Administrator: A person or a corporation who is appointed by the court to administer your estate when you die without a Will (intestate).
Annual Exclusion: Each year, each individual can give away up to $13,000 per recipient with no gift tax, income tax or estate tax consequences. Not all gifts qualify for the annual exclusion.
Applicable Credit Against Gift or Estate Taxes: The applicable exemption credit is that amount which can pass free of estate tax on your death or free from gift tax on transfers for less than fair value. Under the current law (2012) the amount of assets which can pass free of federal estate tax is $5,000,000 (but is scheduled to decrease to $1,000,000 January 1, 2013). The amount which can pass free of Minnesota estate tax, however, is only $1,000,000. The lifetime federal exemption for gift tax purposes is $5,120,000 for 2012 (but is scheduled to decrease to $1,000,000 January 1, 2013), and under the current law there is no gift tax in Minnesota. All these exemption amounts are lifetime amounts.
Attorney-in-Fact: A person you appoint in your Power of Attorney to handle financial and property transactions for you.
Beneficiary: A person who receives property under your Will or Trust, or who receives benefits as a designated beneficiary under a retirement plan, an insurance policy, an annuity or a bank or investment account with named pay on death beneficiaries.
Conservator: An individual, a corporation or an agency appointed by the court to be responsible for the care of the person and/or to manage the property of the protected person.
Conservatorship: A legal proceeding in which a court appoints an individual, a corporation or any agency to be responsible for the care of the protected person and/or the management of the property of the protected person. It is less restrictive of the protected person's civil rights than a guardianship.
Decedent: A person who has died.
Designation of Temporary Custodian: A document in which you are able to appoint someone to have joint custodianship of your children with you in the event you are unable to carry out the responsibilities of parenting your minor children. It is a short term document - the authority granted under this document is generally good for a period of time less than one year, but that time frame can be extended in certain circumstances. The authority granted with this document does not survive your death.
Disclaimer: A disclaimer is an irrevocable and unqualified refusal by an individual to accept ownership of an interest in property. A disclaimer can be a "qualified" disclaimer or a disclaimer that does not satisfy the rules for a qualified disclaimer. The distinction between the two types of disclaimers is a tax law, but a "qualified" disclaimer must satisfy the federal tax rules and Minnesota's state statutes for what is a disclaimer. If an individual makes a "qualified" disclaimer as defined by the Internal Revenue Code, and if the disclaimer satisfies Minnesota's property laws with respect to the disclaimer, the disclaimed interest will be treated as if the person making the disclaimer had predeceased the person from whom the interest in property is to be received, and the disclaimer will be effective for both state and federal estate tax, gift tax and generation-skipping tax purpose.
Durable Power of Attorney: A written document which appoints a person to transact financial and property for the principal. The document specifically provides that its authority will continue even if the principal is incompetent or otherwise incapacitated.
Estate: The property a person owns. This can include intangible property such as stock and bonds, cash value life insurance, annuities or bank accounts, or tangible property such as vehicles and household goods, or it can include real estate.
Estate Tax: A tax imposed by the State and Federal governments on the estate (assets/property) you leave upon your death. Under the current law (2009), the Federal government doesn't begin taxing your estate until the estate exceeds $3.5 million dollars, but Minnesota starts taxing when your estate exceeds $1 million dollars. These amounts change periodically, so you need to have your estate plan reviewed periodically to be sure you are not unnecessarily exposing your family to unnecessary taxes. Assets which are subject the estate tax include all assets which are in your name or in which you have any interest on the date of your death. They include probate and non-probate assets. After taking into consideration the applicable credit, the minimum effective beginning rate for federal estate taxes rate is 37% and the maximum is 45%. Under the current law (2009), there will be no federal estate in 2010, but on January 1, 2011, the federal government will begin taxing estates at $1,000,000, the same as Minnesota. All of these rules about federal taxes are up in the air right now, so we don't really know how the discussion is going to be resolved. Stay tuned...........
Fiduciary: A person, corporation or agency that stands in a position of trust to you. Examples include a guardian, a conservator, a personal representative, a trustee, etc.
Generation -skipping Transfer Tax: This is a tax imposed on gifts or estate transfers to recipients who are 2 or more generations younger than the person making the transfer. The person making the transfer (the transferor) might be an individual making a gift during his/her lifetime, or it could be a transfer out of his/her estate upon his/her death. The generation-skipping transfer tax under the current law is 45%. The maximum amount that can be transferred by skipping a generation is $3,500,000 during the transferor's lifetime.
Gift Tax: The gift tax is a federal tax imposed on transfers during the lifetime of the transferor for less than fair value at tax rates between 18% and 45%, depending on the size of the gift, but only on that amount which exceeds the annual exclusion from the gift tax ($13,000 in 2009). Each individual has a lifetime exclusion of $1,000,000 and that exclusion is in addition to the annual exclusion.
Grantor: A person who creates a trust and transfers assets into the trust (also sometimes called the "Settlor" or the "Donor"); or a person who transfers real property to another.
