Accumulation Trust
A trust that may pay out its income currently or accumulate it for distribution in a future year.
Adjusted Basis
In income tax law, the taxpayer's basis in an asset, reduced for depreciation or depletion deductions properly allowable with respect to the asset.
Annual Exclusion (or annual per donee gift tax exclusion)
A gift tax exclusion of $15,000 per donee for gifts made each year. The gift must be of a present interest. The exclusion is unlimited for direct payments of a donee's medical or tuition expenses.
Alternative Valuation Date
A date other than the date of death as of which the executor of an estate may elect to value all of the estate's assets. The alternative valuation date is the date six months after the date of death, except for assets that have been sold, exchanged, or otherwise disposed of before that date, as to which the alternative valuation date is the date of sale, exchange, or disposition.
Anti-Byrum Rule
A statutory rule reversing the Supreme Court's decision in Byrum v. United States, under which a decedent's gross estate includes the value of closely held stock given away before death if the decedent retained the right to vote the stock.
Attorney-in-Fact
The person authorized to represent the principal under a power of attorney.
Attorney, Power of
See Power of Attorney
Bargain Sale
A sale, usually among family members or between an individual and a charity, at less than the full fair market value of the property.
Basis
In income taxes, the amount representing the taxpayer's cost of an asset, against which any amount realized on its sale or other disposition is compared to determine the amount of taxable gain, if any, and which may be depreciated, if the asset is depreciable.
Basis, Adjusted
See Adjusted Basis
Beneficiary-Owned S Corporation Trust
A trust that owns stock in one or more S corporations, and that may do so without jeopardizing the corporation's special tax status because the trust is treated as owned entirely by someone other than its grantor.
Beneficiary-Owned Trust
A trust that is treated as owned by someone other than its grantor, by virtue of 678.
Buy-Sell Agreement
A contract or provision in corporate documents or a partnership agreement under which one or more persons or entities (the partnership or the corporation) agree to buy the interests of the other parties to the agreement, at certain times (usually in lieu of other lifetime sales or transfers and at death), at a stated price and on stated terms.
Capital Gains
Gains recognized from the sale or exchange of capital assets (most property other than inventory and certain specifically excluded types of assets).
Capital Gains, Long-Term
Capital gains recognized on the sale or exchange of a capital asset held for more than six months.
Capital Gains, Short-Term
Capital gains recognized on the sale or exchange of a capital asset held for not more than six months.
Charitable Lead Trust
A charitable trust under which the charity receives an annuity interest (a fixed dollar amount, or a percentage (required to be at least 5 percent) of the annual or initial value of the trust assets), for a term of years, after which a noncharitable person or group receives the remainder interest.
As a planning tool, Lead trusts offer the most benefit when the 7520 Rate is low, as the fictional return will favor the remainder beneficiary.
Charitable Remainder Annuity Trust
A charitable remainder trust under which the noncharitable income interest is expressed as a fixed dollar amount or percentage (at least 5 percent) of the initial value of the trust assets, and which does not permit subsequent additions.
Charitable Remainder Trust
A trust under which an individual or group of individuals receive an income or annuity interest for life or a term of years, and a charity receives the remainder interest thereafter.
Charitable Remainder Unitrust
A charitable remainder trust under which the noncharitable income interest is expressed as a percentage (at least 5 percent) of the annual value of the trust assets.
Closely Held Corporation
A corporation the stock of which is owned by relatively few persons (often under thirty-five), rather than being subject to public trading.
Commissioner
The Commissioner of Internal Revenue.
Community Property
A concurrent ownership of property between spouses under the law of some states under which each spouse owns an undivided one-half interest in all property acquired during the marriage (often with specific exceptions).
Complex Trust
A trust that is not a simple trust, because it does not have to distribute all of its income currently, or because it makes a charitable distribution, or because it distributes principal.
Concurrent Ownership
The ownership of property by more than one person at the same time. Takes the form of community property, tenancy by the entirety, tenancy in common, or joint tenancy.
Controlled Corporation
A corporation the majority of the stock of which is owned by one or a very few persons.
Credit, Unified
See Unified Credit
Cross-Owned Life Insurance
Policies of life insurance on the lives of a husband and wife, where each spouse owns the policy on the life of the other spouse.
Cross-Purchase Agreement
A buy-sell agreement under which the other partners or stockholders agree to buy the interest of a deceased or transferring partner or stockholder. Distinguished from a redemption agreement.
