Glossary

Bezaire & Leathers

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Glossary

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BASIS OF PROPERTY

The value used to determine gain or loss for income tax purposes. The basis is usually the cost, although it may be a different amount depending on the law governing the transaction. (See Stepped-up Basis).

BENEFICIARY

The person or persons entitled to receive money or property under the terms of a trust or will. Under a revocable living trust, the person creating the trust (the trustor) is generally also the beneficiary during his or her lifetime. The trust will name who the beneficiary will be after the trustor dies.

CAPITAL GAINS TAX

A type of income tax paid when a person sells appreciated property. The amount of the capital gains tax is calculated by subtracting the basis of the property from its sale price. Under the Tax Reform Act of 1986, the amount of the gain is added to the income of the taxpayer in the year it is received.

CHOSES IN ACTION

Intangible assets such as contract rights.

CODICIL

An addition to a will that may add to, or change its provisions. Codicil must be signed with the same formalities as a will.

COMMUNITY PROPERTY

A form of property ownership between husband and wife, each spouse owning equal shares. Unlike property owned in joint tenancy, in this case the one-half interest of each spouse in the community property may be left to persons other than the spouse by will or trust. If one spouse dies without leaving a will or trust, the other spouse will inherit the community property.

CONSERVATORSHIP

A proceeding in which the Superior Court assumes control of an individual’s assets because that individual is not able to deal with his or her own assets. Usually the family must prove at a court hearing that the individual is incompetent. A court-appointed manager must post a bond. A Revocable Living trust can avoid a conservatorship by providing for the management of assets in the event of incapacity.

EXECUTOR

The individual or corporation appointed in a will to handle the probate of an estate upon the death of the testator; also called a personal representative. The executor chooses the probate attorney.

FEDERAL ESTATE TAXES

The amount of property that will pass tax free upon death. As of 2024 this exemption amount is $13,610,000 (indexed with inflation).The increased federal gift and estate tax exemption amounts are set to expire on December 31, 2025, under the 2017 Tax Cuts and Jobs Act. Unless there are legislative changes, the exemptions will revert to $5 million per person, adjusted for inflation, starting January 1, 202

FEDERAL ESTATE TAX EXEMPTION

The taxes imposed on the transfer of assets upon death. Federal Estate Taxes are determined by the size of the estate.

FIDUCIARY

A person charged with the duty of trustee on behalf of beneficiary. Executors and trustees are fiduciaries.

GIFT TAX ANNUAL EXEMPTION

Tax-free gifts that may be made to any number recipients each year. The following is for tax year 2024: Each tax-free gift made by a single person may not exceed $18,000 per donee. Each tax-free gift made by a husband and wife may not exceed $36,000 per donee.

GROSS VALUE

For purposes of calculating probate fees, the gross value is the value of the estate before debts are paid. For example, if a home is worth $100,000 but has $80,000 mortgage, the gross value is $100,000 and the probate fees will be based on the $100,000.

GUARDIAN

The person who has legal responsibility for the care and management of a child during his or her minority. In California, minority ends at age 18.

HEIR

The person who would inherit property under state and federal law.

INHERITANCE TAXES

The death taxes imposed by the state. In 1982, California abolished inheritance taxes, but many states still have them.

INTER VIVOS TRUST

The Latin term for living trusts, as contrasted to a testamentary trust established by a will.

INTESTATE SUCCESSION

The law that determines who receives an estate when an individual dies without a will or trust.

IRREVOCABLE TRUST

A type of trust where the trustor gives up the right to change the terms of the trust and gives up control of the assets in the trust. In contrast, see definition of Revocable Trust.

JOINT TENANCY

A form of property ownership by two or more person. Joint tenancy has what is called the “right of survivorship” meaning the surviving joint tenant gets the property upon the death of a joint tenant regardless of what a will or trust might provide.

MULTIPLE PROBATE

If an individual dies who owned real property in more than one state, ordinarily there must be a separate probate proceeding in each state where the real property is located. If title to the real property is in more than one state, ordinarily there must be a separate probate proceeding in each state where the real property is located. If title to the real property is held in a revocable living trust, multiple probates are avoided.

NET-VALUE

The value of an estate after debts are paid. Federal estate taxes are based on the net value of the estate.

PERPETUITIES (RULE AGAINST)

A complicated rule, the purpose of which is to keep property from being frozen in a trust beyond a certain period of time. The perpetuities clause in a trust causes the trust to terminate automatically at the required time. This protects the legality of the trust.

