An A-B trust is a joint trust created by a married couple for the purpose of minimizing estate taxes.

IRS provides tax inflation adjustments for tax year 2020

IRS provides tax inflation adjustments for tax year 2021

An A-B trust is a joint trust created by a married couple for the purpose of minimizing estate taxes. The trust gets its name from the fact that it splits into two upon the first spouse's death—where trust A is the survivor's trust and trust B is the decedent's trust. This is because the B trust uses up the estate tax exemption of the spouse that died first, hence, any funds left in the decedent’s trust will be passed tax-free. If one spouse dies, the unused portion of their estate tax exemption can be transferred and added to the estate tax exemption of the surviving spouse. After death, the sum of money equal to the estate tax exemption in the year that they die is put in an irrevocable trust called the bypass trust, or B trust.

A-B Trust

Abeyance is a situation in which the rightful owner of a property, office or title has not yet been decided. 

Abeyance is a situation in which the rightful owner of a property, office or title has not yet been decided. Although they are not part of the trust itself, the probate court is a necessary component of the trust's activity because the court oversees the trustee's handling of the trust. Abeyance is when the rightful owner of a property or trust has not been decided or has not met the obligations required to inherit the property, such as age or achievement requirements. It is created to address any assets accumulated during that person's lifetime or generated as a result of a postmortem lawsuit, such as a settlement in a survival claim or the proceeds from a life insurance policy held on the settlor. A trustee is appointed to direct the trust until a set time when the trust expires.

Abeyance

An absolute beneficiary is an agreement in an insurance policy or another policy that says the designated beneficiary cannot be changed without that entity's approval.

An absolute beneficiary is a designation of a beneficiary that can not be changed without the written consent of that beneficiary. By law, the individual or entity that requests a policy with an absolute beneficiary, or the company that provides it, cannot later change the beneficiary without the written permission of that initially named beneficiary. An absolute beneficiary is a beneficiary of a policy, such as an insurance policy, that cannot be changed without the written consent of that beneficiary. Once a party is named an absolute beneficiary, the other party involved in the agreement cannot later remove that person as a beneficiary, even in the case of a divorce, disownment, estrangement, falling out, or another form of separation or disagreement. An absolute beneficiary is a designation of a beneficiary that can not be changed without the written consent of that beneficiary.

Absolute Beneficiary

An acceptance of office by a trustee implies that the trustee will assume the administrative duties of an estate after being nominated.

An acceptance of office by a trustee is the mutual understanding that a person has with an estate that implies they will assume administrative duties after being nominated. Generally, the offer made to a trustee includes important information relating to a trust, such as the name of the trust, the date it was created, an article within the trust naming a successor, the name and the date of death of the trust creator, the acknowledgment and acceptance of the trustee, a space for the signature, and the date on which the acceptance was made and the form was signed. The acceptance of the office may include official paperwork for the new trustee as well as resignation or termination paperwork for the current trustee to dissolve their duties. An acceptance of office by a trustee is a formal consent a trustee has with an estate to administer the affairs of a trust. A trustee may be aware of their nomination and informally agree to the position, but a formal acceptance of office is necessary in order to move forward with the duties of the office.

Acceptance of Office By Trustee

An account in trust is a type of financial account opened by one person for the benefit of another.

Table of Contents
What Is an Account in Trust?
How an Account in Trust Works
How to Set Up an Account in Trust
Benefits An account in trust or trust account refers to any type of financial account that is opened by an individual and managed by a designated trustee for the benefit of a third party per agreed-upon terms. A trustee may even close the account in trust or open a subsidiary account, to which they can transfer some or all of the assets in the account in trust. Totten or Payable on Death (POD) trust accounts allow beneficiaries to claim the account's assets upon the death of the account holder. The two main types of escrow accounts are the purchase escrow account and refinance escrow account.﻿﻿ A purchase escrow account holds funds related to the purchase of a home and is managed by an escrow agent.

Account in Trust

An active trust is a trust in which the trustee is required to perform extra duties other than simply caring for a distributing property.

An active trust is a trust wherein the trustee has to take additional actions beyond passively dealing with property for the benefit of the beneficiary. Active trusts may prohibit disbursements to beneficiaries for certain reasons or only payout if beneficiaries follow through with certain pre-established benchmarks.
An active trust is a type of trust, a legal relationship entered into by at least three parties—the trustor, the trustee, and the beneficiary—for the purposes of transferring property from the trustor to the beneficiary. A common form of trust is a passive trust, whereby a trustor gives legal ownership of assets like money or real estate to a trustee, who is then responsible for simply distributing those assets to a beneficiary at a predetermined date. According to the Uniform Trust Code, trusts are typically arranged between a trustor and an identifiable beneficiary, but there are some trusts, like charitable or honorary trusts with no identifiable beneficiary. These trusts are considered active trusts because the trustee is not only required to distribute money, but also verify that the beneficiary is behaving in a certain way.

Active Trust

Adjusted gross estate is the net worth of a deceased person’s estate after deducting the cost of outstanding debts and administrative costs.

The adjusted gross estate is the net worth of a deceased person’s estate after deducting the cost of any outstanding debts and administrative costs. The adjusted gross estate is the net worth of a deceased person’s estate after deducting the cost of any outstanding debts and administrative costs. Adjusted gross estate is the net worth of a deceased person's estate outstanding debts and administrative costs. Available deductions, in the form of outstanding debts (such as the mortgage on her house) and administrative costs for the estate execution, bring down the total estate to $9 million. Taxes are levied on the adjusted gross estate minus value of any mortgages that may be present in the estate.

Adjusted Gross Estate

An administrator is a court-appointed individual who handles all financial matters for a decedent during probate.

An administrator is a court-appointed individual who handles all remaining financial matters for a decedent during probate. If the decedent owned a business, the administrator takes legal title to the assets of the business and must hire a third-party appraiser to value the assets before the administrator liquidates them, pays all the business's liabilities, and finally, closes the business down. An administrator is responsible for settling all financial matters–including outstanding debt, expenses, and other obligations–related to a decedent's estate.
States have different criteria outlined in their probate codes for choosing administrators. Then, the administrator is tasked with gathering up all of the documents and personal files that encompass the financial dealings and transactions of the decedent: bank account records, brokerage statements, credit card statements, insurance claims, tax notices, medical expense invoices, automobile financing statements, etc. However, legally-speaking, an administrator is appointed by a court when the decedent has not named an executor in their will or if a named executor refuses or is unable to assume the responsibilities.

Administrator

Agency by necessity is a type of relationship in which one party can make essential decisions for another party.