Crummey Demand Power (or trust)
A power granted to an individual under a trust instrument, whereby the individual can, for a limited period following any gift to the trust (usually thirty through ninety days), withdraw all or some stated portion of the gift. The power is used to make gifts to the trust present interests qualifying for the annual gift tax exclusion.
Defective Trust
A trust that is taxed as a grantor trust, usually because of a power inserted specifically to achieve this result, as with some life insurance trusts.
Depletion Deduction
An income tax deduction for the annual diminution of value in a natural resource (such as an oil and gas interest) caused by its exhaustion from productive use.
Depreciation Deduction
An income tax deduction for the wear, tear, and obsolescence of business and investment assets having a useful life.
Direct Skip Gift
A gift to the donor's grandchild or other person assigned to a similar or more remote generation (see "Skip Person"), upon which a generation-skipping transfer tax may be imposed.
Doctrine of Equitable Recoupment
The Doctrine that a party litigating a tax claim in a timely proceeding may, in that proceeding, seek recoupment of a related, and inconsistent, but now time-barred tax claim relating to the same transaction. See United States v. Dalm, supra at 608 (interpreting Bull v. United States, 295 U.S. 247 [15 AFTR 1069] (1935), and Stone v. White, 301 U.S. 532 [19 AFTR 503] (1937)).
A claim of equitable recoupment requires: (1) That the refund or deficiency for which recoupment is sought by way of offset be barred by time; (2) that the time- barred offset arise out of the same transaction, item, or taxable event as the overpayment or deficiency before the Court; (3) that the transaction, item, or taxable event have been inconsistently subjected to two taxes; and (4) that if the subject transaction, item, or taxable event involves two or more taxpayers, there be sufficient identity of interest between the taxpayers subject to the two taxes so that the taxpayers should be treated as one. See United States v. Dalm, supra at 604-605 & n.5; Coohey v. United States, 172 F.3d 1060 [83 AFTR 2d 99-1791] (8th Cir. 1999); Parker v. United States, 110 F.3d 678, 682-683 [79 AFTR 2d 97-1766] (9th Cir. 1997)
Durable Power of Attorney
A Power of Attorney that does not end on the disability of the principal. Authorized in every state but not in the District of Columbia.
ESOP
A variation on the classic Voting Trust is the Trust created as part of an Employee Stock Ownership Plan, or ESOP. An ESOP is a qualified retirement plan that invests only in the stock of the sponsoring company. Like any retirement plan, there has to be a plan document adopted by the sponsoring company, but in addition there has to be a trust that holds the stock of the company purchased or issued in accordance with the plan.
Like a classic Voting Trust, the ESOP trust holds the voting rights of the common stock and acts to protect the rights of the beneficiaries of the trust by voting for the directors and officers of the Corporation. Unlike a classic voting trust, the ESOP trust cannot receive the stock directly from the existing shareholders, as their shares must be purchased by the Trust either by taking out a loan from a bank or by issuing a promissory note to the current shareholders. The beneficiaries of the trust are employees of the corporation and their respective share is determined by the terms of the ESOP plan document adopted by the sponsoring corporation, and not by the ESOP trust itself, as the beneficial ownership of the shares in the Trust will change as the employee?s vesting in the retirement plan changes.
Additionally, the ESOP trust traditionally has an employee of the corporation (such as the CFO) act as the Trustee of the ESOP trust, though an independent Trustee can be used.
Estate Freeze
The use of one or more techniques (such as a recapitalization of a corporation or partnership, or a buy-sell agreement) to fix the value of a business interest or other property for estate tax purposes, causing all subsequent appreciation to inure to someone other than the interest's owner.
Executorship
This is the most limited and benign form of legal delegation. The individual or firm has been instructed to complete the settlement of an estate and to comply with a discrete set of directives that the client has authorized counsel to perform in his/her name even if the individual is deceased. Once the specified tasks have been completed, the Executor's work is usually finished.
Exemption Equivalent
The exemption that is equivalent to the estate or gift tax sheltered by the unified credit. Massachusetts no longer follows the Federal estate tax law, and the gift Tax exemption is no longer unified with the estate tax law.
Family Attribution Rules
Several tax rules under which stock or other interests owned by one family member are treated as owned by another family member.
Family Corporation
A corporation in which one or more family members are stockholders, often receiving their stock by gifts from other stockholder/family members.
Family Partnership
A partnership in which one or more partners receive their interests by gifts from other partners.