PERSONAL PROPERTY

Movable property as contrasted with real property (land). Personal property includes furniture, automobiles, equipment, cash and stock.

PORTABILITY

In simple terms, portability of the federal estate tax exemption between married couples means that (when or upon) the first spouse’s death, if the value of the estate does not require the use of all of the deceased spouse's federal exemption from estate taxes, then the amount of the exemption that was not used for the deceased spouse's estate may be transferred to the surviving spouse's exemption so that he or she can use the deceased spouse's unused exemption plus his or her own exemption when the surviving spouse later dies.

POUROVER WILL

A will accompanying a trust, which provides that any assets intentionally or unintentionally left outside of a trust shall be transferred into the trust upon death.

PROBATE

A legal procedure in which the Superior Court assumes jurisdiction over the assets of someone who has died. The Superior Court supervises the payment of debts, taxes, and probate fees, then, supervises the distribution of the remainder to the persons named in a will, or the heirs if there is no will. (See Intestate Succession). Probate can last from approximately one year to two years or more depending on the complexity of the estate. Ordinary probate fees are set by statute and the court may approve extraordinary fees. Generally, probate fees run from approximately 4%-10% of the gross value of the estate.

PROBATE CODE SECTION 240

Probate Code Section 240 is often referenced in a revocable trust to provide who shall receive the share of a beneficiary who dies prior to the trustor. It provides that the share of a deceased child shall be distributed to his or her issue (lineal descendants). In contrast to “Right of Representation,” if all children are deceased, the estate is distributed equally to the grandchildren rather than each group of grandchildren receiving what their parent would have received.

QUALIFIED TERMINABLE INTEREST PROPERTY QTIP TRUST

The special type of trust is used most frequently by a married person whose estate exceeds the federal exemption amount and who wants to restrict the surviving spouse’s use of the trust estate after the death of the first spouse. The Q-Tip Trust allows the surviving spouse to enjoy the income of the trust, but preserves assets for the predeceased trustor’s family or other heirs. A married couple can create a Q-Tip Trust. A married person can create his or her own individual Q-Tip Trust.

QUITCLAIM DEED

A legal instrument used to release someone’s right, title, and interest in a piece of real property.

REAL PROPERTY

Land and property permanently affixed to land.

REVOCABLE TRUST

A special type of trust used as an alternative to a will. The trust remains under the complete control of the trustor. The trustor has the power to use all of the assets of the trust during his or her lifetime. The trustor also retains the power to amend or revoke the trust, and to change who the ultimate beneficiaries will be.

RIGHT OF REPRESENTATION

The principle by which the descendants of a predeceased beneficiary receive that beneficiary’s share.

SMALL ESTATE AFFIDAVIT

A document used to claim property outside of probate. If you have the legal right to inherit personal property, like money in a bank account or stocks, and the estate is worth $184,500 or less, you may not have to go to court to have the property transferred to you. You may be able to use a Small Estate Affidavit to have the property transferred to you. You give this Affidavit to the person, company, or financial institution (such as a bank) that has the property so that they can legally transfer it to your name.Type your paragraph here.

STATUTORY WILL

A will on a preprinted form approved by the State. A statutory will must go through probate.

STEPPED-UP BASIS

When property is inherited, the person who inherits that property receives a new basis in the property (See Basis of Property). The new basis is the value of the property at the date of the owner’s death.

TRUST

A method of holding title to property. The trustor transfers title to assets to the trustee with instructions to hold the assets for the benefit of a beneficiary. In the case of a Revocable Living Trust, which is generally used as an alternative to a will, the trustor, the trustee, and the beneficiary are usually the same person during the trustor’s lifetime. Successor trustees and successor beneficiaries are named in the trust instrument. Holding title in this manner gives the successor trustee the power to transfer title to the assets to the successor beneficiaries after the trustor’s death without going through a probate proceeding.

TRUSTEE

The person who manages and controls the assets in a trust. Often the trustor and trustee of a Revocable Living Trust are the same person or persons.

UNLIMITED MARITAL DEDUCTION

Any amount can be left to a spouse tax-free as long as it is left outright to the spouse or in a Q-TIP trust, so long as the surviving spouse is a United States citizen. A special trust known as a Qualified Domestic Trust (Q-DOT) can be used to defer federal estate taxes if the surviving spouse is not a U.S. citizen.

WILL

A document that provides for the disposition of a person’s estate after his or her death. It can be a formal will, witnessed by at least two persons, or it can be a holographic will, which is not witnessed. A holographic will must be all in the handwriting of the person making it and must dated and signed. All wills go through probate.