Oregon Estate Planning Glossary

A

Advance Directive
A set of written instructions specifying a person’s wishes regarding medical care and treatment. It also allows a person to appoint a health care representative to make medical care decisions, if the person is unable to act.

Annual Gift Tax Exclusion
The amount a person can gift each year without any gift or estate tax consequences. The annual exclusion is currently $15,000 per donor, per recipient, per calendar year.

Annuity
Any continuing payment with a fixed total annual amount for a specific length of time or for life.

Attorney-Client Privilege
The attorney-client privilege allows for confidentiality of oral and written communication between a client and the attorney. This protects the client’s ability to be honest with the attorney without fearing future disclosure.

Attorney-in-Fact
A person designated in a power of attorney to act as agent for the principal.

B

Beneficiary
A person (or legal entity) who receives money or other property from a Trust or another arrangement such as life insurance

C

Codicil
An amendment to a will.

Community Property
Property that a married couple acquires when the couple resides in a community property state. Community property states are as follows: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. If a married couple has community property, it is imperative that they notify their tax advisors and attorney of this because community property has distinct income tax treament and other features.

Conservator
A person or institution who has the legal authority to make decisions about the financial affairs of a protected person, such as a minor or incapacitated person. The Court supervises a Conservator, and annual accountings are generally required.

Credit Shelter Trust
A Trust that is created at the first spouse’s death in which the primary purpose of the trust is to take advantage of certain available tax credits. Existing trusts of this type should be reviewed carefully under current law.

D

Donee
A person who receives a gift from a donor.

Donor
A person who gives a gift.

Decedent
A person who has died.

Distributee
A person (or legal entity) who receives money or other property from a Will.

Durable General Power of Attorney
A document in which a person appoints an agent, who has legal authority to manage the person’s financial and legal affairs. The term “Durable” means that the document should remain effective even if the person becomes incapacitated. The term “General” means that the document is meant to be effective for all the assets owned by the person; the alternative is for the document to only be a Specific Power of Attorney, which would be effective with regard to only a specific asset or other limited circumstances.

E

Elective Share
The amount that a surviving spouse can receive from a decedent’s estate if the decedent disinherited the surviving spouse. For example, if a decedent executed a Will and did not provide for any assets to be distributed to the surviving spouse, Oregon law will protect the surviving spouse by allowing the surviving spouse to claim a certain amount of assets. The amount of assets that can be claimed by a surviving spouse ranges from 5% to 33%, depending on the length of the marriage.

Estate
An estate consists of all assets and debts left by a person at death. Includes both real estate and personal property.

Estate Tax
A tax imposed on a person’s “taxable estate” (the total value of the person’s assets, less obligations and certain exemptions). An estate tax comes into effect at a person’s death. There are federal and state estate taxes.

Executor
See Personal Representative.

F

Fiduciary
A legal or ethical relationship of trust between two or more parties. For example: a trustee is a fiduciary who must prudently invest property on the behalf of a trust beneficiary.

Financial Statement
A written compilation of assets and liabilities at a particular point in time for either an individual or a business.

Funding
Trust Funding refers to the process of transferring assets from an individual’s name to the name of the trust. For example: if an individual “funds” a revocable trust with a residence, a new deed is recorded with the County in which the residence is located. The new deed will state that the trust now owns the property. If the individual dies and the trust owns the property, the trustee will distribute (or manage) the property as required by the terms of the trust. Because the decedent’s name is not on the deed, probate will not be necessary to change ownership. See Probate.

G

Gift Tax
A tax on gifts made during a person’s lifetime.

Generation Skipping Transfer Tax
A tax which is imposed upon certain transfers (including inheritances and gifts) to recipients who are more than 37.5 years younger than the donor or who are more than one generation removed from the donor.

Grantee
The recipient of property (usually real property).

Grantor
A person who grants or conveys property. Also, a person who creates a Trust, also known as a Settlor.