Agency by necessity is a type of legal relationship in which one party can make essential decisions for another party. Specific estate planning tasks could include but are not limited to:
Writing a will
Limiting estate taxes by setting up trust accounts in the name of beneficiaries
Establishing a guardian for living dependents
Naming an executor of the estate to oversee the terms of the will
Creating/updating beneficiaries on plans such as life insurance, IRAs and 401(k)s
Setting up funeral arrangements If a family member in possession of or who is an agent of the family’s wealth becomes incapacitated in an accident or is ill, another close family member of similar capabilities and understanding of the family finances may take over as an agent of necessity. For example, if an individual is sick and unable to make a critical investment or retirement decision, agency of necessity would allow an attorney, parent or spouse to make decisions on behalf of the incapacitated party. In addition to preserving family wealth and providing for surviving spouse and children, many individuals will undertake serious estate planning to fund children or grandchildren’s education or leave their legacy behind to a charitable cause.

Agency by Necessity

The Alaska Trust Act provides protection against creditors for irrevocable trusts provided that the trust has a grantor who is a discretionary beneficiary.

The Alaska Trust Act provides protection against creditors for irrevocable trusts provided that the trust has a grantor who is a discretionary beneficiary. The Alaska trustee must have the power to maintain trust records in Alaska and file tax returns for the trust. The records of the trust must be physically located in Alaska, and a percentage of the administration of the trust must take place in Alaska. The trustee must either be a bank or trust company with its principal place of business in Alaska, or an individual who is a resident of Alaska. The Alaska Trust Act was spearheaded by Jonathan Blattmachr, who was a partner at the New York firm of Milbank, Tweed, Haley & McCloy when he devised a law that could make the new Alaskan trust.

Alaska Trust Act

An alternate beneficiary is a term used for the individual who is usually named in a will in the event that a person who is the named beneficiary refuses, disclaims or is unable to accept the inheritance.

An alternate beneficiary is a term used for the individual who is usually named in a will in the event that a person who is the named beneficiary refuses, disclaims or is unable to accept the inheritance. During the time they were creating their will, their lawyer recommended that they also name an alternate beneficiary, so they chose their cousin, Jane, as an alternate beneficiary in the event that Chad was unable or unwilling to receive their inheritance. In an insurance policy, an alternate beneficiary is usually a secondary or contingent beneficiary who receives the proceeds if the primary beneficiary has died. An alternate beneficiary is a term used for the individual who is usually named in a will in the event that a person who is the named beneficiary refuses, disclaims or is unable to accept the inheritance. In the event that the primary beneficiary is unavailable and there is no alternate beneficiary, the estate is divided according to state law.

Alternate Beneficiary

Annual exclusion is the amount of money that one person may transfer to another as a gift without incurring a gift tax or affecting the unified credit.

The annual exclusion is the amount of money that one person may transfer to another as a gift without incurring a gift tax or affecting the unified credit. To be approved for an annual exclusion, taxpayers must submit copies of appraisals, copies of relevant documents regarding the transfer, and any documentation of unusual items shown on the return (such as partially-gifted assets).
The $15,000 annual exclusion means you can give $15,000 to as many people as you want. The annual exclusion is the amount of money that one person may transfer to another as a gift without incurring a gift tax or affecting the unified credit. For example, the following gifts are not taxable:
Gifts that are less than the year’s annual exclusion
Tuition or medical expenses
Gifts to a spouse
Gifts to a political organization Any gifts you make to a single person in excess of $15,000 count toward your combined estate and gift tax exclusion.

Annual Exclusion

An asset protection trust (APT) is a financial-planning vehicle for holding an individual's assets to shield them from creditors.

An asset protection trust (APT) is a trust vehicle that holds an individual's assets with the purpose of shielding them from creditors. There are two kinds of irrevocable trusts that work as asset protection vehicles: domestic asset protection trusts and foreign (or offshore) asset protection trusts. Although foreign asset protection trusts might provide effective protection from a U.S. court-ordered seizure of assets, they also expose the assets to potential economic and political risks associated with the jurisdiction in which the offshore account is held. Although they are usually more costly than their domestic counterparts, foreign asset protection trusts have more stringent privacy measures than their U.S. counterparts, so they offer even more effective protection for your assets. Domestic asset protection trusts offer the most flexible asset-protection trust laws in the United States.

Asset Protection Trust  (APT)

An authorized investment is an investment made by a trustee that follows the written instructions in a trust.

An authorized investment is one that is made by a trustee–or fiduciary–that follows the written instructions in a trust. Authorized investments may be dictated by state laws or by trust instruments designed to restrict the kinds and amounts of investments allowed within a trust. Authorized investments may be dictated by state laws or by trust instruments designed to restrict the kinds and amounts of investments allowed within a trust. While trustees have legal ownership over the assets held in trust, they are also legally and ethically bound to act in the best interest of the beneficiaries who have equitable title to the property, according to the general rules that govern a fiduciary's investment choices and the management of trust assets. In most cases, an authorized investment list prevents aggressive or speculative investments and ensures that the trust is conservatively managed.

Authorized Investment

A bankruptcy trustee is a person appointed by the United States Trustee to represent the debtor's estate during a bankruptcy proceeding.

Annual Business and Non­‐business Filings by Year (1980­‐2019)

A bankruptcy trustee is a person appointed by the United States Trustee, an officer of the Department of Justice, to represent a debtor's estate in a bankruptcy proceeding. There are three main types of bankruptcy: Chapter 7, Chapter 11, and Chapter 13; the trustee's responsibilities vary depending on which type has been filed. A bankruptcy trustee is a person appointed by the United States Trustee, an officer of the Department of Justice, to represent a debtor's estate in a bankruptcy proceeding. With Chapter 11 bankruptcy, a trustee helps reorganize a debtor's business obligations, debts, and assets; this usually applies to a corporation. With Chapter 13 bankruptcy, a trustee helps an individual looking to keep some assets by repaying their debt over time on a payment plan.

Bankruptcy Trustee

A bare trust is a type of trust that provides beneficiaries with immediate and absolute ownership of its capital and the income it generates. 

A bare trust is a basic trust in which the beneficiary has the absolute right to the capital and assets within the trust, as well as the income generated from these assets. A bare trust is a basic trust in which the beneficiary has the absolute right to the capital and assets within the trust, as well as the income generated from these assets. In the simplest form of a bare trust, the assets bequeathed by the individual who set up the bare trust are owned by the trustee and beneficiary. Beneficiaries may also be responsible for paying inheritance tax if the trust settlor dies within seven years of establishing the trust because bare trusts are treated by tax authorities as potentially exempt transfers. For example, a grandparent opening a bare trust for an infant grandchild would have to pay taxes on the income generated by trust assets until the infant beneficiary turns 18.

Bare Trust

A beneficial interest refers to an individual's right to benefit from assets held by someone else, and is often related to matters concerning trusts.

