|
|
Estate Planning
Definitions & Glossary
Below is a helpful list of terms and words found on this site or
related to estate and trust planning.
P
|
Pay on Death - Transfer on Death Account |
|
Account established at a financial institution wherein a beneficiary is named who is entitled to the account upon the account holder's death. The beneficiary inherits the account by operation of law even if the will or trust contains contrary intent.
|
|
Per Capita |
|
A distribution made equally to the number of persons at a specific level of relationship. For example, a distribution per capita to my grandchildren would be divided into as many equal shares as I have grandchildren, without consideration as to which of my children are the parents of my grandchildren.
|
|
Per Stirpes |
|
A distribution which is made by right of representation through family lines. If I have three children and one child predeceases me with two children of his own, then his two children each receive 1/6 while my two surviving children receive 1/3 each.
|
|
Personal Representative |
|
An individual or trust company nominated in a will and appointed by a court to settle the estate of the testator. Sometimes called executor or executrix in some states.
|
|
Pour Over Will |
|
A will that serves to "pour" assets into your trust. Generally speaking, when one has a revocable living trust, most of one's assets are to be distributed pursuant to the trust terms. You do not want assets subject to the probate process. Your will serves as a "safety net" catching any such assets that you did not fund into your trust during your lifetime, and pours them into your trust.
|
|
Power of Appointment |
|
The right and authority to transfer or dispose of property that you do not own. These are usually found in trusts established by someone else for your benefit. Depending upon the terms, this right can cause the value of the assets to be included in your estate for estate tax purposes.
A Limited, or Special Power of Appointment usually is limited to an ascertainable standard so that the power holder does not recognize a gift or estate tax on the exercise of the power.
A General Power of Appointment, on the other hand, would include the assets subject to the power in one's estate, so that transfers under a general power of appointment result in either gift tax or estate tax.
|
|
Predeceased Child Exception to the GSTT |
|
The predeceased child exception limits the application of the generation skipping transfer tax (GSTT) where you leave amounts to a grandchild if said grandchild's parent who is your child has predeceased you. The grandchild steps up into the child's generation for determining whether the GSTT applies.
|
|
Preemptive right |
|
The privilege of a shareholder to maintain a proportionate share of ownership by purchasing a proportionate share of any new stock issued. In most states, an existing shareholder has the right to buy additional shares of a new issue to preserve his equity before others have a right to purchase shares of the new issue.
|
|
Present Interest Gifts |
|
A gift of a "present interest is one that the beneficiary has a current right and/or power to enjoy. Annual exclusion gifts must qualify as a gift of a present interest to be considered gift tax free. Crummey powers are often used to qualify gifts that would otherwise not be enjoyed until a future date as a present interest gift.
|
|
Pretermitted |
|
Refers to a beneficiary, usually a spouse or a child, who became a spouse or was born after the creation of the will or trust that existed at the time of the death of the testator/grantor. In such event, the law presumes that the testator/grantor would have added the spouse or child had he or she had the chance, so that individual receives as if he or she was a party to the will or trust.
|
|
Principal |
|
Refers to the assets of the trust themselves, as opposed to the income earned on those assets.
|
|
Private Letter Ruling (PLR) |
|
A taxpayer may request that the IRS issue a Private Letter Ruling for a particular transaction to determine the IRS' position on such matter. Private Letter Rulings may not be used as legal precedent for any other taxpayer, as they are valid only for the party requesting the ruling.
|
|
Probate |
|
A court process wherein your last will and testament is confirmed as such by a probate court, letters of administration are issued to your personal representative (executor) so that he or she can act as the legal representative of your estate, creditors and taxes are cleared, accountings are made and distribution to beneficiaries achieved. The probate process is public, and the files may be reviewed by the public. Revocable trusts are generally preferred to wills since they are a private process and avoid the probate court. Contrary to what many believe, probate is not a tax.
|
|
Prudent Investor Rule |
|
A trustee of a trust is held to the "prudent investor rule" when holding and investing assets for the trust beneficiaries. If the trustee violates the prudent investor rule he or she may be held personally liable to the beneficiaries for their losses or damages.
|
|
