529 Plan: An investment vehicle that allows for tax-free growth designed to allow families to save for educational costs.

AB Trust: A tax-shelter trust traditionally used by married couples to minimize or avoid federal estate taxes at the death of the first spouse by dividing the estate into trusts A and B. The “A Trust” is commonly known as the “Survivor’s Trust.” The “B Trust” is commonly known as the “Bypass Trust,” “Creditor Shelter Trust” or “Non-Marital Trust.” There may also be a “C Trust” if the couple has a large estate. The “C” Trust is commonly known as the “Marital Trust,” “QTIP Trust,” or “Marital Deduction Trust.”

Administrator: A person or entity appointed by a probate court to administer the estate of a deceased person who died without a valid Will.

Advance Health Care Directive (also known as Medical Durable Power of Attorney): A legal document that designates a Health Care Agent and memorializes a person’s medical care preferences. This is one of the documents that make up a comprehensive estate plan.

Aid & Attendance Benefit: A needs-based pension provided by the Department of Veteran’s Affairs offered to qualified veterans.

Annual Exclusion: The annual dollar amount that can be given by any one person to one or more people or entities free of federal gift taxes in a calendar year. A gift that qualifies for the annual exclusion does not need the filing of a gift tax return. The exclusion amount fluctuates – The annual gift tax exclusion for 2023 will be increasing to $17,000 – an increase from $16,000 in 2022.

APN (Assessors Parcel Number): The number used by a local county assessor to identity real property for property tax purposes.

Asset Protection: Legal techniques and strategies used to protect assets from monetary judgment.

Attorney-in-Fact: A person or entity appointed as an agent in a Power of Attorney to handle the financial affairs of another. The terms “Agent” and “Attorney-in-Fact” are used interchangeably.

Beneficiary: A person or entity designated to receive property from another from a Will, Trust, life insurance policy or other contract for benefits.

Bond: A guaranty purchased from a bond company as security to guarantee that the bonded party will not misappropriate funds..

Business Entity: An organization formed to engage in lawful business activity. In California, business entities are commonly structured as sole proprietorships (also known as DBA), partnerships, corporations, s corporations and limited liability companies (LLC).

Bypass Trust: See glossary entry for AB Trust.

Certificate of Trust: A certification that documents the authority and power of the Trustee over a Trust.

Charitable Trust: An irrevocable Trust used to minimize or avoid federal estate taxes by making charitable gifts.

Codicil: A modification to a Will used to alter the provisions of the Will. A codicil must meet the formal requirements of a Will.

Community Property: In contrast to separate property, a form of holding property in California (and other community property states) which presumes property acquired during marriage is jointly owned by both spouses, excepting property received through inheritance or gift.

Conservator: A person or entity appointed by a probate court to care for an incapacitated adult and/or to manage his or her affairs.

Conservatee: An incapacitated adult over whom a conservator has ben appointed by a probate court.

Conservatorship: A court process by which a probate court appoints a conservator to care for an incapacitated adult and/or to manage his or her affairs. In California, this process is lengthy, expensive and public.

Credit Shelter Trust: See glossary entry for AB Trust.

Custodian: A person or entity that manages the affairs of another, usually a minor.

CUTMA (California Transfers to Minors Act): A California law that governs the transfer and gifting of property to a minor until a certain age.

Decedent: A person who has died.

Deed: A legal record of ownership over real property.

Devise: A gift made by Will or Trust.

Disclaimer: An election made by a beneficiary to renounce his or her legal rights to property. A disclaimer must meet formal requirements and exercised within a specific time period.

Disinherit: The act of omitting a person from receiving an inheritance who would otherwise receive under intestacy laws.

Domicile: The person’s permanent legal residence determined by physical presence and intent to remain.

Donor: A person or entity who makes a gift.

Donee: A person or entity who is a recipient of a gift.

DNR (Do Not Resuscitate): A legal document stating a person’s preference to forego resuscitation or any medical intervention to revive him or her.

