Wills, Trusts, and Probate Law Chap 9

A/B trust

a trust for married couples that divides in two upon the death of the first spouse

Annual gift tax exclusion amount

the amount of property that an individual may gift each year without incurring tax liability

Applicable exclusion amount

the amount that can be transferred free from estate and gift taxation

The amount of property that can be placed in a trust and sheltered from federal gift and estate taxation by virtue of the unified credit

Bypass trust/credit shelter trust

a trust where the grantor’s property is held by the trustee; as a result, it is sheltered from or bypasses federal taxes up to the amount of the unified credit

Charitable trust

a trust that benefits a qualified charity or the public in general and lowers or avoids the imposition of estate and gift taxes

Crummey powers

The right of a beneficiary under a life insurance trust to withdraw money which amounts to a present interest

Crummey trust

a life insurance trust, transfers to which qualify for the annual gift tax exclusion

Dynasty trust/generation-skipping trust

a trust designed to allow a gift to skip a generation

Internal Revenue Code (IRC)

contains federal tax laws, including those related to gift, income and estate taxes

Irrevocable life insurance trust (ILIT)/life insurance trust

excludes the life insurance proceeds payable on the death of the grantor from federal estate taxation

A trust designed to hold life insurance on the life of the grantor or another person in order to exclude the life insurance proceeds payable on the death of the grantor from federal estate taxation

Marital trust

A trust designed to hold the remainder of the decedent's property and is sheltered from the federal estate tax by virtue of the unlimited marital deduction

Qualified terminable interest property (QTIP) trust

a marital trust that holds property for a surviving spouse who will not incur tax liability due to the unlimited marital deduction

Rule against perpetuities

prevents someone from controlling the disposition of his/her property for an indefinite period of time in the future. A property interest is invalid unless:

1) when created, it is certain to vest or terminate within the lifetime of an individual then alive or within 21 years after the death of that individual

2) the interest vests or terminates within 360 years after its creation

Special needs trust/supplemental needs trust

a trust created to enable the grantor to provide for the continuing care of a disabled person

Spendthrift trust

a trust designed to avoid making distributions of property directly to irresponsible beneficiaries or their creditors

Unified credit

a person may transfer a certain amount of property without being liable to pay estate, gift or generation-skipping transfer taxes

Unlimited marital deduction

this deduction allows one spouse to transfer property without restriction to the other spouse at any time, without incurring liability for estate or gift taxes