Guardian
A person who has the legal authority (and the corresponding duty) to make decisions about the day-to-day personal care and custody of another person. Compare this with a Conservator, who is appointed to make financial decisions for another person.

H

Heir
A person who is entitled to receive a share of a decedent’s estate if the decedent died without a will, or according to the terms of the will if named in the document.

I

Income Tax Basis
The cost of an asset for purposes of calculating gain or loss upon a subsequent sale or other disposition.

Intervivos Trust
See Living Trust.

Intestate
If a person dies without a Will, the person is “intestate”. Oregon state law provides a default distribution of the person’s assets and usually family members will receive the assets under intestacy provisions.

Irrevocable Life Insurance Trust
A type of trust that is set up so that life insurance proceeds will be excluded from a decedent’s gross estate. This is an estate tax avoidance strategy.

Irrevocable Trust
A type of trust that is set up by an individual (called a “Settlor”) during the Settlor’s lifetime and the Settlor generally cannot modify or terminate the trust until the terms or purposes of the trust have been completed. An irrevocable trust is frequently set up for estate tax avoidance or creditor protection purposes.

L

Living Trust
A Living Trust is a legal document that appoints someone (a “trustee”) to manage the trust property and gives detailed instructions on how the property will be managed and distributed. A living trust is established primarily to provide for probate avoidance. A Living Trust is also called a revocable inter vivos trust, or more simply, a Revocable Trust. Compare this with a Testamentary Trust.

Living Will
(Also, see Advance Directive.) A Living Will is usually a separate document that specifies what actions should be taken in the event that a person is in a coma or other physical or mental state with no hope of recovery.

M

Marital Assets
All property acquired throughout the course of the marriage regardless of how title is held. Assets may include motor vehicles, real estate, bank accounts, stocks, bonds, cash, pensions, insurance, profit sharing plans, and other property. Certain other assets, such as gifts or inheritances, may receive different treatment.

P

Personal Representative/Executor
The Personal Representative is the person (or sometimes a financial institution) appointed by a Court or in the decedent’s will to be responsible for gathering the decedent’s assets and determining whether there are any debts to be paid. Another term for this role is “Executor”.

Pourover Will
A will that generally provides that the majority of the assets owned by the decedent at death will be “poured-over” to a revocable trust created previously by the decedent. This operates primarily as a back-up, in case the revocable trust was not fully funded during the decedent’s lifetime.

Probate
Probate is the legal process by which a Court oversees the distribution of a deceased person’s assets and the payment of any debts under the terms of the will.

Q

Qualified Plan
A type of retirement plan in which money contributed to a retirement plan qualifies for an income tax deduction in the year that the money was contributed to the plan. Funds in the plan grow on a tax-deferred basis; distributions are taxed upon withdrawal from the plan.

R

Required Minimum Distributions
Annual withdrawals that must be made from IRAs and other retirement accounts, usually beginning at age 70 ½.

Revocable (or Living) Trust
A trust in which a Settlor reserves the right to revoke or change its provisions. The Revocable Trust becomes irrevocable at death or incapacity.

S

Settlor
The person who creates a trust. Also called a “Grantor” or “Trustor”.

Spousal Rollover
If retirement benefits are payable to a surviving spouse, the spouse has an option to place the funds into his or her own retirement plan to defer income tax on the funds.

T

Testate
Dying with a will. Compare this with “Intestate”.

Testator/Testatrix
The person who makes a will.

Testamentary Trust
A type of trust that is created under the will after a person dies and is funded with the decedent’s assets. For example, a parent of minor children may sign a Will that provides that testamentary trusts will be established if the parent passes away prior to the children reaching age 35.

Trust
A legal arrangement in which assets are managed by one person or entity for the benefit of another.

Trustee
The person legally responsible for managing and distributing trust assets.

W

Will
A document that appoints fiduciaries and directs the disposition of one’s property after death.