Module 8 Vocab

Question 1

Adjusted Gross Estate

Answer 1

Adjusted Growth Estate =
The gross estate
- administrative expenses to settle the estate
- funeral expenses
- debts of the deceased
- uninsured theft and casualty losses to the estate
- claims against the estate.

Question 2

Administrator

Answer 2

Person who settles the probate estate when an individual dies without a will (intestate).

Question 3

Ancillary probate

Answer 3

An additional probate action required for real estate located in a state other than the deceased domicile.

Question 4

Annual exclusion

Answer 4

The $17,000 limit to tax free gifts by the donor

Question 5

Applicable Credit Amount

Answer 5

Pertains to the total amount you can give over your lifetime tax free

Question 6

Applicable Exclusion amount

Answer 6

The dollar value of taxable transferred property on which federal gift or estate tax does not have to be paid out of pocket because of the gift and estate tax applicable credit amount.

Question 7

Bequest

Answer 7

The act of transferring money in a will

Question 8

Buy-Sell agreement

Answer 8

Pertains to estate planning for a small business owner. It is a written agreement for a business partner or the business entity to buy the owners share to ensure that the beneficiaries get paid out.

Question 9

Community Property

Answer 9

Each spouse has 1/2 interest in the property regardless of how it is titled

Question 10

Comon Law State

Answer 10

A state that does not allow husbands and wives to own property as community property.

Question 11

Cross-purchase Agreement

Answer 11

A type of Buy-Sell agreement where each partner purchases insurance on the lives of the other partners in an amount that is sufficient for the surviving partners to purchase the deceased interest in the business.

Question 12

Dividend Reinvestment Plan

Answer 12

A plan sponsored by a corporation that makes it possible for investors to have cash distributions used for the purpose of acquiring additional shares.

Question 13

Entity Agreement

Answer 13

Pertains to estate planning for business owners. An entity agreement is a buy-sell agreement in which the business agrees to purchase the interest of each owner in the event of death and the business is applicant, owner, premium payer, and beneficiary of policies on the lives of each owner.

Question 14

Equitable Interest

Answer 14

A beneficial interest in property. (Ex: A trust has a beneficial interest in the property in the trust)

Question 15

Estate Liquidity

Answer 15

The ability for an estate to meet cash claims and taxes against it

Question 16

Executor

Answer 16

A representative responsible for distributing property when an individual dies with a valid will.

Question 17

General Trust

Answer 17

A trust to whom assets have been transferred.

Question 18

Life Insurance Trust

Answer 18

A trust that owns assets other than life insurance policies

Question 19

Generation-skipping Transfer Tax

Answer 19

A federal tax on gifts made in life or death to generations younger than your most immediate generation. There is a lifetime exemption, but the rest is taxed at the highest tax rate plus gift tax.

Question 20

Gift splitting

Answer 20

You can give the maximum annual amount to a husband and wife separately to increase the tax-free amount.

Question 21

Incidents of Ownership

Answer 21

Ownership rights to change beneficiary designations, borrow against policies, surrender or assign policies, elect settlement options, or receive policy dividends and other benefits for life insurance policies.

Question 22

Inter Vivos Transfers

Answer 22

Transfers that take place during a transferor’s lifetime

Question 23

Irrevocable Beneficiary Designation

Answer 23

A policy owner names a beneficiary but does not retain the right to change the named beneficiary.

Question 24

Legal Interest

Answer 24

An interest held by the legal owner of a property, such as a trustee of a trust.

Question 25

Life Interest

Answer 25

Entitles the holder to the income from a property or to the use of the property, or a portion of the property during their lifetime.

Question 26

Living Trust

Answer 26

A trust that is created during the grantor’s lifetime ad that is to be operative during their lifetime.

Question 27

Marital Deduction

Answer 27

An individual can give an unlimited amount of property to their spouse tax-free

Question 28

Power of Appoiontment

Answer 28

A right given to a person to appoint title to property owned by another.

Question 29

Present Interest

Answer 29

An unrestricted and immediate right to possess, use, or enjoy property.

Question 30

Probate

Answer 30

The legal process of distributing an estate.

Question 31

Property Interest

Answer 31

The rights and liabilities that come from ownership of a specific property.

Question 32

Remainder Interest

Answer 32

An interest in which the individual is entitled to the property after a specified period of time or after a life interest has ended.

Question 33

Separate Property

Answer 33

Property that belongs exclusively to a single spouse in a marriage.
- Inheritance
- Property owner prior to marriage
- Individually received gifts
- Purchases with individual funds

Question 34

Spousal elective share

Answer 34

State statute that allows a surviving spouse to elect to receive a certain amount of a deceased spouses estate to prevent the surviving spouse from being completely disinherited.

Question 35

Tenancy by the entirety (TBE)

Answer 35

A form of property ownership between husband and wife recognized by some states. It contains the right of survivorship and thus can act as a will substitute.

Question 36

Tenancy in Common

Answer 36

A form of property ownership between 2 or more people who my own unequal percentages of a property. It does not act in place of a will since there is no right of survivorship feature.

Question 37

Testamentary transfers

Answer 37

Transfers that take place at or after the transferor’s death.

Question 38

Testamentary Trust

Answer 38

A trust that is created under a will or Inter Vivos trust provision and does not become operative until after the creator’s death.

Question 39

Testate

Answer 39

Dying with a valid will

Question 40

Trust Corpus

Answer 40

Property owned by a trust.

Question 41

Uniform Gifts to Minors Act (UGMA)

Answer 41

Laws enacted in many states that enables gits to minor children. UGA account only allow gifts of cash, securities, or life insurance.

Question 42

Uniform Transfers to Minors Act (UTMA)

Answer 42

Laws enacted in many states that enable the transfer of property to minor children. UTMAs are more flexible that UGMAs and can have either Inter Vivos or Testamentary transfers.