Durable Power of Attorney: A legal document that gives someone legal authority to act on behalf of another over legal and financial matters. Unlike a “Power of Attorney,” a “Durable” Power of Attorney continues to be effective after the incapacity of the person who granted the power. This is one of the documents that make up a comprehensive estate plan.

EIN (Employee Identification Number): The tax identification number assigned by the IRS used to identify an entity or estate.

Elder Abuse: Intentional actions that cause harm or create serious risk of harm, whether or not intended, to an elder adult (over 65) or dependent adult.

Elder Law: A specialized area of law that addresses the needs of an elder adult (over 65), including Medi-Cal planning, the VA Aid and Attendance benefit, as well as resources to the elders and their families.

Estate: Refers to all of the property owned by a person, including real estate, personal property and investments.

Estate Taxes: Federal or state-level taxes imposed on the value of a person’s estate upon death. California does not have a state estate tax.

Estate Plan: A collection of legal documents primarily composed of a Durable Power of Attorney, Advance Health Care Directive, Will and Trust to: (1) address the care of a person in the event of incapacity; (2) manage the assets of a person during life and govern the transfer those assets at death; and (3) appoint a Guardian for the care of minor children.

Estate Planning: The process of creating an estate plan.

Executor: A person or entity nominated in a Will and appointed by a probate court to administer an estate of a deceased person.

Federal Estate Tax (FET) Exemption: A credit amount set by Congress and applied to a person’s taxable estate at the time of death. The FET exemption has been unified with the gift tax exemption so that the total amount a person can transfer (excluding annual exclusion gifts) over his or her lifetime and at death is $12.92 million (current for 2023). Therefore, the actual FET exemption amount applied at death depends on whether previous taxable gifts were made during life.

Fiduciary: A person or entity appointed to manage the property for the benefit of another. A fiduciary is held to strict standards of care and must act in the best interest of the person for whom the fiduciary relationship has been established.

Funding: A process by which legal ownership of an asset is transferred to the Trustee of a Trust.

Generation Skipping Transfer Tax: A federal tax on certain transfers to either a related person who is more than one generation younger than the donor or an unrelated person more than 37.5 years younger than the donor.

Geriatric Care Manager: A professional (typically a former nurse or social worker) who advises families on public benefits, rehabilitation and attendant care, residential arrangements and daily support services, etc. for incapacitated or elderly persons.

Gift Tax: Taxes imposed on the value of gifts given during life. The gift tax exemption has been unified with the federal estate tax exemption resulting in an amount of up to $12,060,000 (current for 2022) that can be gifted during life or at death without any gift taxes becoming due. Any gift taxes due are paid by the donor. (See the glossary entry for Annual Gift Exclusion.)

Gift Tax Return (Form 709): A gift tax return must be filed with the IRS by the donor for any gifts that exceed the annual exclusion in any given year. A gift that qualifies for the annual exclusion does not require the filing of a gift tax return.

Grantor: A person or entity who creates a Trust. This term is used interchangeably with Settlor, Trustor and Trustmaker.

Gross Estate: All real and personal property owned by a person at death, wherever located.

Guardian: A person named in a Will or appointed by a probate court to care for a minor child and/or manage his or her estate. The guardian maintains physical and legal custody of the child, helps the child with daily tasks and makes financial and medical decisions on the child’s behalf.

Guardianship: The legal process in which a probate court appoints a person as Guardian to care for a minor child and/or manage his or her estate. In California, this process is expensive, public and often lengthy..

Health Care Agent: A person appointed to make health care decisions for another under an Advance Health Care Directive or Medical Power of Attorney.

Health Care Power of Attorney: See glossary entry for Advance Health Care Directive.

Heir: A person who receives an inheritance under the laws of intestate succession.

HIPAA (Health Insurance Portability and Accountability Act): A federal privacy law that prohibits health care providers and their affiliates from disclosing a patient’s medical records to third parties. The California equivalent is known as CMIA or California Medical Information Act.

HIPAA Waiver: A written consent signed by the patient that allows health care providers and their affiliates to disclose medical records to designated third parties.

Holographic Will: A Will written in the handwriting of the drafter that does not need to be witnessed. A holographic Will has the same force and effect of a formal Will. Holographic Wills are valid in California but not in every state. See glossary entry for Will.