A beneficial interest is the right to receive benefits on assets held by another party. The trust creator can stipulate distribution of the account's assets to the children during the parent's lifetime,
Beneficial interest will alter depending on the rules of a trust's arrangement and the type of trust account.
Parents may set up Crummey trusts, funded through annual gifts, to take advantage of gift tax exclusions. For example, most beneficial interest arrangements are in the form of trust accounts, where an individual, the beneficiary, has a vested interest in the trust's assets. A beneficiary interest will change depending on the type of trust account and the rules of the trust agreement. With these employer-sponsored accounts, the account holder may designate a named beneficiary who can benefit from the account funds in the event of the account holder's death.

Beneficial Interest

A beneficiary clause permits an investment vehicle policy owner to name individuals as primary and secondary beneficiaries.

H.R.1994 - Setting Every Community Up for Retirement Enhancement Act of 2019

A beneficiary clause is a provision in a life insurance policy or other investment vehicle such as an annuity or individual retirement account (e.g., an IRA), that permits the policy owner to name individuals as primary and secondary beneficiaries. A beneficiary clause is a provision in a life insurance policy or other investment vehicle such as an annuity or individual retirement account (e.g., an IRA), that permits the policy owner to name individuals as primary and secondary beneficiaries. For example, if the original account owner purchased an annuity for $100,000 and then passed away when the value was worth $150,000, the gain of $50,000 is taxed as ordinary income to the beneficiary. Typically, any person or entity can be named a beneficiary of a trust, will, or life insurance policy. Many of these clauses allow for a secondary or tertiary beneficiary to be designated in case the owner survives those named first.

Beneficiary Clause

A beneficiary of trust is the individual or group of people chosen to benefit from trust assets and the income they generate.

Trust Beneficiary Rights | Can a Beneficiary Sue a Trustee?

Beneficiary of a Trust? What you Need to Know

A beneficiary of trust is the individual or group of individuals for whom a trust is created. However, all beneficiaries typically have the right to monitor trust activity and take legal action if they suspect the trustee has breached their fiduciary duty.
Beneficiaries of trust generally fall into two categories.
One type of beneficiary is ultimately entitled to take ownership and control of trust capital and the income it generates as outlined in the trust agreement. The trust creator or grantor designates beneficiaries and a trustee, who has a fiduciary duty to manage trust assets in the best interests of beneficiaries as outlined in the trust agreement. The person who creates a trust also determines the trust beneficiary and appoints a trustee to manage the trust in the beneficiary's best interests. the trust asset's gains, losses, and expenses, such as commission fees paid out. If a trustee fails to send at least one annual report, beneficiaries can request an accounting of trust investments from the court.

Beneficiary of Trust

A bequest is an act of giving personal property or financial assets such as stocks, bonds, jewelry and cash to an individual or organization through the provisions of a will or estate plan.

A bequest is a financial term describing the act of giving assets such as stocks, bonds, jewelry, and cash, to individuals or organizations, through the provisions of a will or an estate plan. Some of the major estate planning tasks include the following steps:
Drafting a will
Naming an executor of the estate to oversee the terms of the will
Limiting estate taxes by setting up trust accounts in the name of the beneficiaries
Establishing a guardian for living dependents
Creating and/or updating beneficiaries on plans such as life insurance, IRAs, and 401(k)s
Establishing annual gifting to qualified charitable and non-profit organizations to reduce the taxable estate
Setting up a durable power of attorney (POA) to direct other assets and investments People can give gifts while avoiding taxes by using the Crummey power, which lets a person receive a gift that is not eligible for a gift-tax exclusion and change it into a gift that is eligible for the exclusion. Gift givers can also avoid taxes by exercising their Crummey power, a technique that enables a person to receive a gift that is not eligible for a gift-tax exclusion and change it into a gift that is eligible. This essentially means that an individual may leave $11.58 million to his or her heirs and pay no federal estate or gift tax, while a married couple can shield just under $24 million from federal estate and gift taxes, by doing the same.

Bequest

Canadian Royalty Trust– also called a CanRoy trust–is an oil, gas or mineral company that is organized as a trust rather than as a traditional corporation.

A Canadian Royalty Trust–also called a CanRoy trust–is an oil, gas or mineral company that is organized as a trust rather than as a traditional corporation. A CanRoy trust is similar to an energy trust: investors can earn royalties and other income, but unlike a trust that only owns mineral rights, the CanRoy trust owns–but does not operate–the physical infrastructure of the mines or wells.
CanRoy trusts have flexible structures but tend to focus on older mining or extraction infrastructure for cash flows.
Canadian and foreign investors can buy shares in a CanRoy but tax treatments are different depending on where the investor lives.
Investing in a CanRoy allows an investor to gain indirect exposure to the energy industry without having direct exposure to individual companies in the industry. A Canadian Royalty Trust–also called a CanRoy trust–is an oil, gas or mineral company that is organized as a trust rather than as a traditional corporation and is established in Canada. CanRoy trusts were initially not taxed at the corporate tax rate, but the Canadian government's tax policy has evolved so that now some CanRoy trusts pay corporate taxes. A Canadian Royalty Trust–also called a CanRoy trust–is an oil, gas or mineral company that is organized as a trust rather than as a traditional corporation.

Canadian Royalty Trust (CanRoy)

Carryover basis is a method for determining the tax basis of an asset when it is transferred from one individual to another.

Carryover basis is a method for determining the tax basis of an asset when it is transferred from one individual to another. In the process of estate planning, the carryover basis helps determine the initial value of one's estate, so the carryover basis helps determine the tax rate that the heirs of an estate must pay on capital gains when they sell any assets associated with that estate. When shares are given to you as a gift, your cost basis is the cost basis of the original holder of the asset who gave you the gift. Determining the correct cost basis of an investment—also referred to as the tax basis—is important especially if you reinvested dividends and capital gains distributions instead of taking the earnings from the investment in cash. For 2020 and 2021, the gift tax maximum is $15,000 per person per year.﻿﻿ This means that an individual may gift another individual $15,000 or less per year without incurring a gift tax.

Carryover Basis

Cash distribution per unit is a measure that refers to the amount of cash payments made to individual unitholders of a specified income trust. 

Cash distribution per unit is a measure, used in Canada, that refers to the amount of cash payments made to individual unitholders of a specified income trust. CDPU   \= Total Cash Distributions Total Issued Unit Shares where: \\begin{aligned}&\\text{CDPU}\\ = \\frac{\\text{Total Cash Distributions}}{\\text{Total Issued Unit Shares}}\\\\&\\textbf{where:}\\\\&\\text{CDPU}\\ =\\ {\\text{cash distribution per unit}}\\end{aligned} ​CDPU \=Total Issued Unit SharesTotal Cash Distributions​where:​
Cash distribution per unit is a type of yield measure reported for Canadian income trusts. Cash distribution per unit is a measure, used in Canada, that refers to the amount of cash payments made to individual unitholders of a specified income trust. Canadian income trusts are a popular investment in Canada and can be compared to U.S. real estate investment trusts (REITs). Some business analysts argue that paying nearly 100% distribution of earnings before income taxes to unitholders is a negative thing for firms, as there is little money left for investing in the business in order to stimulate growth.

