The following terms frequently appear in discussions of estate planning, as well as estate planning documents. These definitions should help you understand discussions of this topic. However, as with any word, a particular term may carry different meanings in different contexts. These definitions do not cover every conceivable situation.

Administrator: The person who manages an estate when there is no will or trust. An administrator performs many of the same functions as an executor.

Administratrix: The feminine form of Administrator.

Applicable Exemption Amount: A lifetime estate tax exemption used to calculate the Applicable Credit Amount. Transfer of property up to the Applicable Exemption Amount is generally exempt from unified tax. Between 1997 and 2006, the Applicable Exemption Amount will increase from $600,000 to $1,000,000.

Attorney in Fact: The person holding power to act for another under a Power of Attorney document.

Basis: The value subtracted from the net sales price to calculate gain or loss for capital gains tax purposes.

Beneficiary: The person who receives benefits from a will, insurance policy, or other document.

Charitable Remainder Trust: A trust naming a charity as beneficiary.

Community Property: A system of property law determining the interests of spouses in property acquired during marriage. Includes everything acquired by a married couple during the marriage, except property acquired by gift or inheritance. Each spouse owns an equal, undivided one half interest of the Community Property. Community Property concepts come from continental civil law, as opposed to English common law. Only a few western states use the Community Property system.

Conservator: A person named by a court to act on behalf of someone who has become physically or mentally incapaciated.

Durable Power of Attorney: A legal document appointing another person (the Attorney in Fact) to act on behalf of another, even if that person becomes disabled or incapacitated.

Durable Power of Attorney for Healthcare: A legal document that gives another person the power to make certain decisions regarding healthcare.

Estate: The condition and circumstance in which a person stands with regard to those around him and his property. In other words, a person’s possessions.

Estate Planning: Strategies used to direct property to the proper beneficiaries, to minimize tax liability and other costs, and to arrange for property management in the event of physical or mental disability.

Estate Tax: A transfer tax on estates exceeding the personal exemption amount. Currently, the top rate is 55%.

Executor: The person named in a will to manage an estate. The Executor’s duties include collecting the estate assets, paying the estate’s debts, and distributing the property according to the will.

Executrix: The feminine form of Executor.

Fair Market Value: The price at which an asset passes from a willing buyer to a willing seller.

Family Limited Partnership: A form of holding property combining some of the advantages of holding property as a corporation with some of the advantages of owning property in a partnership. A Family Limited Partnership is sometimes used as a vehicle for a gift program to reduce or eliminate estate tax.

Fiduciary: A person or institution legally responsible for the management, investment, and distribution of funds. The law places various responsibilities on fiduciaries to act in the interests of the beneficiaries.

Grantor: The person who transfers assets into the trust. Sometimes also called a Settlor.

Gross Estate: The total property or assets held by a person as defined for federal estate tax purposes.

Guardian: A person legally charged with responsibility for a child.

Healthcare Power of Attorney: A power of attorney naming a person to make medical decisions in the event of mental or physical incapacity.

Heir: The person who inherits the property.

Holographic Will: A will entirely in the handwriting of the signer. Although valid in some states in some circumstances, most lawyers advise strongly against doing this.

Incapacitated Person: A person who is impaired by reason of mental illness, mental deficiency, physical illness or disability, advanced age, chronic use of drugs, chronic intoxication, or other cause (except minority) to the extent of lacking sufficient understanding or capacity to make or communicate responsible decisions.

Inter Vivos: Between living persons. Usually refers to a trust created during the Trustor’s lifetime for the benefit of another.

Intestacy, Intestate: The state or condition when a person dies without a valid will. The law has rules determining who gets the estate property if a person dies Intestate.

Irrevocable: Indicates something cannot be changed or terminated.

Irrevocable Trust: A Trust with terms that cannot be changed or terminated.

Joint Tenancy with Right of Survivorship: A form for holding undivided title to property among more than one person. When of the co-owners dies, the other becomes the sole owner of the property.

Joint and Survivor Insurance: A policy underwritten on the life of two persons, usually husband and wife or business partners.

Living Trust: Commonly used instead of a will in order to avoid probate proceedings, a Living Trust is a revocable trust in which the grantor transfers some or all of his property to one or more Beneficiaries. Also called an inter vivos trust.

Living Will: A legal document stating that the signer does want to be kept alive by artificial or extraordinary means, when there is no expectation of recovery from a physical or mental disability. The enforceability of such documents are unclear in absence of applicable legislation.

Marital Deduction: A deduction allowing for the unlimited transfer of any or all property from one spouse to the other generally free from estate or gift tax.

Minor Child: A person who has not reached the age of majority. The age is usually 16-18 years of age, and varies from state to state.

Power of Appointment: Authority conferred by deed or will to make a gift or distribute property. A "general" power of appointment places no limitation on the receivers of the property. A "special" or "limited" power of appointment limits who can receive the property.

Power of Attorney: A legal document granting authority for a person to act for another.

Probate: The process of proving to a court of appropriate jurisdiction that a document is a deceased person’s will. When proved to the satisfaction of the court, the document is received, filed, and recorded, and is then said to be admitted to probate or probated.

Probate Court: The court with the authority to recognize a document as a deceased person’s will. The court executes the directive of the will.

Representative: Someone who is authorized to act on one’s behalf, such as an executor or trustee.

Separate Property: Everything owned by an individual that is not Community Property, such as property acquired before marriage and kept separate by the owner, property acquired during marriage by gift or inheritance, or a joint tenant’s interest in joint tenancy property.

Settlor: One who places assets in trust. Another term for Trustor.

State Death or Inheritance Taxes: Some states impose a tax on the transfer of property at a person’s death.

Step-Up in Basis: At death, the Basis of most property becomes the Fair Market Value at the time of death, as opposed to the Fair Market Value at the time the decedent acquired the property.

Testamentary Trust: A trust created by the terms of a will.

Testate: A person who dies with a valid will.

Trust: A legal document created by a grantor during his lifetime for the benefit of another.

Trustee: The person named in a trust to manage the property and distribute the property according to the terms of the trust.

Unified Credit: An estate tax credit equal to $192,800, which allows an exemption from tax on property transfers up to $600,000. The Taxpayer Relief Act of 1997 replaced the Unified Credit with the applicable exemption amount and corresponding credit amount.

Will: A legal document directing the disposition of property at death. A will takes force through the probate court.

SOURCE: FindLaw in an article by Christopher J. Enge