Income: Money received within a specific timeframe. Income can be earned through wages, work and disability benefits and earnings from self-employment, etc. Income can also be unearned through interest and dividends, retirement income and social security, unemployment benefits, alimony and child support, etc.

Incompetent or Incapacitated: A person who is deemed unable to effectively manage his or her property or financial affairs. This may be temporary or permanent.

Inheritance Tax: Taxes imposed on the value of property received upon the death of a person. The recipient of the inheritance pays the inheritance tax. California does not have an inheritance tax.

Intestate: This occurs when a person dies without a valid Will. In such an event, the deceased person’s estate is distributed in accordance with state law.

Intestacy Laws: State laws that dictate the distribution of an estate when a person dies without a valid Will.

Irrevocable Trust: A Trust that cannot be changed, canceled or revoked once established.

Issue: Lineal descendants of a person, such as children, grandchildren, great-grandchildren and so on.

Joint Tenancy: A form of co-ownership where two or more persons own property. Upon the death of a joint owner, the property will automatically pass to the surviving joint owner(s).

Letters Testamentary: A formal court document issued by a probate court granting a personal representative (either Executor or Administrator) authority over a decedent’s estate during a probate administration.

Life Insurance: An insurance policy purchased on the life of a person (insured) for the benefit of a designated beneficiary, usually a spouse or child.

Irrevocable Life Insurance Trust (ILIT): An irrevocable Trust created to own a life insurance policy used to minimize or avoid federal estate taxes.

Living Trust: A Trust created by a person during his or her lifetime. The Trust contains instructions for management and distribution of property by a Trustee for the benefit of one more beneficiaries and can be amended or revoked during life. A living Trust is also known as an inter vivos Trust or revocable Trust.

Living Will: A legal document that defines the type of medical treatment and life-sustaining measures if a person is unable to give informed consent. A living will is one component of an Advance Health Care Directive.

Marital Deduction: A tax deduction that allows one spouse to transfer to another spouse assets tax-free. This is unlimited if the donee spouse is a U.S. citizen or resident.

Medi-Cal: A California state-based program, partially funded by the federal government, which provides health care and long-term care to indigent and disabled Californians.

Minor: A child under the age of 18.

Non-Probate Property: Property that has a beneficiary designation and passes directly to the named beneficiary, thereby bypassing probate. Typical examples include life insurance, annuities, retirement benefits, etc. .

Personal Representative: A person or entity representing a person or a person’s estate (for example: a guardian for a ward, a conservator for a conservatee, an executor or administrator for a decedent’s estate, etc.). In the case of a minor, the minor’s parent or another adult with legal custody of the minor would be the personal representative.

Personal Property: Any property belonging to a person that is not real estate.

Per Stirpes (or per stirpital): A term used to describe the succession of property among descendants and much easier to explain by example: Alice has two daughters both of whom die before her. Suppose Child 1 has one child (Grandchild 1) and Child 2 has two children (Grandchild 2a and 2b). If Alice’s estate is being divided per stirpes, Grandchild 1 would receive her mother’s share of Rebecca’s estate (i.e. 1/2) and Grandchild 2a and 2b would each receive their mother’s share of Alice’s estate equally (i.e. ¼). This type of distribution pattern is also known as by right of representation.

Per Capita: A term used to describe the succession of property among descendants and much easier to explain by example: Betty has two daughters both of whom die before her. Suppose Child 1 has one child (Grandchild 1) and Child 2 has two children (Grandchild 2a and 2b). If Betty’s estate is being divided per capita, all of her grandchildren will receive in equal shares (i.e. 1/3).

Pet Trust: A Trust created by pet parents that contains instructions for management of property to ensure that their pets receive the appropriate care.

Physician’s Orders for Life Sustaining Treatment (POLST): A legal document printed on hot-pink cardstock and signed by a doctor that allows medical care providers to identify final wishes so they can be honored. This is used to in lieu of a DNR and is legally enforceable. The POLST should be posted near the patient and should be transported with the person from home to hospital to rehab, etc.