Funded Life Insurance Trust
A life insurance trust that holds significant assets other than life insurance policies.
General Power of Appointment
See Power of Appointment, General
Generation-Skipping Transfer
A transfer to a grandchild or other individual who is at least two generations below that of the donor, or to a trust for the benefit of such individuals, upon which a generation-skipping transfer tax may be imposed.
Generation-Skipping Transfer Tax
A tax imposed on a generation-skipping transfer.
Gift/Leaseback
A gift of property followed by the donor's leasing the property back.
Gift-Splitting
A donor's making of a gift as to which the donor's spouse elected on a timely gift tax return to be treated as the donor of one half of the gift, thus enabling the use of the donor's spouse's unified credit and annual gift tax exclusion.
Graegin Note
Note from decedent's estate for payment of estate taxes due to illiquidity of assets in estate and the desire to avoid an economic loss due to a "forced sale" of assets. Based on "Estate of Cecil Graegin" TCM 1988-512. Also see topical memo Deductibility of Interest payments on loans to pay estate taxes.
Grantor Retained Annuity Trust
A trust under which the grantor retains an annuity interest for a term of years, followed by a transfer of the trust funds to the named individual or individuals.
Grantor Retained Income Trust
A trust under which the grantor retains an income interest for a term of years, followed by a transfer of the trust funds to the named individual or individuals.
Grantor Retained Unitrust
A trust under which the grantor retains an annuity interest for a term for years, measured by a percentage of the annual value of the trust assets, and followed by a transfer of the trust funds to the named individual or individuals.
Grantor S Corporation Trust
A trust that owns stock in one or more S corporations, and that may do so without jeopardizing the S corporation's tax status because the trust is wholly treated as owned (under 671 through 677) by a grantor who is a U.S. citizen or resident alien.
Grantor Trust
A trust that is treated as owned, in whole or in part, by its grantor under 671 through 677, and 679.
Group-Term Life Insurance
A term life insurance policy covering a group of persons, usually employed by the same employer.
Guardianship
This is a more extensive and more generalized form of legal delegation because it usually involves the care and maintenance of a living person and covers an unknown set of future circumstances over an unknowable period of time. As a result, the attorney is given much more flexible powers than those involved with an executorship. These powers are focused more upon securing certain outcomes intended by the client for the best interests of the person, rather providing a precise and detailed list of instructions. Because the future is uncertain, no one can know exactly what powers will be required. The client and the attorney must operate almost as partners in a joint venture to ensure that a thoughtful plan is in place so that there is a reasonable likelihood of achieving the desired outcome.
Health Care Proxy
In Massachusetts, living wills are not valid, but you can appoint others to make medical decisions if you are unable to communicate your desires to your physician. If you wish to restrict the level of heroic medical measures used to keep you alive you can include that in the proxy, but the ultimate decision rests with whomever you pick. Usually, we suggest your wife and family members.
Holding Period
The length of time a taxpayer is deemed to have held an asset. This is important in distinguishing between long-term and short-term capital gains.
Hybrid Buy-Sell Agreement
A buy-sell agreement under which both the entity (partnership or corporation) and the other owners (partners or stockholders) have rights and obligations to buy the interest of a transferring or deceased partner or stockholder.
Incidents of Ownership
Economic benefits from the ownership of a life insurance policy. If a deceased holds at death one or more incidents of ownership on a policy of insurance on his or her own life, the proceeds are part of his or her gross estate for estate tax purposes.
Irrevocable Trusts
Clients often set up irrevocable trusts, which are another class of inter vivos trusts, for other beneficiaries. In an irrevocable trust the all rights to the property transferred to the trust are given up. The basic difference between an inter vivos trust and an outright gift is that the former provides the beneficiary with competent property management and with protection from himself and others who might misuse or waste the gift. If the transferred property constitutes a taxable gift, the value is added to his gross estate at his death for purposes of determining his estate tax liability. Since outright gifts and irrevocable trusts differ only in terms of control over and protection of the beneficiary, the tax consequences are basically the same.
Installment Gift
A gift made by selling property on the installment basis (receiving a note calling for a series of installment payments) and forgiving the payments annually.
Installment Sale
A sale in which the seller receives a note calling for a series of installment payments, rather than a sale wholly for cash.
Invasion Trust
A trust over which the beneficiary may demand the distribution of all or some portion of the principal at any time or at specific times.
