Glossary of Terms

A-F  |  G-L  |  M-R  |  S-Z

---

A

B

• Beneficiary

  A beneficiary is any person who gains an advantage and/or profits from something. In the financial world, a beneficiary typically refers to someone eligible to receive distributions from a trust, will, or life insurance policy.

C

• Charitable Remainder Trust

  
  A charitable remainder trust is a type of irrevocable trust that provides financial benefits to both individual beneficiaries and a qualified charitable organization. The grantor contributes assets to the trust, which then pays income distributions to designated beneficiaries (often the grantor or family members) for a specified period — either for life or a set number of years. After that term ends, the remaining trust assets are distributed to a tax-exempt charitable organization. CRTs are commonly used to reduce income and estate taxes, generate an income stream, and support philanthropic goals.

• Crummey Notice 

  A Crummey Notice is a written notification sent by the trustee to beneficiaries of certain irrevocable trusts when a contribution (gift) is made to the trust. The notice informs each beneficiary of their temporary right to withdraw the portion of the gift allocated to them, typically for a limited window of time (e.g., 30 days). This process is required to ensure that the gift qualifies as a present interest under IRS rules, which is necessary for the gift to be eligible for the annual gift tax exclusion. Without providing Crummey Notices, the contribution may be treated as a future interest and not qualify for the exclusion.

D

• Designation of Successor Trustee

  A legal document used to name or update who will serve as successor trustee of a trust after the current trustee can no longer serve. The ability to make or change this designation is determined by the terms of the trust agreement. 

• Distribution Committee

  A group, often named in a trust agreement or formed by a trust company, responsible for deciding if, when, and how trust distributions are made to beneficiaries. The committee must act in accordance with the terms and discretion outlined in the governing trust document.

• DNR (Do Not Resuscitate)

  A medical order that instructs healthcare providers not to perform CPR or other life-saving measures if a person’s heart stops or they stop breathing. DNR orders are typically put in place by individuals with serious health conditions who wish to avoid aggressive resuscitation efforts.

• Durable Powers-of-Attorney (DPOA)

  A durable power of attorney is a legal document that authorizes an individual (the agent) to manage financial, legal, and property matters on behalf of another person (the principal), including during the principal’s incapacity. The scope of authority is defined in the document and may be broad or limited. Some jurisdictions require specific language for real estate transactions. A DPOA does not cover healthcare decisions, which are addressed in a separate healthcare power of attorney.

• Dynasty Trust

  A dynasty trust is a long-term trust designed to pass wealth across multiple generations while minimizing estate, gift, and generation-skipping transfer (GST) taxes. Unlike traditional trusts that may terminate within a set period, dynasty trusts are intended to last for many decades—or even indefinitely—depending on applicable state laws. Many states have modified or abolished the traditional “rule against perpetuities,” which historically limited a trust’s duration to “a life in being plus 21 years.” These modern laws often extend the permissible trust term to 90, 365, or even 1,000 years, and in some jurisdictions, allow trusts to exist in perpetuity. This extended or perpetual duration enables families to preserve and protect wealth over successive generations.

E

• Estate Tax Return (Form 706)

  An estate tax return is filed with the IRS with respect to a decedent and will outline, among other things, all of the decedent's assets and liabilities which he or she owned at the date of death and their value for estate tax purposes.

• Executor(s)

  An executor of an estate is an individual appointed to administer the last will and testament of a deceased person. The executor's main duty is to carry out the instructions to manage the affairs and wishes of the deceased. The executor is appointed either by the testator of the will (the individual who makes the will) or by a court, in cases wherein there was no prior appointment.

F

• Foreign Bank and Financial Account Reporting (FBAR)

  FBAR refers to Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts. US persons who have ownership or control (for example signature authority) of foreign accounts with an aggregate value of over $10,000 in the calendar year are required to file.

G 

• Generation Skipping Tax (GST)

  The generation-skipping transfer tax is a federal tax that results when there is a transfer of property by gift or inheritance to a beneficiary who is at least 37½ years younger than the donor. Generation-skipping transfer taxes serve the purpose of ensuring that taxes are paid when assets are placed in a trust, and the beneficiary receives amounts in excess of the generation-skipping estate tax credit.

• Generation Skipping Tax (GST) Exemption

  The amount that can be allocated as exempt from generation-skipping tax. The GST tax exemption amount, which can be applied to generation-skipping transfers (including those in trust) during 2022, is now $12.06 million, which was increased from $11.7 million. The tax rate over the exemption amount is 40 percent.

• Generation Skipping Tax (GST) Exemption

  The amount that can be allocated as exempt from generation-skipping tax. The GST tax exemption amount, which can be applied to generation-skipping transfers (including those in trust) during 2022, is now $12.06 million, which was increased from $11.7 million. The tax rate over the exemption amount is 40 percent.

