Chapter 25 Key Terms

Pregunta	Respuesta
Adjusted gross estate	gross estate reduced by administrative expenses, debts of the decedent, losses incurred during the administration of the estate, and state death taxes.
Adjusted taxable gifts	cumulative taxable gifts from previous years other than gifts already included in the gross estate valued at date of gift values.
Alternative valuation date	the date six months after the decedent’s date of death.
Annual exclusion	amount of gifts allowed to be made each year per donee (regardless of the number of donees) to prevent the taxation of relatively small gifts ($15,000 per donee per year currently).
Applicable credit	also known as the unified credit, the amount of current tax on the exemption equivalent; designed to prevent transfer taxation of smaller cumulative transfers.
Beneficiary	person for whom trust property is held and administered.
Carryover basis	the basis of an asset the transferee takes in property received in a nontaxable exchange. The basis of the asset carries over from the transferor to the transferee.
Common-law states	the 41 states that have not adopted community property laws.
Community property states	nine states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin) that automatically equally divide the ownership of property acquired by either spouse during a marriage.
Complex trust	a trust that is not required by the trust instrument to distribute income currently.
Corpus	the principal or property transferred to fund a trust or accumulated in the trust.
Current gifts	gifts completed during the calendar year that are not already exempted from the gift tax.
Deceased spousal unused exclusion (DSUE)	amount of unused applicable credit from predeceased spouse.
Distributable net income (DNI)	the maximum amount of the distribution deduction by fiduciaries and the maximum aggregate amount of gross income reportable by beneficiaries.
Distribution deduction	deduction by fiduciaries for distributions of income to beneficiaries that operates to eliminate the potential for double taxation of fiduciary income.
Donee	person receiving a gift.
Donor	person making a gift.
Estate	fiduciary legal entity that comes into existence upon a person’s death and is empowered by the probate court to gather and transfer the decedent’s real and personal property.
Executor	the person who takes responsibility for collecting the assets of the decedent, paying the decedent’s debts, and distributing the remaining assets to the rightful heirs.
Exemption equivalent	the amount of cumulative taxable transfers a taxpayer can make without exceeding the applicable credit.
Family limited partnership	a partnership designed to save estate taxes by dividing a family business into various ownership interests representing control of operations and future income and appreciation of the assets.
Fiduciary	a person or legal entity that takes possession of property for the benefit of beneficiaries.
Fiduciary duty	a requirement that a fiduciary act in an objective and impartial manner and not favor one beneficiary over another.
Future interest	the right to receive property in the future.
Generation-skipping tax (GST)	supplemental transfer tax designed to prevent the avoidance of estate and gift taxes through transfers that skip a generation of recipients.
Grantor	person creating a trust.
Gross estate	property owned by the decedent at death and certain property transfers taking effect at death.
Heirs	persons who inherit property from the deceased.
Inter vivos transfers	gifts made by a donor during his or her lifetime.
Joint tenancy	joint ownership of property by two or more people in equal proportions.
Joint tenancy with right of survivorship	title to property that provides the co-owners with equal rights to it and that automatically transfers to the survivor(s) at the death of a co-owner.
Last will and testament	the document that directs the transfer of ownership of the decedent’s assets to the heirs.
Life estate	the right to possess property and/or collect income from property for the duration of someone’s life.
Life insurance trust	a trust that is funded with an irrevocable transfer of a life insurance policy and that gives the trustee the power to redesignate beneficiaries.
Marital deduction	the deduction for transfers of qualified property to a spouse.
Nondeductible terminable interests	transfers of property interests to a spouse that do not qualify for a marital deduction because the interest of the spouse terminates when some event occurs or after a specified amount of time and the property is then transferred to another person.
Present interest	right to presently enjoy property or receive income from the property.
Probate	the process in the probate court of gathering property possessed by or titled in the name of a decedent at the time of death, paying the debts of the decedent, and transferring the ownership of any remaining property to the decedent’s heirs.
Probate estate	property possessed by or titled in the name of a decedent at the time of death.
Remainder	the right to ownership of a property that transfers to a new owner, the remainderman, following a temporary interest.
Remainderman	the person entitled to a remainder interest.
Reversion	terms by which ownership of property returns to the original owner following a temporary interest.
Serial gift	transfer tax strategy that uses the annual exclusion to convert a potentially large taxable transfer into a tax-exempt transfer by dividing it into multiple inter vivos gifts spread over several periods or donees.
Simple trust	a trust that must distribute all accounting income currently and cannot make charitable contributions.
Taxable estate	adjusted gross estate reduced by the marital deduction and the charitable deduction.
Taxable gifts	the amount left after adjusting current gifts for gift splitting, annual exclusions, the marital deduction, and the charitable deduction.
Tenancy in common	ownership in which owners hold divided rights to property and have the ability to transfer these rights during their life or upon their death.
Terminable interest	a right to property that terminates at a specified time or upon the occurrence of a specified event, such as a life estate.
Testamentary transfers	transfers that take place upon the death of the donor.
Trust	fiduciary entity created to hold and administer the property for other persons according to the terms of a trust instrument.
Trustee	the person responsible for administering a trust.

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