Cash Distribution Per Unit (CDPU)

Cestui que vie refers to an individual with a right to property and the income and profits that the property provides.

Cestui que vie is French for he who lives. It is a legal term for an individual who is the beneficiary of a trust or an insurance policy, with rights to property and the income and profits that the property provides. More recently, laws against property held in perpetuity required that parties named as the beneficiaries in a trust should vest, and thus have an interest in the trust rather than passively receive benefits. In a trust, the cestui que trust is the person who has an equitable interest in the trust. The legal concepts behind cestui que vie changed a bit over the centuries in order to reduce fraud and to ensure that property owners couldn’t shift their property into trusts in order to dodge creditors.

Cestui Que Vie

A Charitable Remainder Annuity Trust (CRAT) is a type of gift transaction in which a donor contributes assets to a charitable trust.

A Charitable Remainder Annuity Trust (CRAT) is a type of gift transaction in which a donor contributes assets to a charitable trust which subsequently pays a fixed income to a designated beneficiary, in the form of an annuity. A Charitable Remainder Annuity Trust (CRAT) is a type of gift transaction in which a donor contributes assets to a charitable trust which subsequently pays a fixed income to a designated beneficiary, which can be a non-profit entity, a university, or another such party. Beneficiaries receive a fixed income from the CRAT in the form of an annuity, which is typically calculated as a fixed percentage of the initial value of trust assets. Note: although the trust itself is a tax-exempt entity, the trust income distributed to beneficiaries is in fact taxable, according to terms dictated by the U.S. Internal Revenue Code and accompanying U.S. Treasury regulations.

Charitable Remainder Annuity Trust (CRAT)

A charitable lead trust is designed to reduce a beneficiary's taxable income by first donating a portion of the trust's income to charities.

A charitable lead trust is a type of irrevocable trust designed to reduce a beneficiary's potential tax liability, upon inheritance. With a charitable remainder trust, these charities and foundations can be changed over time, unlike a charitable lead trust, which must adhere to the groups that were originally written into the language of the trust at its initial signing.
**\[Important: Charitable lead trusts may be structured to be “reversionary,” where remaining assets revert to the individual who created the trust, or they may be “non-reversionary,” where remaining assets funnel to a beneficiary other than A charitable remainder trust is the polar opposite of a charitable lead trust, because instead of only making monthly payments to a charity, the trust can make a monthly payment to the beneficiary, as well. A charitable lead trust signifies a type of irrevocable trust that aims to reduce a beneficiary's potential tax liability upon inheritance. A charitable lead trust is a type of irrevocable trust designed to reduce a beneficiary's potential tax liability, upon inheritance.

Charitable Lead Trust

A charitable remainder trust is a tax-exempt irrevocable trust designed to reduce the taxable income of individuals and support charities.

A charitable remainder trust is a tax-exempt irrevocable trust designed to reduce the taxable income of individuals by first dispersing income to the beneficiaries of the trust for a specified period of time and then donating the remainder of the trust to the designated charity. Two main types of charitable remainder trusts include:
1.  Charitable remainder annuity trusts or CRATs that distribute a fixed annuity each year
2.  Charitable remainder uni-trusts or CRUTs that distribute a fixed annual percentage based on the balance of the trust assets (CRATs do not allow for additional contributions, while CRUTs do permit this.)
Additional types of trusts outside of charitable remainder trusts include a bare trust, in which the beneficiary has the absolute right to the capital and assets within the trust, as well as the income generated from these assets. A charitable remainder trust is a tax-exempt irrevocable trust designed to reduce the taxable income of individuals by first dispersing income to the beneficiaries of the trust for a specified period of time and then donating the remainder of the trust to the designated charity. A charitable remainder trust disperses income to the trust beneficiaries for a specified period and donates the remainder to the designated charity. A charitable remainder trust is a tax-exempt irrevocable trust designed to reduce the taxable income of individuals.

Charitable Remainder Trust

Chartered Trust And Estate Planner is a professional accreditation offered by the Global Academy of Finance and Management. 

Certified Chartered Trust and Estate Planner

Chartered Trust and Estate Planner is a professional accreditation offered by the Global Academy of Finance and Management (GAFM).
Chartered Trust and Estate Planner is an accreditation granted by the GAFM, formerly the American Academy of Financial Management. Chartered Trust and Estate Planner is a professional accreditation offered by the Global Academy of Finance and Management (GAFM).
Chartered Trust and Estate Planner is an accreditation granted by the GAFM, formerly the American Academy of Financial Management. The Chartered Trust and Estate Planner certification is a good fit for a wide range of financial professionals serving upper-income clients, including wealth managers, trust officers, hedge fund managers, brokerage and market analysts, and stock market professionals. Legal and financial topics covered in this course and certification evaluation also include tax planning, anti-avoidance rules, controlled foreign corporations, and U.S. tax treaties. The curriculum and testing process offered by GAFM evaluates the person’s competency via a course that provides an overview of the various types of trusts available and their appropriate use.

Chartered Trust And Estate Planner

Clifford Trusts allow grantors to transfer assets that produce income into the trust and then reclaim them when the trust expires. 

The Adviser’s Guide to Financial and Estate Planning 2020

Abusive Trust Tax Evasion Schemes - Questions and Answers

Clifford Trusts allow grantors to transfer assets that produce income into the trust and then reclaim them when the trust expires. Grantor trust rules also outline certain conditions when an irrevocable trust can receive some of the same treatments as a revocable trust by the Internal Revenue Service. Under these rules, the individual who creates a grantor trust is recognized as the owner of assets and property held within the trust for income and estate tax purposes. Grantor trust rules are guidelines within the Internal Revenue Code, which outline certain tax implications of a grantor trust. Clifford Trusts allow grantors to transfer assets that produce income into the trust and then reclaim them when the trust expires.

Clifford Trust

A codicil is an addendum of any kind to a will, used to change the provisions in the will. 

A codicil is an addendum of any kind to a will. Therefore, the term codicil translates into the literal meaning of a little codex, or little book, which is a little bit of writing on a small piece of writing material, used to add to or change something about a larger piece of writing. All codicils must meet the same legal administrative requirements as the original will and testament, and they must each affirm that the original will is valid except for the changes outlined inside. Because of the serious nature of codicils and their power to change the entire will, two witnesses are usually required to sign when a codicil is added, much like in creating the original will itself. Some legal experts believe that you shouldn’t just rely on a codicil, but that it may be advisable to draw up a new will altogether if changes are warranted, especially since much of the legal proceedings are similar.

