continuing right of a donor to make a tax-free gift of up to $11,000 (or $22,000 if gift-splitting with one’s spouse) to each of any number of donees in any year.
Grantee
The person to whom property is transferred.
Grantor
The person transferring property, including someone who transfers property in trust.
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.
Inheritance Tax
A state tax on an heir’s right to receive property, determined by the value of an asset.
Installment Sale
Sale of property over more than one tax year for the purpose of spreading the impact of any capital gains.
Inter Vivos or Living Trust
A trust that is established and becomes operative during the lifetime of the person who created it.
Intestate
The term applied when an individual dies without a will.
Irrevocable Trust
A trust that cannot be ended by the person who created it.
Joint Ownership
The ownership of property by two or more people, usually with the right of survivorship.
Life Estate
An interest in property for life, for example, someone who has the right to occupy a residence for life.
Life Income Plan
An arrangement by which a person gives a principal sum or property to an institution with the stipulation that income be paid to one or more beneficiaries for their lives.
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
- Estate Tax Deduction—An unlimited deduction from the gross estate of the decedent for property passing to the surviving spouse.
- Gift Tax Deduction—Allowed for lifetime, full-value gifts to spouse.
Ordinary Income Property
Property which, if sold at a profit, gives rise to ordinary income as distinguished from long-term capital gains. A gift of ordinary income property to charity is deductible only to the extent of the donor’s adjusted cost basis in the property.
Power 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 who the distributees may be. A power is “limited” or “special” if it limits the eventual distributee.
Power of Attorney
A legal document giving an individual the authority to act for another.
Probate
The court process for determining the validity of a deceased person’s will.
Residual Estate
That portion of the estate that remains after all administrative expenses, taxes, and specific bequests have been paid. The person or entity named to receive all or part of the residual estate is said to have a residual interest.
Revocable Trust
A trust that may be ended by the person who created it.
Tangible Personal Property
Property other than cash, securities, or real estate, for example, a painting, stamp collection, or automobile.
Tenancy
An interest in real property.
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
The arrangement whereby property is held by a trustee (an individual or entity) for the benefit of another. The trustee holds legal title to the property. The beneficiary is the person or institution who benefits. The person establishing the trust is called the grantor, creator, donor, or settlor.
Trustee
The individual or institution entrusted with the duty of managing property placed in the trust.
Unified Credit
A federal tax credit that offsets gift tax and estate tax liability. The unified credit is being increased gradually from $192,800 in 1997 to $345,800 in 2006, which is equivalent to a combined gift and estate tax exclusion of $600,000 in 1997 to $1 million in 2006.
Will
A legally executed document that directs how and to whom a person’s property is to be distributed after death.
For more information on gift planning with the Sinsinawa Dominicans, contact
The Sinsinawa Dominicans
Office of Development
585 County Road Z
Sinsinawa, WI 53824-9701
(608) 748-4411, ext. 273
Fax (608) 748-4491
E-mail develop@sinsinawa.org
Neither the author nor this organization is engaged in rendering legal or tax advisory service. You should consult your attorney or tax advisors about the applicability of the legal principles contained on this web page.