QUALIFIED DOMESTIC RELATIONS ORDER (QDRO)
At the time of divorce, this order would be issued by a state domestic relations court and would require that an employee’s ERISA retirement plan accrued benefits be divided between the employee and the spouse.
QUALIFIED PERSONAL RESIDENCE TRUST (QPRT)
A Qualified Personal Residence Trust (“QPRT”) is a type of trust which permits the Trustmaker to transfer a qualified residence to a trust and retain use of the residence for a period of years. After the period of years, the residence passes to the remainder beneficiaries. This technique is often used to allow the Trustmaker to use the residence for a period of years while removing property appreciation from the Trustmaker’s taxable estate, if the Trustmaker lives beyond the period of years specified in the Trust.
QUALIFIED TERMINABLE INTEREST PROPERTY (QTIP)
An irrevocable trust for the benefit of the grantor’s spouse which qualifies for the gift and/or estate tax marital deduction, must provide that the spouse receives all of the trust accounting income at least as often as annually for life (e.g., cannot provide for reduction or cessation of income interest in the event of a spouse’s remarriage) and that no other person has any interest in the trust while the spouse is alive; principal benefit is that the grantor can control the disposition of the trust property at the spouse’s death and still obtain the gift and/or estate tax marital deduction.
Land, and generally whatever is erected or growing upon or affixed to land. Also rights issuing out of, annexed to, and exercisable within or about land. A general term for lands, tenements, and hereditaments; property which, on the death of the owner intestate, passes to his heir.
One entitled to the remainder of an estate after a particular reserved right or interest has expired.
REVOCABLE LIVING TRUST
A revocable trust created by a person during his or her lifetime that provides instructions on how and when trust property should be distributed to beneficiaries during the trustmaker’s lifetime and thereafter. Inter vivos is Latin for “between the living.” A trust in which the creator reserves the right to modify or terminate the trust.
RIGHT OF SURVIVORSHIP
A right as to property owned as joint tenants or as tenants by the entirety, whereby one or more joint owner succeeds to the interest of a deceased joint owner.
An SCIN (self canceling installment note) is an installment debt obligation that, by its terms, is extinguished at the death of the seller. It is similar to a private annuity in that an asset is sold to the child on an installment basis. However, with an SCIN, the installments are shorter than the seller’s life expectancy and the child usually would pay a “risk premium” in the form of an above-market interest rate to the parent as consideration for the cancellation provision. Generally, nothing will be included in the seller’s gross estate, but any deferred gain on the installment obligation will be reported on the seller’s estate income tax return.
In community property states, all property which is not held commonly by a married couple is considered separate property. In general, it is property owned by one spouse in which the other spouse does not own an interest.
A person who establishes a trust. The term settlor is used interchangeably with the terms “trustor” and “grantor”.
An individual who cannot handle money wisely and spends it wastefully.
One designed to provide for the needs of a spendthrift while protecting the corpus of the trust.
An arrangement under which two parties (usually a corporation and employee) share the cost of a life insurance policy and split the proceeds.
Each spouse is entitled to give any individual $13,000 in a calendar year without tax consequences. If a married couple tries to give more than $13,000 to an individual, they must file a gift tax form declaring that the gift is split between them.
A term for a married person, either a husband or wife.
A power to act on the occurrence of some certain criteria, such as an illness or incompetency. The power is said to spring into existence upon the occurrence of the event. The agent’s power to act for the principal under a durable power of attorney is usually a springing power.
Tax credits, the most appealing type of tax deductions, are subtracted directly, dollar for dollar, from your income tax bill.
The portion of an estate that is subject to federal estate taxes or state death taxes. Technically, all of an estate is subject to federal estate taxes, but because of the unified credit, only estates with a value over the exemption equivalent amount actually have to pay any estate taxes.
The amount of income used to compute tax liability. It is determined by subtracting adjustments, itemized deductions or the standard deduction, and personal exemptions from gross income.
TENANCY IN COMMON
A form of co-ownership. Upon the death of a co-owner, his or her interest passes to his or her chosen beneficiaries and not to the surviving co-tenants.
TERM LIFE INSURANCE
Type of life insurance that provides temporary protection for a specified number of years.
A trust, set up in a will, which does not become effective until the death of the testator.