Codicil

A collective investment fund (CIF) is a tax-exempt, pooled investment fund, available mainly in retirement plans.

A collective investment fund (CIF), also known as a collective investment trust (CIT), is a group of pooled accounts held by a bank or trust company. There are two types of collective investment funds:
A1 funds, grouped assets contributed for investment or reinvestment
A2 funds, grouped assets contributed for retirement, profit sharing, stock bonus, or other entities exempt from federal income tax
CIFs are generally available to the individual only via employer-sponsored retirement plans, pension plans, and insurance companies. Pros
Diversified portfolio
Lower management and distribution costs
Held to bank fiduciary standard
Tax-exempt earnings
Available only through employer retirement plans
Performance difficult to track
Less transparent operations
Fewer investment options
Perhaps most notably, CIF tends to have lower operating costs than mutual funds, since they don't have to meet Securities and Exchange Commission (SEC) reporting requirements—providing prospectuses or install independent boards of directors, for example. Although CIFs are pooled funds just as mutual funds are, CIFs are unregistered investment vehicles, more akin to hedge funds. A collective investment fund (CIF) is a tax-exempt, pooled investment fund, available mainly in employer-sponsored retirement plans.

Collective Investment Fund (CIF)

A commingled trust fund combines assets under a joint investment management strategy.

A commingled trust fund combines assets under a joint investment management strategy. In 2009, the state Treasurer Alexi Giannoulias proposed consolidating the investment authority of the state's five retirement systems—The Teachers’ Retirement System (TRS), State Universities’ Retirement System (SURS), State Employees’ Retirement System (SERS), Judges Retirement System (JRS), and the General Assembly Retirement System (GARS)—into a commingled trust. Before investing in a commingled trust fund, investors should seek professional advice to make sure that it is appropriate for their financial situation.
Because the SEC doesn't regulate commingled trust funds, investors may find it difficult to obtain detailed information about them. Due to low overhead costs, commingled trust funds are cheaper to invest in similar alternative investment options, such as mutual funds. Commingled trust funds are similar to mutual funds; they are both managed by professional money managers and invest in stocks, fixed income securities, and other assets.

Commingled Trust Fund

Conservatorship is when a court appoints someone to manage an incapacitated person or minor's financial (and sometimes personal) affairs.

History of Fannie Mae and Freddie Mac Conservatorships

Conservatorship is a legal status to which a court appoints a person to manage an incapacitated or incompetent individual's or minor's financial affairs. Conservatorship, on the other hand, generally refers to the designation of a conservator to manage the financial affairs of an incapacitated or incompetent individual, minor, or older adult with limited capacity.
In some jurisdictions and states, a conservatorship is referred to as a guardianship and conservators are sometimes related to as trustees. Individuals needing conservatorship may include people who are suicidal or who struggle with psychosis, dementia, or intellectual disabilities that render the person unable to make legal, financial, and medical decisions on their own behalf.
Elderly individuals—specifically those with Alzheimer's or dementia— Conservatorship is a legal status to which a court appoints a person to manage an incapacitated or incompetent individual's or minor's financial affairs. A court order will establish a conservatorship for an individual who is a minor or a person with physical or intellectual disabilities.

Conservatorship

A credit shelter trust allows a surviving spouse to pass on assets to their children, free of estate tax. 

Treasury, IRS: Making Large Gifts Now Won’t Harm Estates After 2025

Avoid Capital Gains Tax by Rethinking the Credit Shelter Trust

Table of Contents
What Is a Credit Shelter Trust?
Understanding a Credit Shelter Trust (CST)
Credit Shelter Trusts (CSTs) and Tax Protection
Benefits of a Credit Shelter Trust (CST)
Example of a Credit Shelter Trust
Credit Shelter Trust FAQs
A Credit Shelter Trust (CST) is designed to allow affluent couples to reduce or completely avoid estate taxes when passing assets on to heirs, typically, the couple's children. This type of irrevocable trust is structured so that upon the death of the trust's creator or settler, the assets specified in the trust agreement and the income they generate are transferred to the settler's spouse. Protecting growth on the assets from further estate tax on the surviving spouse’s death: A $5 million property or stock portfolio can be allocated to the CST on the decedent spouse’s death. Protecting the testamentary intent of the deceased spouse: In a blended family, each spouse may want to ensure that their share of the estate is passed to their chosen beneficiaries, children from a prior marriage, for example, and not just to the surviving spouse’s beneficiaries. However, because the assets in the credit shelter do not become part of the surviving spouse’s taxable estate, there is no second step-up in basis upon the surviving spouse’s death.

Credit Shelter Trust (CST)

Crummey power is a technique that enables a person to receive a gift that is not eligible for a gift-tax exclusion and change it into one that is eligible.

D. Clifford Crummey v. Commissioner of Internal Revenue, 397 F.2d 82 (9th Cir. 1968)

Crummey power is a technique that enables a person to receive a gift that is not eligible for a gift-tax exclusion and change it into a gift that is, in fact, eligible. Crummey power allows a person to receive a gift that is not eligible for a gift-tax exclusion and then effectively transform the status of that gift into one is eligible for a gift-tax exclusion. Crummey power was named after Clifford Crummey, a wealthy grantor who, in the 1960s, wanted to build a trust fund for his children, while maintaining the ability to reap the yearly tax exemption benefits. Crummey power is a technique that enables a person to receive a gift that is not eligible for a gift-tax exclusion and change it into a gift that is, in fact, eligible. Crummey power was first created in the 1960s, when a wealthy grantor named Clifford Crummey had a strong desire to build a trust fund for his children, while still reaping the yearly tax exemption benefits.

Crummey Power

Curtesy is a common law right of a husband to the estate and property of his deceased wife. 

Statute 392.020, Surviving Spouse's Interest in Property of Deceased Spouse -- 'Dower' and 'Curtesy' Defined

Curtesy is a common law right of a husband to the estate and property of his deceased wife. Curtesy is a common law right of a husband to the estate and property of his deceased wife. Civil law is a comprehensive, codified set of legal statutes created by legislators; some of these laws are based on common law. Curtesy is a husband's right to the estate and property of his deceased wife, if a child was born when they were married. Curtesy and dower rights were different in most states earlier, but those differences have been abolished in favor of a common set of rights for surviving spouses, regardless of sex.

Curtesy

Cy pres doctrine is a legal concept which gives courts the power to interpret the terms of a charitable trust, will, or gift.

Cy pres doctrine is a legal concept that gives courts the power to interpret the terms of a will, gift, or charitable trust. Without the use of the cy pres award, unused funds could end as state funds or even return to the defendant of the class action case. The use of the cy pres doctrine to distribute settlement funds begin in 1986 so that unused funds could flow to the next best beneficiary. The use of the cy pres doctrine to distribute settlement funds begin in 1986 so that unused funds could flow to the next best beneficiary. “The Clinic is honored and thankful for being selected as the recipient of the cy pres award,” said Professor J. Damian Ortiz, clinical professor and director of Pro Bono Litigation Clinic in a press release.