Joint Tenancy
A type of concurrent ownership under which each owner owns an undivided interest in the whole property, and when one owner dies, the surviving joint owners succeed to his or her interest.
Leveraged Purchase
A purchase of an asset paid for largely with the buyer's debt, rather than for cash.
Limited Power of Appointment
See Power of Appointment, Limited
Long-Term Capital Gains
See Capital Gains, Long-Term
Long Term Care Insurance (LTC)
LTC pays for long term care services, such as home care or care in a nursing home or assisted living facility, not otherwise covered by Medicare.
Net Gift
A gift as to which the donee agrees to pay the donor's gift tax liability.
Nonrecourse Debt
A debt on which the specified security alone may be foreclosed upon to satisfy the debt.
Oil and Gas Royalties
Royalty Interest
An interest in an oil and gas property entitling the true owner to a share of oil and gas production free of costs of exploration,-development and production. Royalty interests can be in the form of Working Interest, Overriding Interest and Landowner's Interest.Working Interest
The interest in an oil and gas leasehold which is subject to the payment of the expenses of development, operation and maintenance of a well and is subject to the payment of Landowner's Royalty and Overriding Royalty Interests.Overriding Royalty Interest
A royalty interest typically retained by geologists or third parties that interest bears no part of the cost of drilling- completing or operating the well.Landowner's Royalty
The interest retained under an oil and gas lease by the person who has the authority to grant an oil and gas lease and which bears no part of the cost of drilling or producing the oil and natural gas.
Original Issue Discount
Under the income tax law, a system under which interest is imputed on a debt instrument that fails to state a total interest equal to the applicable federal interest rate for loans of that term.
Outright Gifts
Gifts to an individual not made through a trust.
Part-Sale/Part-Gift
A transfer of property for less than its fair market value, creating a transaction that is in part a sale (receipt by the transferor of some consideration for the property) and in part a gift (receipt by the transferee of some of the property for no adequate consideration).
Per Se Rule on Incidents of Ownership
A position of the IRS, now apparently relaxed, that incidents of ownership on a life insurance policy held by the insured in a fiduciary capacity would cause the insured's estate to include the proceeds, notwithstanding that the insured could receive no personal benefit from the trust or estate.
Personal Holding Company
A closely held corporation that primarily serves to own the stock of other corporations.
Personal Holding Company Tax
A surtax imposed on closely held corporations that receive most of their income from passive sources, such as rents, royalties, interest, and dividends.
Pick-Up Tax
A state death tax measured by the allowable federal estate tax credit for state death taxes.
Pooled Income Fund
A charitable trust created and maintained by a charitable institution to which individual donors may make gifts and as to which the donor or some designated person retains for life (or a term of years) the right to a proportionate share of the trust's income, the remainder being vested in the charity.
Power of Appointment
A right held by one person to designate who shall possess or enjoy property that that person does not own. Estate and gift taxation are governed by 2041 and 2514.
Power of Appointment, General
Under tax law, any power of appointment that can be exercised in favor of the holder, the holder's estate, the holder's creditors, or the creditors of the holder's estate.
Power of Appointment, Limited
Under tax law, any power of appointment that is not a general power of appointment. Also known as a "special" power of appointment.
Power of Attorney
A document authorizing one person to represent another in specified transactions.
Private Annuity
The sale, usually by one family member to another, of property or the payment of money in exchange for an agreement to make a stated periodic payment, e.g., weekly, monthly, annually, for the rest of the seller's life.
Put
The contractual right to insist that someone else purchase stock or other assets at a specified price.
Qualified Conservation Contribution
A gift, deductible for income tax purposes, of a remainder interest or perpetual restriction for any of the following charitable purposes: 1) preserving land areas for outdoor recreation by the general public; 2) preserving land areas for education of the general public; 3) protecting in a relatively natural habitat fish, wildlife, plants, or similar ecosystems; 4) preserving open space for scenic enjoyment; or 5) preserving an historically important land area or certified historic structure.
Qualified Interest
An annuity interests the retention of which by a donor will be treated as a valuable interest for purposes of measuring the value of the interest transferred in the same assets, under the special valuation rules.
Qualified Payment
A right to a fixed and cumulative distribution with respect to preferred stock or a partnership interest, the value of which is taken into account in determining the value of a transferred interest in the same enterprise, under the special valuation rules.