Gross Estate: The total value of all the property you own, including but not limited to your home, your bank accounts, your investments, your vehicle, the death benefit of your life insurance policies, your 401(k), IRAs, some other retirement plans, etc. This is determined before any adjustments are made for debts and other claims against the estate.
Guardian: A person, a corporation or an agency appointed by the court to be responsible for the care of a person and/or to manage his or her property. You may nominate a guardian for your minor children in your Will, but a court still has to approve and appoint that guardian.
Guardian ad Litem: An individual, corporation or agency appointed by the court for a party, or more frequently for a minor child whose parents are in the process of divorce, for the purposes of the litigation. The responsibility of the guardian ad litem (GAL) is to advocate for either the incapacitated adult or the minor child only during the litigation in which he or she was appointed. It does not require the GAL to be responsible for the physical needs of the individual.
Guardianship: A legal proceeding in which a court appoints an individual, a corporation or any agency to be responsible for the care of the protected person and/or the management of the property of the protected person. It is more restrictive of the protected person's civil rights than a conservatorship.
Health Care Directive: A document which states your wishes with respect to your health care if you cannot communicate or make medical decisions. You can name someone in this document to make medical decisions for you if you cannot. This document is still sometimes referred to by the public as a Living Will, although Minnesota no longer approves the Living Will.
Incapacity: The condition of being unable to make decisions for yourself and/or care for yourself. A court or a physician will generally make this determination, but you can create documents which define when you will consider yourself to be incapacitated.
Incompetent: Incompetence is similar to incapacity, but is generally more severe.
Inheritance Tax: Minnesota no longer has an inheritance tax. We now have an estate tax.
Inter Vivos Trust: A trust which is created during your lifetime. It can own property which is held and managed for your benefit or for the benefit of others.
Intestate: The condition of having died without leaving a valid Will.
Irrevocable Trust: A trust created and funded during your lifetime or a trust created in your Will which becomes irrevocable after your death. The trust can be for your benefit or for the benefit of others. With extremely limited exceptions, it cannot, however, be changed once it is signed and funded.
Joint Tenancy with Right of Survivorship: A method of ownership which provides that the surviving joint owner will receive the entire interest in the property upon the death of the other joint owner or owners. It can be used for real estate, bank accounts, stock accounts, vehicles, etc. Joint ownership takes an asset out of the purview of a Will and does not require probate to pass title to the survivor.
Living Trust: A "living trust" is really a revocable trust. It is just very often referred to as a living trust. It is created and funded during the grantor's lifetime and can hold assets for the benefit of the grantor or for other beneficiaries. It can be revoked or changed at will and is one method of avoiding probate.
Living Will: The Living Will is still available in Minnesota. However, it is a document that is only effective when you are in a "terminal condition" and cannot communicate. Both conditions must be present for the Living Will to be effective. The Health Care Directive is a preferable document because it is effective anytime you cannot make decisions regarding your health care. You may designate a health care agent in either document to make health care decisions for you if you cannot, but the Health Care Directive is a broader document than the Living Will.
Marital Deduction: A special provision with respect to the estate tax which permits all transfers on death to a spouse to pass free of the estate tax. Currently (2009) this deduction is unlimited, but the estate tax laws change periodically so you need to have your estate plan reviewed periodically by an experienced estate planning attorney.
Non-Probate Property: Any property that has a joint owner or designated beneficiary. This might include but is not limited to a home that is owned in joint tenancy, real estate that was transferred with a Transfer on Death deed, bank accounts owned in joint tenancy or with a pay on death beneficiary, stock accounts in joint tenancy or with a transfer on death beneficiary, life insurance policies, retirement accounts, annuities, etc.
Personal Representative: The person or corporation appointed in your Will to be in charge and manage your estate after your death. Some people still refer to this as the Executor, although Minnesota hasn't used that designation for quite some time.
Power of Appointment: A right given to another person, generally in a Will or a Trust, which gives that person the right to decide how to distribute your property on your death. A "general" power of appointment is very broad, whereas a "limited" or "special" power of appointment places restrictions on who may receive your property. This power needs to used only under the direction of an experienced estate planning attorney because the general power of appointment can result in your estate being included in the estate of the person to whom you gave the power of appointment for estate tax purposes. That can be an unintended consequence and can result in unnecessary estate taxes.
Power of Attorney: A document in which financial authority is given to another. A Power of Attorney can be either a "common law" or a "statutory" Power of Attorney. The rules are different with respect to each.
Probate: The process by which the state court system supervises the administration of your estate, makes sure all your debts are paid and your property is distributed to the persons entitled to receive it.
Protected Person: A vulnerable person who has been placed under the protection of the court via a conservatorship or guardianship proceeding. This person is sometimes referred to as the "conservatee" or the "ward."
Trust: A written document which provides for the ownership and management of your property. It can be a revocable trust or an irrevocable trust. It can be an inter vivos trust or a testamentary trust. In very limited circumstances, a trust might even be created by the particular facts and circumstances of the situation.
Trustee: An individual or a corporation (generally a bank trust company) who has agreed (or has been appointed by a court) to be in charge of and to manage and distribute the property owned by your trust.
Will: A document with very specific rules about how it is to be signed an witnessed which states how you want your property distributed upon your death.