• Gift Tax

  A gift tax is a federal tax paid by an individual who transfers something of value to another individual without receiving something of similar value in return. Gifts can be anything of significant value, such as large sums of money or real estate, and the tax can be imposed even if the person donating never intended it to be a gift. The Internal Revenue Service (IRS) sets limits on how much you're allowed to gift before you must file a return and before you are taxed. Sums over the annual thresholds are reportable and count toward a lifetime gift tax exemption amount. Once this generous allowance is exhausted, the gift tax becomes payable.

• Gift Tax Returns

  A gift tax return is a federal tax return that must be filed under certain conditions by the giver of a gift. The return is known as Form 709.

• Grantor Retained Annuity Trust

  In a grantor retained annuity trust (GRAT), a grantor makes an irrevocable gift to a trust that is not subject to gift, generation skipping or estate tax. The trust typically makes annuity payments to the grantor and the excess value is retained in trust for the benefit of the trust's beneficiaries.

• Grantor 

  A grantor is an individual or other entity that creates a trust (i.e., the individual whose assets are put into the trust) regardless of whether the grantor also functions as the trustee. The grantor may also be referred to as the settlor, trustmaker, or trustor.

• Grantor Trust

  A grantor trust is typically any trust, revocable or irrevocable, which is taxed to the grantor.

H

• Healthcare Power-of-Attorney

  The healthcare power of attorney designates someone - the powerholder - who can act on behalf of the party granting the power, with respect to most healthcare matters as specifically spelled out in the agreement in the grantor's inability to act.

• HIPAA Releases

  HIPAA release forms allow patients to authorize their health provider to disclose information to a third party of their choosing. This can be particularly important in non-spousal situations, including parents and adult children.

I

• Insurance Trust

  An insurance trust is an irrevocable trust set up with a life insurance policy as the asset, putting the proceeds of the insurance policy outside of the insured's taxable estate. The trust is typically the owner and beneficiary of the insurance policy and the grantor typically makes gifts to the trust to pay any insurance premiums.

• Insurance Trust

  An irrevocable trust cannot be revoked by the grantor. The grantor, having effectively transferred all ownership of assets into the trust, legally removes all of their rights of ownership to the assets and the trust. Irrevocable trusts are generally created to minimize estate taxes, preserve access to government benefits, and to protect assets. This is in contrast to a revocable trust, which allows the grantor to modify or revoke the trust. A revocable trust has different benefits than an irrevocable trust, like avoiding probate, and is part of any minimally viable estate planning.

J

K

L

• Lifetime Exemptions

  The lifetime estate tax exemption is the amount of money or assets the government permits you to give away over the course of your lifetime without having to pay the federal estate tax. This limit is adjusted each year. The lifetime estate tax exemption amount increased from $11.7 million to $12.06 million this year. The estate tax rate remains 40 percent above the exemption amount. In the case of married couples, the exemption is "portable," meaning that an unused exemption at the death of one spouse can be preserved and used by the other spouse at the death of the second spouse.

• Living Will

  A living will—also known as an advance directive—is a legal document that specifies the type of medical care that an individual does or does not want in the event they are unable to communicate their wishes.

M

N

O

P

• Power-of-Appointment

  Powers of appointment are typically created and governed by the terms of a trust agreement and allow the powerholder, during their lifetime or on death, to direct the distribution of trust property in accordance with the terms of the power granted.

• Power-of-Appointment Committee

  Often created within a trust company or a trust agreement, the Power of Appointment Committee is typically empowered to exercise a power of appointment in accordance with the terms of the applicable trust agreement.

Q

R

• Revocable Trust

  In a revocable trust, the grantor typically has the power to amend or revoke the trust during the grantor's lifetime. The revocable trust is an important piece of a minimally viable estate plan as it helps an estate avoid probate and directs the disposition of the grantor's estate. During lifetime, the revocable trust is effectively the alter-ego of the grantor.

S

• Special Purpose Trust

  A trust established for a non-charitable purpose, such as to benefit specific family members (e.g., family members with special needs), pets, maintain a cemetery, maintain an art collection or antiques, or maintain a family vacation home.

• Successor Trustees

  A successor trustee refers to the person(s) or institutional trustee(s) who will be responsible for administering a trust after the death, retirement, resignation or incapacity of an existing trustee.

T

• Testamentary Power of Appointment

  See powers of appointment. In this case, the power is exercised upon the powerholder's death, typically by a codicil to the powerholder's Will.

• Trust Protector

  The trust protector is a role created in a so-called directed trust. The trust protector’s role, in essence, is to supervise the trustee and to protect the beneficiaries.

• Trustee

  A trustee is the person(s) or institution(s) that hold and administer property or assets in trust for the benefit of the beneficiaries of the trust.

U

V

W

• Wills

  A will is a legal document that spells out your wishes regarding the care of your children, as well as the distribution of your assets after your death. In a minimally viable estate plan, special bequests are made in the Will and the balance of the estate pour-over into a revocable trust for further disposition. This helps avoid probate and maintain privacy.

• Will Codicils

  A codicil is a legal document that acts as a supplement to your last will and testament. In it, you can make changes to your will without having to rewrite your entire original will document. Codicils are also often used to exercise a testamentary power of appointment.

X

Y

Z

---