Qualified Subchapter S Trust (QSST)
A trust that, because it meets certain requirements, may be a shareholder of an S corporation. The trust must: 1) own stock of one or more S corporations; (2) distribute all of its income currently to one U.S. resident or citizen; (3) be required to make any principal distributions it makes during the income beneficiary's life to the income beneficiary. The income beneficiary's interest must terminate at death or when the trust terminates, the trust assets must be distributed to the income beneficiary if the trust terminates while the beneficiary is alive, and the beneficiary, or his or her legal representative, must elect to be treated as the trust's owner.
Recapitalization
A change in the stock, partnership, or debt interests of a corporation or partnership, sometimes accomplished to freeze the value of one party's interest artificially.
Recourse Debt
A debt on which the debtor is personally liable, so that if the creditor forecloses on the specified security (if any), and the proceeds of its sale are inadequate to satisfy the debt, the creditor may take and sell the debtor's other assets.
Redemption Agreement
A buy-sell agreement under which the corporation or partnership agrees to buy out the interest of a shareholder or partner. Distinguished from a cross-purchase agreement or a hybrid agreement.
Remainder Interest
The right given a beneficiary of a trust (or the beneficiary of certain nontrust arrangements, such as life estates or terms for years) to receive the trust fund upon some event, such as the death of another beneficiary.
Reversionary Interest (or reversion)
A right retained by a trust's grantor (or by the creator of certain nontrust arrangements, such as life estates or terms for years) to receive the trust fund upon some event, such as the death of the beneficiary.
Revocable Trust
A Revocable Trust, also called and inter vivos trust, a living trust and a Grantor Trust, is a trust over which the Grantor retains the right to revoke the transfer. As such they are not considered to be a completed gift and are disregarded for income tax purposes so long as the Grantor is alive. Once the Grantor gives up the right to revoke the trust, or dies, the gift is complete and the trust becomes an irrevocable trust.
Right of Survivorship
A right as to property owned as joint tenants or as tenants by the entirety, whereby one joint owner succeeds to the interest of a deceased joint owner.
S Corporation
A closely held corporation whose stockholders have elected to have corporate net earnings taxed directly to themselves, rather than taxed once at the corporate level and again when paid out as dividends.
Section 306 Stock
Certain preferred stock that, because of the circumstances of its issuance and acquisition, will generate ordinary income, rather than capital gains, on its disposition.
Section 2503(b) Trust
A minors' trust that qualifies for the gift tax annual exclusion because it gives the income beneficiary a right to all of the trust's income for life or for a term of years. Only the income interest qualifies for the annual exclusion as a present interest.
Section 2503(c) Trust
A minors' trust that qualifies for the gift tax annual exclusion because it meets the requirements of Internal Revenue Code Section 2503(c), including terminating in favor of the beneficiary at or before age 21 or in favor of the estate (or under a general power of appointment) if the beneficiary dies before attaining this age.
Self-Destructing Trust Clause
A provision in a life insurance trust under which, if any of the proceeds are included in the insured's gross estate (as when the insured dies within three years of having given the policy to the trustee), the proceeds are paid back to the insured's estate or to the insured's surviving spouse.
Self-Settled Trust
A Trust, which is established with the funds of the beneficiary?typically, a tort victim or a person receiving an inheritance.
Settlement Options
The various options, given by a life insurance company to the beneficiary of the policy proceeds, as to the form in which the proceeds will be paid.
Short-Term Capital Gains
See Capital Gains, Short-Term
Simple Trust
A trust that is required to distribute all of its income currently, that does not pay principal, and that makes no charitable distributions.
Skip Person
An individual assigned to a generation at least two generations below that of a grantor, or a trust solely for such individuals. A gift to a skip person is subject to the generation-skipping transfer tax as a "direct skip" gift.
Soak-Up Tax
Also known as a "sponge" tax; this is a state death tax measured by the allowable federal estate tax credit for state death taxes. Massachusetts ands several other states have "decoupled" their estate tax from the federal estate tax since the phase out of the state death tax credit, setting the state estate tax at the same rate the sponge tax would have been prior to the repeal of the federal estate tax in 2001.
Special Allocation
A provision in a partnership agreement by which tax or other benefits are allocated among the partners otherwise than in accordance with their percentages of partnership interest generally.
Split-Gift
A gift as to which the donor's spouse elected on a timely gift tax return to be treated as the donor of onehalf of the gift, thus enabling the use of the donor's spouse's unified credit and annual gift tax exclusion.
Split-Purchase
An arrangement under which two persons buy property together, one buying a life interest and the other buying the remainder interest.
