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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.
S
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S Corporations |
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Refers to Subchapter S Corporations under the Internal Revenue Code. Subchapter S Corporations do not pay tax on corporate level earnings. Instead, the income flows through to the shareholders of the S Corporation who must recognize and pay tax on that income. The income is reported on the corporate tax return Form 1120S and the shareholder portion of the earnings is reported on a Schedule K-1.
There are restrictions on what kind of shareholders may own S Corporation stock without destroying the flow through treatment of the corporation's earnings. See Qualified Subchapter S Trusts.
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Second to Die - Last to Die Insurance |
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An insurance policy that covers a husband and wife's joint lifetimes. The policy typically does not pay to the beneficiaries unless and until both spouses are deceased. Commonly used to "prepay" estate tax liability and are commonly owned within irrevocable life insurance trusts.
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Self Proving Will or Trust |
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Provisions found in the signature pages of a will or trust that "self proves" the will or trust so that the witnesses don't have to verify their signatures after the death of the testator/grantor.
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Settlor |
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The maker and party who signs his or her trust. Also known as a "Grantor".
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Special Power of Appointment |
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See Power of Appointment
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Specific Devise |
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A gift of a specific amount or item. If your will says "I leave my home to my daughter Suzie" , this is a specific devise of your home.
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Spendthrift Provision |
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A clause in a trust or will that prohibits the beneficiary from pledging, alienating or appointing any interest in the trust or will in advance of receiving a distribution. The purpose is to limit the beneficiary's creditors from reaching trust assets before they are actually distributed to the beneficiary.
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Split Interest Trust |
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Refers to a trust that has different income and remaindermen beneficiaries.
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Spousal Elective Share |
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Where a will or trust does not leave the spouse sufficient assets or property to cover a spouse's minimum interest as provided under state law, and where no valid nuptial agreement is in place where the surviving spouse waived his or her rights to a minimum portion of the decedent's estate, state law often provides the spouse the right to make an elective share against the estate and/or trust
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Sprinkle or Spray Power |
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A trustee's right to distribute income (and sometimes principal) in any proportions to several named beneficiaries rather than equally. For example, when you establish a trust for your children, you cannot know which child may have greater needs at some future time, so the trust may give the trustee discretion to pay more income to the child most in need at any given time.
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Step Up in Tax Cost Basis |
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Beneficiaries receive a step up in tax cost basis equal to the date of death fair market value on most assets. Example: Suppose I purchase Coca Cola stock at $1/share and it has appreciated to $10/share. If I sold it the day before my death I recognize a $9/share capital gain. If instead I leave the stock to my daughter who then sells it the day after my death she gets a step up in tax cost basis to $10 share and thus there is no capital gain.
Exceptions: Income with respect to a decedent assets don't receive a step up in tax cost basis nor do holdilngs inside of certain entities, such as S Corporations.
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Successor Trustee |
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A trustee who follows the original or prior trustee, the appointment of whom is provided for in the trust instrument.
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Supplemental or Special Needs Trust |
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A type of trust that is usually established for a disabled beneficiary, to provide for the needs of the beneficiary over and above those satisfied by benefits received from federal or state programs. This type of trust may limit distributions so as not to disqualify the beneficiary from federal or state entitlement programs, such as Medicaid.
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