Cy Pres Doctrine

"Decedent" is a term used by tax accountants, lawyers, and estate planners to refer to a deceased person.

Does Your State Have an Estate or Inheritance Tax?

Life Insurance Death Benefits: What You Need to Know

Section 691—Recipients of Income in Respect of Decedents

Table of Contents
What Is a Decedent? The decedent's remaining debts are paid from the decedent's estate, along with any money owed in taxes on the decedent's final tax return. The income in respect of a decedent and final earned income must be reported to the IRS, and their final taxes must be filed by the trustee of the decedent's estate. The legal process of executing a will or trust always refers to the deceased as a decedent and requires filing a final tax return that lists the entire estate. A decedent trust is another name for a joint trust called an A-B trust.

Decedent

A declaration of trust appoints a trustee to take responsibility for assets being held for the benefit of another person or people.

A declaration of trust under U.S. law is a document or an oral statement appointing a trustee to oversee assets being held for the benefit of one or more other individuals. State laws also govern how a declaration of trust is applied to all those involved in the operation of the trust including grantors, trustees, and beneficiaries.
A declaration of trust has a different meaning in the U.K. The person creating the declaration of trust would be the registered owner on the title deeds of the property, but the parents can register their interests on the trust deed. A declaration of trust, or nominee declaration, appoints a trustee to oversee assets for the benefit of another person or people. A declaration of trust under U.S. law is a document or an oral statement appointing a trustee to oversee assets being held for the benefit of one or more other individuals.

Declaration Of Trust

Defalcation is the misuse of funds by a trustee but also refers to a flawed accounting practice of consolidating debt into a single, total debt.

Table of Contents
What Is Defalcation?
Understanding Defalcation
Special Considerations
Types of Defalcation There are also other uses of the term, including the sum of misappropriated funds, the use improper use of escrow funds in title insurance, and the consolidation of two debts (carried by two related parties) without the consent of one of the parties. In this case, defalcation is the sum of monies that are misappropriated when a title agent misuses funds deposited into the escrow account that are intended to cover and close real estate transactions. As noted above, this type of defalcation involves title insurance agents who misuse or misappropriate funds that are held in an escrow or trust account. Defalcation predominantly refers to the theft, misuse, or misappropriation of money or funds held by an official trustee, or other fiduciary.

Defalcation

A disclaimer trust allows a surviving spouse to put specific assets under the trust.

A disclaimer trust is a type of trust that contains embedded provisions, usually included in a will, allowing a surviving spouse to put specific assets under the trust by disclaiming ownership of a portion of the estate. A disclaimer trust is a type of trust that contains embedded provisions, usually included in a will, allowing a surviving spouse to put specific assets under the trust by disclaiming ownership of a portion of the estate. A see-through trust, or pass-through trust, permits individuals to pass retirement assets from their individual retirement accounts (IRAs), via a trust, to their elected beneficiaries. For example, a trust can provide for surviving minor children as long as the surviving spouse elects to disclaim inherited assets, passing them on to the trust. An inheritance tax is generally distinct from an estate tax: An inheritance tax would aim to tax the heir who has received the inheritance, while an estate tax would apply to the assets of the deceased's estate.

Disclaimer Trust

Discretionary beneficiaries are individuals or entities that a grantor names in a trust, life insurance policy, or retirement plan that have no legal proprietary interest.

Discretionary beneficiaries are individuals or entities that a grantor names in a trust, life insurance policy, or retirement plan who will only receive their distributions at a time that has been deemed as appropriate, such as if they pass certain milestones in age or education. While the trustees still have a fiduciary responsibility to a discretionary beneficiary, they must overall enforce the discretion stated by the grantor, unless a specific letter of intent exists from the grantor of the trust that overrides the previous instructions. Absolute beneficiaries are also referred to as irrevocable beneficiaries and can be associated with a trust, an employee benefit plan such as a pension, and a range of additional instruments or contracts with a beneficiary clause. Discretionary beneficiaries are individuals or entities that a grantor names in a trust, life insurance policy, or retirement plan who will only receive their distributions at a time that has been deemed as appropriate, such as if they pass certain milestones in age or education. A secondary beneficiary inherits the assets if the primary beneficiary dies before the grantor.

Discretionary Beneficiary

Distributable net income is used to allocate income between a trust and its beneficiaries.

If we use the formula above, the trust's taxable income is $51,800:
$51,800 = $10,000 (interest income) + $30,000 (dividends) + $15,000 (capital gain) - $3,000 (fees) - $200 (exemption)
We can then use this taxable income figure to calculate the DNI, which would be $37,000:
$37,000 = $51,800 (taxable income) - $15,000 (capital gain) + $200 (exemption) Estates and trusts are allowed to deduct the distributable net income or the sum of the trust income required to be distributed—whichever is less.
As noted above, when a trust calculates the distributable net income, it essentially prevents any instance of double taxation of the funds issued by a trust. According to U.S. tax code, estates and trusts are allowed to deduct the distributable net income or the sum of the trust income required to be distributed—whichever is less—and other amounts “properly paid or credited or required to be distributed” to beneficiaries to prevent double taxation on income. While DNI is the income distributed from a trust to its beneficiary or beneficiaries, net income is used by a business to calculate its earnings per share (EPS)—the total profit of a company divided by the number of outstanding shares of its common stock—and is also referred to as net earnings.

Distributable Net Income (DNI)

A donee beneficiary receives intended benefits from a contractual obligation without technically being party to the contract.

A donee beneficiary receives the benefit of a contract between two other parties as a gift from one of the parties to the contract. Donee beneficiaries are separate from other third-party beneficiaries, such as creditor beneficiaries and incidental beneficiaries. As with other situations involving third-party beneficiaries, donee beneficiaries have the legal right to demand benefits promised to them once their rights to the contract have vested. Incidental beneficiaries have no legal right to enforce a contract because no party to the contract intends that they benefit. Since the promisee technically owes a creditor beneficiary something prior to entering the contract, creditor beneficiaries typically have legal avenues to go after payment from both parties.

Donee Beneficiary

A dower was a common law that entitled a widow to a portion of her husband's estate in absence of a will. 

Uniform Probate Code, Article II: Intestacy, Wills and Donative Transfers

A Dower is a common law that entitled a widow to a portion of her husband's estate in absence of a will. If there were surviving descendants, the descendants took one-half of the balance of the estate in excess of $50,000 (for example, $25,000 in a $100,000 estate). Under the Uniform Probate Code, which has been adopted in 19 states,﻿﻿ if one spouse dies without a will the other spouse inherits the estate. However, each state may have varying laws on rights to an estate, so be sure to check with an attorney or other professional versed in the laws of your state. A Dower is a common law that entitled a widow to a portion of her husband's estate in absence of a will.