An individual who has executed a valid will is said to be testate.
An individual who executes a will.
A legal document by which one person, called the trustmaker, trustor, donor, grantor or settlor, places property in the title of the trust for the benefit of himself or another. Normally involves trustor, trustee, who is charged with managing the trust, and beneficiary, in whose behalf the trust is established.
A person or corporation appointed by a grantor to take control of trust property and administer it for the benefit of a beneficiary named by the grantor in the trust instrument. The grantor may also designate himself as the trustee and beneficiary. The trustee has a strict duty of accountability (fiduciary) to the beneficiary.
The person who creates a trust (also known as a grantor, settlor or trustor).
A person who establishes a trust. The term trustor is used interchangeably with trustmaker, settlor, grantor, or donor.
A credit allowed against both the federal estate and gift taxes. To the extent the credit is not used against an individual’s lifetime gift tax liabilities, it is available to offset estate tax obligations. The credit in 2014 is $5,340,000. The Unified Credit is also referred to as the Applicable Exemption Amount.
UNIFORM GIFTS (Transfers) to MINORS ACT (UGMA or UTMA)
A method to hold property for the benefit of a minor, which is similar to a trust but the rules are governed by state law.
UNIVERSAL LIFE INSURANCE
A type of life insurance that combines a death benefit with a savings element that accumulates tax deferred at current interest rates, subject to change, but with a guaranteed minimum. Under a universal life insurance policy, the policyholder can increase or decrease his or her coverage, with limitations, without purchasing a new policy. Universal life is also referred to as “flexible premium” life insurance. Access to cash values through borrowing or partial surrenders can reduce the policy’s cash value and death benefit, increase the chance that the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured. Policy loans or withdrawals will reduce the policy’s cash value and death benefit. Additional out-of-pocket payments may be needed if actual dividends or investment returns decrease, if you withdraw policy values, if you take out a loan, or if current charges increase. There may be surrender charges at the time of surrender or withdrawal and are taxable if you withdraw more than your basis in the policy. Any guarantees are contingent on the claims-paying ability of the issuing company. The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased.
VARIABLE UNIVERSAL LIFE INSURANCE
A type of life insurance that combines a death benefit with an investment element that accumulates tax deferred. The account value can be allocated into a variety of investment sub-accounts. The investment return and principal value of the variable sub-accounts will fluctuate; thus, the policy’s account value, and possibly the death benefit, will be determined by the performance of the chosen sub-accounts and is not guaranteed. Withdrawals may be subject to surrender charges and are taxable if the account owner withdraws more than his or her basis in the policy. Policy loans or withdrawals will reduce the policy’s cash value and death benefit and may require additional premium payments to keep the policy in force. There may also be additional fees and charges associated with a VUL policy. Any guarantees are contingent on the claims-paying ability of the issuing company. Variable universal life is sold by prospectus. Please consider the investment objectives, risks, charges, expenses, and your need for death-benefit coverage carefully before investing. The prospectuses, which contains this and other information about the variable universal life policy and the underlying investment options, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.
Persons for whom guardians are appointed, usually minors or incompetent persons.
WILL (LAST WILL & TESTAMENT)
An instrument (testament) executed by a testator which sets out the testator’s instructions for winding up his/her affairs after death. The will has no effect until the testator dies. It is common for a Testator to nominate Guardians for their minor children in a will.
WHOLE LIFE INSURANCE
A type of life insurance that offers a death benefit and also accumulates cash value tax deferred at fixed interest rates. Whole life insurance policies generally have a fixed annual premium that does not rise over the duration of the policy. Whole life insurance is also referred to as “ordinary” or “straight” life insurance. Access to cash values through borrowing or partial surrenders can reduce the policy’s cash value and death benefit, increase the chance that the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured. Policy loans or withdrawals will reduce the policy’s cash value and death benefit. Additional out-of-pocket payments may be needed if actual dividends or investment returns decrease, if you withdraw policy values, if you take out a loan, or if current charges increase. There may be surrender charges at the time of surrender or withdrawal and are taxable if you withdraw more than you basis in the policy. Any guarantees are contingent on the claims-paying ability of the issuing company. The cost and availability of the life insurance depend on factors such as age, health, and the type and amount of insurance purchased.