Sprinkling Trust
A trust in which the trustee may pay income (and sometimes principal) to any of a number of beneficiaries, usually in any proportions the trustee deems appropriate.
Standby Trust
A revocable trust that is used to manage the assets of the grantor after his or her disability.
Stepped Up Basis
The basis of property acquired from a decedent or by the decedent's estate from the decedent is generally stepped up (or down) to its fair market value as of the date of death of the decedent or alternate valuation date. A special use value is used as a basis for farm or other closely held business real property. This value will often give the property a stepped-up basis, although the property's basis may be stepped down where the property has depreciated in value. If the taxpayer, or his or her spouse, donates appreciated property and reacquires the property from the donee if the donee subsequently dies, a special basis rule may apply.
Sweetheart Contract
A contract made on especially favorable terms.
Taxable Distribution
Distribution of income or principal from a trust to a beneficiary assigned to a generation at least two below that of the grantor, if there remains at least one trust beneficiary assigned to a generation not more than one below that of the grantor.
Taxable Termination
Termination of an interest of a trust beneficiary who is assigned to a generation not more than one generation below that of the grantor, if that termination causes the trust to vest in one or more beneficiaries who are assigned to generations at least two below that of the grantor.
Tenancy by the Entirety
A type of concurrent ownership between spouses in which each spouse owns an undivided interest in the whole, with a right of survivorship, and which can be terminated only by the consent of both spouses or the termination of the marital relationship.
Tenancy in Common
A type of concurrent ownership of property whereby each party owns an undivided fractional interest in the property, with no right of survivorship. The factional interests need not be equal.
Term Life Insurance
A type of life insurance that provides pure life insurance protection and no cash values.
Three-Party Gift/Leaseback
A gift/leaseback in which the donor gives property to the donee, and then the donor's corporation leases it back from the donee.
Two-Party Gift/Leaseback
A gift/leaseback in which the donor leases the property directly from the donee.
Trusteeship
This is the greatest level of legal delegation of control. Here, the Trustee is provided with the actual legal title of property for the benefit of another with the most extensive powers and the most discretion with respect to exercising those powers. Trustees are held to the highest duty of care and loyalty and are required to exercise their powers only in the best interests of the beneficiaries.Their role is defined and guided by the Trust documents and, if the Trust is silent on an issue, but the extensive Common Law traditions and statutory authority. Trusts attempt to anticipate the future, sometimes for several generations, and must be flexible and not rigid to avoid falling apart and failing to achieve their original intent when facing the challenges of the future. Consequently, the need for sound thinking, practical experience, reasoned drafting and the right kind of firm is paramout
Unfunded Life Insurance Trust
A life insurance trust that holds no significant assets other than a life insurance policy.
Unified Credit
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.
Uniform Gifts to Minors Act
A uniform law, adopted in every state, under which gifts of cash or "securities," and sometimes other types of property, may be given to a named custodian on behalf of a minor donee.
Uniform Gifts to Minors Act Custodian
The person who holds property for a minor under the Uniform Gifts to Minors Act.
Uniform Simultaneous Death Act
A uniform law, adopted in every state, that creates a presumption of an order of death when it is impossible to determine which of two related persons died first.
Uniform Transfers to Minors Act
The 1984 revision of the Uniform Gifts to Minors Act, under which more and different types of property may be the subject of gifts to minors through custodians and more types of transfers (by trusts and estates) are permissible.
U.S. Person
An individual who is either a U.S. citizen or who is an alien residing in the U.S. for tax purposes.
Whole Life Insurance
A type of life insurance whereby part of the premiums is invested and the principal and earnings on these investments are used to defray part of the cost of future premiums
Will
A will is the most valuable instrument in estate planning. Among other things, a will can: (1) designate who should receive various items of the testator's probate property, and provide a line of beneficiaries in the event that the primary beneficiary predeceases the testator; (2) prescribe whether the property should be transferred outright or in trust, and if in trust, whether income should be paid or accumulated, upon what events or criteria principal can be invaded, and when outright distributions of part or all of the trust corpus should occur; (3) coordinate the amount transferred to a spouse under its terms with property passing to the spouse outside the will to not permit too much property to qualify for the marital deduction resulting in unnecessary estate tax on the surviving spouse's estate; (4) designate the fund from which estate taxes are to be paid; (5) appoint guardians for children, executors and/or trustees; and (6) provide the fiduciaries with adequate powers to carry out the administration of estate assets.