Portability: A technique used to minimize the estate tax liability of a second decedent spouse by using the unused portion of the federal estate tax exemption of the first decedent spouse.

Pour Over Will: A Will used with a revocable Trust that transfers assets outside of the Trust into the Trust upon the Testator’s death. This type of safety net breaks at $166,250 (current as of 2020). If the assets outside of the Trust exceed $166,250 a court process will be necessary to transfer the asset(s) into the Trust.

Power of Appointment: A power that enables a beneficiary to name other recipients of assets upon the beneficiary’s death. This can be a “special” power of a “general” power.

Power of Attorney: A legal document that designates an Attorney-in-Fact or agent to handle the legal and financial affairs of another. A “Durable” Power of Attorney continues after the incapacity of the principal.

Preliminary Change of Ownership Form (PCOR): This form is filed with the local county Assessor’s Office when there is a change in ownership in real property.

Principal: Principal has two different meanings that are relevant to estate planning. First: The principal is the person who authorizes another to act on his or her behalf over medical, legal or financial matters. Second: The principal refers to assets on which interest is calculated.

Probate: A court process by which a deceased person’s estate is administered. In California, this process is lengthy, expensive and public.

Probate Fees: Fees associated with a probate administration, including attorney’s and personal representative fees. In California, attorney’s fees are set by statute and are expensive.

Real Property: Property that is non-movable and permanent, such as land and buildings.

Residuary Estate: The remaining part of an estate after debts, taxes, costs and fees are paid and specific gifts are distributed.

Restatement: A complete amendment to a Trust. The funding of the former trust remains effective.

Revocable Trust: A Trust that reserves the power to terminate, modify or amend by the Settlor during his or her life.

Right of Representation: See glossary entry for Per Stirpes.

Separate Property: In contrast to community property, a form of holding property in California (and other community property states) which describes property acquired by a spouse before entering a marriage, during the marriage if received by gift or inheritance, or after separation or dissolution of a marriage.

Settlor: A person or entity that creates a Trust. This term is used interchangeably with Grantor, Trustor and Trustmaker.

Small Estate Affidavit: A certification used to transfer the estate of a decedent whose assets are valued cumulatively under $166,250.

Special Needs Trust: A Trust established for a disabled person and designed to preserve his or her eligibility for needs-based public benefits.

Spendthrift: A clause in a Trust that restricts a beneficiary from transferring any of his or her interest in Trust assets.

Successor Trustee: A Trustee who takes over when the initial or previous Trustee can no longer serve.

Survivor’s Trust: A type of Trust used to hold the assets for a surviving spouse after the death of the first spouse.

Taxable Estate: All property and property interests owned at death that are subject to estate tax.

Tenancy in Common: A form of co-ownership where two or more persons own an interest in the same property. Unlike a joint tenancy, upon the death of one owner, the property does not automatically pass to the surviving owner(s).

Testate: When a person dies leaving a valid Will.

Testator: A person who creates a Will.

Testamentary Trust: A Trust established by a Will that takes effect after death. This type of Trust is subject to probate and rarely used in California.

Transmutation: A formal change in the character of property between spouses from community property to separate property or vice versa.

Trust: An arrangement whereby property is legally owned and managed by a Trustee for the benefit of one or more beneficiaries.

Trust Administration: The process of administering a Trust estate after the death of the Grantor.

Trustor: A person who creates a Trust. This term is used interchangeably with Grantor, Settlor and Trustmaker.

Trustee: A person or entity designated to manage property for the benefit of one or more beneficiaries. A Trustee is considered a fiduciary and has a legal duty to act in the best interest of the beneficiary and therefore, is held to the strict standards of care. A Trustee can be held personally responsible for acts of gross negligence and bad faith.

Ward: A person (usually a minor) for whom a guardian has been appointed by a probate court to care and be responsible for him or her.

Will: A testamentary document that provides instructions for disposition of a person’s property upon death. It may be holographic or formal. A formal Will is typewritten and signed by two independent witnesses.

Witness: A person who is present at the signing of the Will or other legal document and attests to the signing.