A trust is a three-party fiduciary relationship in which the first party, the trustor or settlor, transfers ("settles") a property upon the second party for the benefit of the third party, the beneficiary.
A will or testament is a legal document by which a person, the testator, expresses their wishes as to how their property is to be distributed at death, and names one or more persons, the executor, to manage the estate until its final distribution. For the devolution of property not disposed of by will, see inheritance and intestacy.
Intestacy is the condition of the estate of a person who dies without having made a valid will or other binding declaration. Alternatively this may also apply where a will or declaration has been made, but only applies to part of the estate; the remaining estate forms the "intestate estate". Intestacy law, also referred to as the law of descent and distribution, refers to the body of law that determines who is entitled to the property from the estate under the rules of inheritance.
In common law and statutory law, a life estate is the ownership of land for the duration of a person's life. In legal terms, it is an estate in real property that ends at death when ownership of the property may revert to the original owner, or it may pass to another person. The owner of a life estate is called a "life tenant".
Estate planning is the process of anticipating and arranging, during a person's life, for the management and disposal of that person's estate during the person's life and at and after death, while minimizing gift, estate, generation skipping transfer, and income tax. Estate planning includes planning for incapacity as well as a process of reducing or eliminating uncertainties over the administration of a probate and maximizing the value of the estate by reducing taxes and other expenses. The ultimate goal of estate planning can be determined by the specific goals of the client, and may be as simple or complex as the client's needs dictate. Guardians are often designated for minor children and beneficiaries in incapacity.
An elective share is a term used in American law relating to inheritance, which describes a proportion of an estate which the surviving spouse of the deceased may claim in place of what they were left in the decedent's will. It may also be called a widow's share, statutory share, election against the will, or forced share.
A gift tax is a tax imposed on the transfer of ownership of property. The United States Internal Revenue Service says, a gift is "Any transfer to an individual, either directly or indirectly, where full compensation is not received in return."
In the United Kingdom, Inheritance Tax is a transfer tax. It was introduced with effect from 18 March 1986, replacing Capital Transfer Tax.
A power of appointment is a term most frequently used in the law of wills to describe the ability of the testator to select a person who will be given the authority to dispose of certain property under the will. Although any person can exercise this power at any time during their life, its use is rare outside of a will. The power is divided into two broad categories: general powers of appointment and special powers of appointment. The holder of a power of appointment differs from the trustee of a trust in that the former has no obligation to manage the property for the generation of income, but need only distribute it.
An express trust is a trust created "in express terms, and usually in writing, as distinguished from one inferred by the law from the conduct or dealings of the parties." Property is transferred by a person to a transferee, who holds the property for the benefit of one or more persons, called beneficiaries. The trustee may distribute the property, or the income from that property, to the beneficiaries. Express trusts are frequently used in common law jurisdictions as methods of wealth preservation or enhancement.
Marital deduction is a type of tax law that allows a person to give assets to his or her spouse with reduced or no tax imposed upon the transfer. Some marital deduction laws even apply to transfers made postmortem. The right to receive property conveys ownership for tax purposes. A decree of divorce transfers the right to that property by reason of the marriage and is also a transfer within a marriage. It makes no difference whether the property itself or equivalent compensation is transferred before, or after the decree dissolves the marriage. There is no U.S. estate and gift tax on transfers of any amount between spouses, whether during their lifetime or at death. There is an important exceptions for non-citizens. The U.S. federal Estate and gift tax marital deduction is only available if the surviving spouse is a U.S. citizen. For a surviving spouse who is not a U.S. citizen a bequest through a Qualified Domestic Trust defers estate tax until principal is distributed by the trustee, a U.S. citizen or corporation who also withholds the estate tax. Income on principal distributed to the surviving spouse is taxed as individual income. If the surviving spouse becomes a U.S. citizen, principal remaining in a Qualifying Domestic Trust may then be distributed without further tax.
The taxation of trusts in the United Kingdom is governed by a different set of principles to those tax laws which apply to individuals or companies.
Basis, as used in United States tax law, is the original cost of property, adjusted for factors such as depreciation. When property is sold, the taxpayer pays/(saves) taxes on a capital gain/(loss) that equals the amount realized on the sale minus the sold property's basis.
An inheritance or estate tax is a tax paid by a person who inherits money or property or a levy on the estate of a person who has died.
A life insurance trust is an irrevocable, non-amendable trust which is both the owner and beneficiary of one or more life insurance policies. Upon the death of the insured, the trustee invests the insurance proceeds and administers the trust for one or more beneficiaries. If the trust owns insurance on the life of a married person, the non-insured spouse and children are often beneficiaries of the insurance trust. If the trust owns "second to die" or survivorship insurance which only pays when both spouses are deceased, only the children would be beneficiaries of the insurance trust.
Residence trusts in the United States are used to transfer a grantor's residence out of the grantor's estate at a low gift tax value. Once the trust is funded with the grantor's residence, the residence and any future appreciation of the residence are excluded from the grantor's estate, if the grantor survives the term of the trust, as explained below.
. United States trust law is the body of law regulating the legal instrument for holding wealth known as a trust.
Under Internal Revenue Code § 1014(a), when a person receives an asset from a giver after the benefactor dies, the asset often receives a stepped-up basis, which is its market value at the time the benefactor dies. A stepped-up basis is often much higher than the before-death cost basis, which is primarily the benefactor's purchase price for the asset. Because taxable capital-gain income is the selling price minus the basis, a high stepped-up basis can greatly reduce the beneficiary's taxable capital-gain income when the beneficiary sells the inherited asset.
The estate tax in the United States is a tax on the transfer of the estate of a deceased person. The tax applies to property that is transferred via a will or according to state laws of intestacy. Other transfers that are subject to the tax can include those made through an intestate estate or trust, or the payment of certain life insurance benefits or financial account sums to beneficiaries. The estate tax is one part of the Unified Gift and Estate Tax system in the United States. The other part of the system, the gift tax, applies to transfers of property during a person's life.
QTIP trust is a type of trust and an estate planning tool used in the United States. "QTIP" is short for "Qualified Terminable Interest Property." A QTIP trust is often used in order to take advantage of the marital deduction and still control the ultimate distribution of the assets at the death of the surviving spouse.
