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Estate Planning
Definitions & Glossary
Below is a helpful list of terms and words found on this site or
related to estate and trust planning.
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In Terrorim Clause |
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A clause that penalizes a beneficiary for challenging a provision in a will or a trust. Many state laws treat such provisions as invalid, having no legal force or effect.
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Incidents of Ownership |
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All rights in an insurance policy. To remove insurance from your estate for federal estate tax purposes you must give up all incidents of ownership over the policy.
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Income |
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Usually refers to interest or dividends earned on the principal, or corpus of the trust. May get more difficult to determine when you have "wasting assets" such as annuities, or "income in respect of a decedent" items such as minimum required distributions from an IRA account. Capital gains, for example, are deemed principal under most state laws rather than income, even though capital gains are taxed on one's income tax return.
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Income with Respect to a Decedent |
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Usually refers to assets and accounts that have grown tax deferred over the lifetime of the account owner, and are taxed upon the distribution of amounts out of the account. Annuities and IRA accounts are prime examples of income with respect to a decedent. These items generally carry with them income tax that the beneficiaries will recognize.
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Inheritance Tax |
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A tax based on the value of the assets and property that a taxpayer inherits. Inheritance taxes are imposed in a number of estates. Contrast with the estate tax, which is the value on the transfer from a decedent to his or her beneficiaries.
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Inheritor's Protected Trust - The Family Estate & Legacy Inheritor's Protected Trust |
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A trust designed to limit the ability of a beneficiary's creditors or predators from taking the trust assets from the beneficiary.
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Insurable Interest |
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legally, to have the ability to purchase insurance on the life of another. Without an insurable interest, you may not be able to purchase a policy or receive the death benefits therefrom. Family members and business partners are usually deemed to have an insurable interest, while investors who are only "betting" on the life expectancy of an individual usually do not.
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Intentionally Defective Grantor Trust (IDGT) |
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Usually is an irrevocable trust that is, by design, treated as a grantor trust for federal income tax purposes (so that the grantor, and not the beneficiaries is taxed on its income) while for transfer tax purposes the value of the trust is treated as a gift and outside of the grantor's estate for federal estate tax purposes. May be used to transfer appreciated assets from the grantor to his or her beneficiaries while at the same time avoiding having the grantor recognize capital gain on the transfer.
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Inter Vivos Trust |
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See Revocable Trust. An inter vivos trust is a trust created during the grantor's lifetime; to be distinguished from a testamentary trust, one that springs into being upon the death of the grantor.
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Internal Revenue Code |
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Sometimes referred to as the "Code" or "IRC". These are statutes consisting of all federal tax laws, including income, gift, generation skipping and estate taxes. These laws are further defined and implemented by the IRS through Treasury Regulations, Revenue Procedures and Revenue Rulings. Fact specific rulings that apply only to the taxpayer requesting the ruling are known as Private Letter Rulings.
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Interpolated Terminal Reserve Value |
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Similar to the "cash surrender value" of a life insurance policy, but is the amount calculated to be the fair market value of the policy for gifting purposes when transferring an insurance policy to another person or to a trust.
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Intestate |
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To die without a will. Most states have intestacy statutes that provide who inherits your estate when you have no will that directs who you would want to inherit your assets.
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Irrevocable Life Insurance Trust (ILIT) |
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An irrevocable trust that usually holds life insurance policy contracts on the grantor's life. Usually designed to exclude the life insurance proceeds from the grantor's estate for federal estate tax purposes. May also have Crummey powers built within the trust to qualify contributions to the trust (usually for premium payments) as annual exclusion gifts for federal gift tax purposes.
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Irrevocable Trust |
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A trust by its terms cannot be revoked by its settlor and can be terminated only under the trust terms or with the consent of someone whose interest is adverse to the settlor's, such as one of the beneficiaries of the trust. Irrevocable trusts are commonly used to remove assets from the settlor's estate for federal estate tax purposes.
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