Anthony Rinaldi and Company, LLC
1360 West 9th St., Suite 310
Cleveland, Ohio 44113
Phone: 216-515-1040
anthony@rinaldi-law.com

Glossary

These terms frequently appear in estate planning discussions and documents. Their definitions should help you understand the topic a little more. As with any word, however, a particular term may carry different meanings in different contexts. These definitions do not cover every conceivable situation.

Administrator

Administrator, in the state of Ohio, is the person who manages an estate when there is no will or trust. An administrator performs many of the same functions as an executor.

Administratrix

Administratrix is the feminine form of Administrator

Attorney in Fact

Attorney in Fact is the person holding power to act for another under a Power of Attorney document.

Basis

Basis is the value subtracted from the net sales price to calculate gain or loss for capital gains tax purposes.

Beneficiary

Beneficiary is the person who receives benefits from a will, insurance policy, or other document.

Charitable Remainder Trust

Charitable Remainder Trust is a trust naming a charity as beneficiary.

Community Property

Community Property is a system of property law determining the interests of spouses in property acquired during marriage. Includes everything acquired by a married couple during the marriage, except property acquired by gift or inheritance. Each spouse owns an equal, undivided one half interest of the Community Property. Community Property concepts come from continental civil law, as opposed to English common law. Only a few western states use the Community Property system.

Corporation

Corporation is a legal entity that is created to conduct business. The corporation becomes an entity--separate from those who founded it--that handles the responsibilities of the organization. Like a person, the corporation can be taxed and can be held legally liable for its actions. The corporation can also make a profit. The key benefit of corporate status is the avoidance of personal liability. The primary disadvantage is the cost to form a corporation and the extensive record-keeping that's required. While double taxation is sometimes mentioned as a drawback to incorporation, the S corporation (or Subchapter corporation, a popular variation of the regular C corporation) avoids this situation by allowing income or losses to be passed through on individual tax returns, similar to a partnership.

Conservator

Conservator is a person named by a court to act on behalf of someone who has become physically or mentally incapaciated.

Durable Power of Attorney

Durable Power of Attorney is a legal document appointing another person (the Attorney in Fact) to act on behalf of another, even if that person becomes disabled or incapacitated.

Durable Power of Attorney for Healthcare

Durable Power of Attorney for Healthcare is a legal document that gives another person the power to make certain decisions regarding healthcare.

Estate

Estate is the condition and circumstance in which a person stands with regard to those around him and his property. In other words, a person's possessions.

Estate Planning

Estate Planning: Strategies used to direct property to the proper beneficiaries, to minimize tax liability and other costs, and to arrange for property management in the event of physical or mental disability.

Estate Tax

Estate Tax is a transfer tax on estates exceeding the personal exemption amount. Currently, the top rate is 55%.

Executor

Executor is the person named in a will to manage an estate. The Executor's duties include collecting the estate assets, paying the estate's debts, and distributing the property according to the will.

Executrix

Executrix is the feminine form of Executor.

Fair Market Value

Fair Market Value is the price at which an asset passes from a willing buyer to a willing seller.

Family Limited Partnership

Family Limited Partnership is a form of holding property combining some of the advantages of holding property as a corporation with some of the advantages of owning property in a partnership. A Family Limited Partnership is sometimes used as a vehicle for a gift program to reduce or eliminate estate tax.

Fiduciary

Fiduciary is a person or institution legally responsible for the management, investment, and distribution of funds. The law places various responsibilities on fiduciaries to act in the interests of the beneficiaries.

Grantor

Grantor is the person who transfers assets into the trust. Sometimes also called a Settlor.

Gross Estate

Gross Estate is the total property or assets held by a person as defined for federal estate tax purposes.

Guardian

Guardian is a person legally charged with responsibility for a child.

Healthcare Power of Attorney

Healthcare Power of Attorney is a power of attorney naming a person to make medical decisions in the event of mental or physical incapacity.

Heir

Heir is the person who inherits the property.

Holographic Will

Holographic Will is a will entirely in the handwriting of the signer. Although valid in some states in some circumstances, most lawyers advise strongly against doing this.