Dower

A dynasty trust is a long-term trust created to pass wealth from generation to generation without incurring estate taxes.

The Rule Against Perpetuities Applied to Trusts

The Rule Against Perpetuities: A Survey of State (and D.C.) Law

A dynasty trust is a long-term trust created to pass wealth from generation to generation without incurring transfer taxes—such as the gift tax, estate tax, or generation-skipping transfer tax (GSTT)—for as long as assets remain in the trust. A dynasty trust is a long-term trust created to pass wealth from generation to generation without incurring transfer taxes—such as the gift tax, estate tax, or generation-skipping transfer tax (GSTT)—for as long as assets remain in the trust. The immediate beneficiaries of a dynasty trust are usually the children of the grantor (the person whose assets are used to create the trust). Moreover, the assets that go into a dynasty trust, as well as any appreciation on those assets, are permanently removed from the grantor's taxable estate, providing another layer of tax relief. Assets that are transferred to a dynasty trust can be subject to gift, estate, and GSTT taxes only when the transfer is made and only if the assets exceed federal tax exemptions.

Dynasty Trust

An endowment fund is an investment fund set up by an institution that makes regular withdrawals from invested capital to fund ongoing operations. 

An endowment fund is an investment fund established by a foundation that makes consistent withdrawals from invested capital. However, the delayed use of the funds also encourages the endowment fund management to grow the income from the fund to ensure that operational needs are covered. Most large endowment funds are professionally managed by investment managers that have clear investment goals and allocate the money into a variety of investments. Many endowment funds have specific investment policies built into its legal structure so that the pool of money must be managed for the long term. Most endowment funds have the following three components, which governs investments, withdrawals, and usage of the funds.

Endowment Fund

An endowment is a nonprofit's investable assets, which are used for operations or programs that are consistent with the wishes of the donor(s).

H.R.1 - An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018

Harvard: the Inside Story of Its Finance Meltdown

After Trump’s Criticism, Harvard Turns Down Federal Relief Money

Table of Contents
What Is an Endowment?
Understanding Endowments
Endowment Types
Requirements for Endowments
Endowments and Higher Education
Criticism of Endowments
Real World Examples of Endowments If an institution is near bankruptcy or has declared it but still has assets in endowments, a court can issue a doctrine of cy-près so the institution can use those assets toward better financial health while still honoring the wishes of the donor as closely as possible.
Drawing down the corpus of the endowment to pay debts or operating expenses is known as invading, or endowment invasion, and sometimes requires state approval. According to U.S. News & World Report, the top five universities by endowment size at the end of the fiscal year 2018 were:
1.  Harvard University $39,233,736,000
2.  Yale University $29,444,936,000
3.  Stanford University $26,464,912,000
4.  Princeton University $25,438,300,000
5. The goal of any group given the task of managing a university's endowments, for example, is to sustainably grow the funds by reinvestment of the endowment’s earnings while also contributing to the operating cost of the institution and its goals. Philanthropies, or more specifically private non-operating foundations, a category that includes the majority of grant-making foundations, are required by federal law to pay out 5% of their investment assets on their endowments every year for charitable purposes.

Endowment

An estate freeze is an asset management strategy whereby an estate owner aims to transfer assets to his or her beneficiaries without a tax consequence.

An estate freeze is an asset management strategy whereby an estate owner seeks to transfer assets to his or her beneficiaries, without tax consequences. In addition to strategies in both the public and private markets, many asset managers also offer estate planning services, which may facilitate the following tasks:
Drafting wills
Minimizing estate taxes by setting up trust accounts in the name of beneficiaries
Establishing a guardian for living dependents
Naming an executor of the estate to oversee the terms of the will
Creating/updating beneficiaries on plans such as life insurance, IRAs and 401(k)s
Setting up funeral arrangements
Establishing annual gifting to qualified charitable and non-profit organizations to reduce the taxable estate
Setting up a durable power of attorney (POA) to direct other assets and investments An estate freeze is an asset management strategy whereby an estate owner seeks to transfer assets to his or her beneficiaries, without tax consequences. An estate freeze describes a strategy where estate owners aim to transfer assets to their loved ones, without triggering tax consequences. In some estate freeze scenarios, the estate owner transfers shares of common stock to a company he invests in, in exchange for preferred shares.

Estate Freeze

An estate tax is a federal or state levy on inherited assets whose value exceeds a certain (million-dollar-plus) amount.

An estate tax is a levy on estates whose value exceeds an exclusion limit set by law. In many instances, the effective U.S. estate tax rate is substantially lower than the top federal statutory rate of 37%.﻿﻿ This happens in part because of the tax being assessed only on the portion of an estate that exceeds the exclusion limit. These provisions make gifting an effective way to avoid tax on assets transferred to people, such as non-family members, who might be subject to the estate tax if the assets were transferred as part of an estate. Life insurance payable to a named beneficiary is not typically subject to an inheritance tax, although life insurance payable to the deceased person or to his estate is usually subject to an estate tax. For 2021, the Internal Revenue Service (IRS) requires estates with combined gross assets and prior taxable gifts exceeding $11.7 million (up from $11.58 million for 2020) to file a federal estate tax return and pay estate tax as required.

Estate Tax

An executor is an individual appointed to administrate the estate of a deceased person. The executor's main duty is to carry out the instructions and wishes of the deceased.

Publication 559 Survivors, Executors, and Administrators

206. Priority for the Payment of Claims Due to the Government

An executor of an estate is an individual appointed to administer the last will and testament of a deceased person. Other major estate planning tasks include:
Limiting estate taxes by setting up trust accounts in the name of beneficiaries
Establishing a guardian for living dependents
Naming an executor of the estate to oversee the terms of the will
Creating/updating beneficiaries on plans such as life insurance, IRAs and 401(k)s
Setting up funeral arrangements
Establishing annual gifting to qualified charitable and non-profit organizations to reduce the taxable estate
Setting up a durable power of attorney (POA) to direct other assets and investments
While it is an honor to be selected as an executor, executing a will takes more work than you might think. The executor has to estimate the value of the estate by using either the date of death value or the alternative valuation date, as provided in the Internal Revenue Code (IRC).
The executor also needs to ensure that all the debts of the deceased are paid off, including any taxes. The value of the estate for death tax purposes is greater than the probate estate (the assets that do not pass automatically to named beneficiaries); it includes all assets in which the decedent had an interest (e.g., IRAs, annuities, life insurance owned by the decedent). For example, think of the time involved in contacting various government agencies (e.g., Social Security Administration to stop Social Security benefits and, in the case of a surviving spouse, claim the $255 death benefit; IRS and state tax authorities for income tax and death tax matters; state’s unclaimed property departments to recoup utility deposits and other outstanding amounts that belonged to the decedent).

Executor

An exemption trust helps minimize or eliminate federal estate taxes on a married couple's estate. The trust holds the assets of the first spouse to die.

An exemption trust is a trust designed to drastically reduce or eliminate federal estate taxes for a married couple's estate. The primary goal of an exemption trust, which is also known as a bypass trust or credit shelter trust, is to mitigate a couple’s federal estate tax liability. When Priya dies, her assets are passed onto trust B and the excess beyond exemption limit (in this case, roughly $11.2 million), is funded into trust A to avoid federal estate taxes. An exemption trust helps to reduce a married couple's estate taxes by placing their assets in a trust after the first member of the couple dies. Because the surviving spouse did not inherit the assets directly, the beneficiaries are not held responsible for any estate taxes when they receive the trust assets after the surviving spouse dies.

Exemption Trust

Exoneration means to free someone from blame; in the financial realm, exoneration usually means to relieve someone of a financial obligation or duty.

Preserving Home Ownership: Foreclosure Prevention Initiatives

Exoneration means to free someone from blame or guilt; in the financial realm, exoneration usually means to relieve someone of a financial obligation or duty. At least nineteen states have abrogated the doctrine of exoneration in favor of the Uniform Probate Code (UPC), which assumes that mortgages and other encumbrances are owed by the inheritor of the property unless the will specifies otherwise.﻿﻿ This is called “default non-exoneration” and applies even if the will makes vague reference to paying off all debts. The common law “doctrine of exoneration” says that encumbrances, such as mortgages, of property conveyed must be paid off by funds from the estate, not separately by the person who inherited the property. Under the doctrine of exoneration, the son who inherits the house is exonerated from paying off the mortgage by himself; instead, it must be paid off equally by the three sons, out of the total value of the estate. Exoneration means to free someone from blame or guilt; in the financial realm, exoneration usually means to relieve someone of a financial obligation or duty.

Exoneration

An exordium clause is a section at the beginning of a will that establishes the document as a will and spells out a few basic premises of the document. 

An exordium clause is a clause that most often appears at the opening of a will, which officially declares that the document is a will. Contents of an exordium clause are likely to include:
1\. Identity of the person who has left the will.
2\. The name of the place of residence of that person. The exordium clause may also include an identification of certain relatives of the person who passed away and a list of the beneficiaries of the will. An exordium clause is a clause that most often appears at the opening of a will, which officially declares that the document is a will. In this clause, the person who is creating the will, who is frequently known as the grantor, identifies themselves and specifies their role in establishing this legal document.

Exordium Clause

Fiduciary negligence is professional malpractice when a person fails to honor his or her fiduciary obligations and responsibilities. 

Fiduciary negligence is a type of professional malpractice in which a person fails to honor their fiduciary obligations and responsibilities. A party that feels they have been negatively impacted by fiduciary negligence can file a legal complaint naming the fiduciary as the defendant. Fiduciary negligence occurs when a fiduciary fails to act on breaches of duty, specifically when their actions could have prevented the infractions or minimized the negative repercussions. If the company's employees are embezzling money or expensing funds on lavish dinners and gifts and the chief financial officer fails to check the financial accounts, allowing such infractions to go unnoticed, that officer would be considered negligent and held accountable even if they did not personally benefit from these actions. This is why this type of failure is called negligence, as opposed to acts of fraud or deception, where the fiduciary initiates or actively engages in behavior that breaches their ethical duty or code of conduct.

Fiduciary Negligence

A final return for decedent is a tax return filed in the year of a person's death.

A final return for decedent is an income tax return that has been filed for an individual in the year of that taxpayer's death. A final return for decedent is an income tax return that has been filed for an individual in the year of that taxpayer's death. In order to properly file a final return for decedent, the executor of the individual's estate or a personal representative is usually responsible for filing that tax return. A final return for decedent refers to a tax return filed for an individual in the year of that person's death. Taxpayers who die in any given year must have one final tax return submitted to the IRS on their behalf to account for any income or transfers received in that year.

Final Return For Decedent

A 5 by 5 Power in Trust is a common clause in many trusts that allows the trust’s beneficiary to make certain withdrawals.

A "5 by 5 Power in Trust" is a common clause in many trusts that allows the trust's beneficiary to make certain withdrawals. For the purposes of income tax, if the beneficiary doesn't exercise the 5 by 5 Power, over time the beneficiary could become the owner of the trust and be liable for taxes on the trust's capital gains, deductions and income. A 5 by 5 Power in Trust lets the person establishing the trust set guidelines, such as when a beneficiary can access funds or what the beneficiary can use the money for. Many trusts with 5 by 5 Powers will also allow the beneficiary access to the income that the trust investments produce (such as rental income from properties or bond interest) each year. For example, a trust owner may establish the rule that a beneficiary can only access funds if he needs to pay for graduate school or other forms of continuing education and professional development.

5 by 5 Power in Trust

A generation-skipping trust (GST) is a legally binding agreement in which assets are passed down to the grantor's grandchildren (skipping the children).

A generation-skipping trust (GST) is a type of legally binding trust agreement in which the contributed assets are passed down to the grantor's grandchildren, thus "skipping" the next generation, the grantor's children. A generation-skipping trust (GST) is a legally binding agreement in which assets are passed down to the grantor's grandchildren—or anyone at least 37½ years younger—bypassing the next generation of the grantor's children.
By skipping the opportunity to receive the assets, the children of the grantor avoid the estate taxes that would otherwise be due. Generation-skipping trusts are liable for taxation if the amount transferred exceeds a certain annually adjusted threshold ($11.7 million in 2021).
Because a generation-skipping trust effectively transfers assets from the grantor's estate to grandchildren, the grantor's children never take title to the assets. Due to the generation-skipping trust's viability as a loophole to avoid federal estate taxes, changes were made to the tax code in 1986 that created a generation-skipping transfer tax. This legislation established a permanent $5 million tax exemption on generation-skipping transfers, which meant the federal tax on a generation-skipping transfer of wealth would apply only if the amount exceeded $5 million.

Generation-Skipping Trust—GST

Gift causa mortis is a gift of personal property made with the expectation that the person giving the gift will soon die.

Gift causa mortis is a gift of personal property made with the expectation that the person giving the gift will soon die. A gift causa mortis is known as the deathbed gift because it is the classic example of a gift being given by a donor at the time of death or on their deathbed. This is a form of a conditional gift, and the gift can only be made if the donor anticipates death. Once the gift is given to the beneficiary, the donor has no rights in the property and cannot take back the gift. A gift causa mortis is taxed under federal estate tax law in the same way as a gift bequeathed by a will.

Trust and Estate Planning

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