Incapacitated Person

Incapacitated Person is a person who is impaired by reason of mental illness, mental deficiency, physical illness or disability, advanced age, chronic use of drugs, chronic intoxication, or other cause (except minority) to the extent of lacking sufficient understanding or capacity to make or communicate responsible decisions.

Inter Vivos

Inter Vivos: Between living persons. Usually refers to a trust created during the Trustor's lifetime for the benefit of another.

Intestacy, Intestate

Intestacy, Intestate is the state or condition when a person dies without a valid will. The law has rules determining who gets the estate property if a person dies Intestate.

Irrevocable

Irrevocable indicates something cannot be changed or terminated.

Irrevocable Trust

Irrevocable Trust is a Trust with terms that cannot be changed or terminated.

Joint Tenancy

Joint Tenancy with Right of Survivorship is a form for holding undivided title to property among more than one person. When of the co-owners dies, the other becomes the sole owner of the property.

Joint and Survivor Insurance

Joint and Survivor Insurance is a policy underwritten on the life of two persons, usually husband and wife or business partners.

Limited liability company (LLC)

Limited liability company (LLC), a hybrid form of partnership, is gaining in popularity because it allows owners to take advantage of the benefits of both the corporation and partnership forms of business. The advantages of this business format are that profits and losses can be passed through to owners without taxation of the business itself while owners are shielded from personal liability.

Living Trust

Living Trust: Commonly used instead of a will in order to avoid probate proceedings, a Living Trust is a revocable trust in which the grantor transfers some or all of his property to one or more Beneficiaries. Also called an inter vivos trust.

Living Will

Living Will is a legal document stating that the signer does or does not want to be kept alive by artificial or extraordinary means, when there is no expectation of recovery from a physical or mental disability. The enforceability of such documents are unclear in absence of applicable legislation.

Marital Deduction

Marital Deduction is a deduction allowing for the unlimited transfer of any or all property from one spouse to the other generally free from estate or gift tax.

Minor Child

Minor Child is a person who has not reached the age of majority. The age is usually 16-18 years of age, and varies from state to state.

Partnership

Partnership involves two or more people who agree to share in the profits or losses of a business. A primary advantage is that the partnership does not bear the tax burden of profits or the benefit of losses--profits or losses are "passed through" to partners to report on their individual income tax returns. A primary disadvantage is liability--each partner is personally liable for the financial obligations of the business.

Power of Appointment

Power of Appointment is the authority conferred by deed or will to make a gift or distribute property. A "general" power of appointment places no limitation on the receivers of the property. A "special" or "limited" power of appointment limits who can receive the property.

Power of Attorney

Power of Attorney is a legal document granting authority for a person to act for another.

Probate

Probate is the process of proving to a court of appropriate jurisdiction that a document is a deceased person's will. When proved to the satisfaction of the court, the document is received, filed, and recorded, and is then said to be admitted to probate or probated.

Probate Court

Probate Court is the court with the authority to recognize a document as a deceased person's will. The court executes the directive of the will. In Ohio, most counties have a separate probate department.

Representative

Representative is someone who is authorized to act on one's behalf, such as an executor or trustee.

Separate Property

Separate Property is everything owned by an individual that is not Community Property, such as property acquired before marriage and kept separate by the owner, property acquired during marriage by gift or inheritance, or a joint tenant's interest in joint tenancy property.

Settlor

Settlor is one who places assets in trust. Another term for Trustor.

Sole Proprietorship

Sole Proprietorship is the most common form of business organization. It's easy to form and offers complete managerial control to the owner. However, the owner is also personally liable for all financial obligations of the business.

State Death or Inheritance Taxes

State Death or Inheritance Taxes: Some states impose a tax on the transfer of property at a person's death.

Step-Up in Basis

Step-Up in Basis is at death, the Basis of most property becomes the Fair Market Value at the time of death, as opposed to the Fair Market Value at the time the decedent acquired the property.

Testamentary Trust

Testamentary Trust is a trust created by the terms of a will.

Testate

Testate is a person who dies with a valid will.

Trust

Trust is a legal document created by a grantor during his lifetime for the benefit of another.

Trustee

Trustee is the person named in a trust to manage the property and distribute the property according to the terms of the trust.

Will

Will is a legal document directing the disposition of property at death. A will takes force through the probate court.
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