Estate Planning Terms and Definitions

Family Limited Partnership
A legal partnership agreement between members of a family for the management and control of property for the benefit of family members. Sometimes used to minimize transfer taxes.

Gross Estate
The value of an estate before the debts are paid. In California Probate statutory attorneys and personal representatives fees are usually calculated based on the gross value of the estate, so that the value of the home is calculated before deducting the amount due on the mortgage.

Transfer Tax
The combined Federal Estate and Gift tax. A single exemption credit applies whether the property was transferred during a person's lifetime (gift tax) or is held by a person at the time of his/her death (estate tax).

Personal Property
Movable property, including furniture, antiques, automobiles, business equipment, cash and stocks. Compare with Real Property.

Living Trust
Sometimes called an Inter-Vivos Trust--A written legal document established during a person's lifetime into which he/she places property.

Interlineation
Something written in-between; often a change to a typed document that is made by crossing out words and entering in replacement words. Never change an executed will or trust by interlineation.

Exemption Credit
The amount of tax credit, similar in nature to the personal income tax exemption, applied to the transfer tax due at a person's death.

In-Terrorum Clause
A provision of a will or trust that disinherits a person in the event that he/she challenges the terms of the will or trust. Sometime called a No-Contest Clause.

Incapacity / Incompetent
Legally unable to manage one's own affairs due to mental disability. This may be temporary or permanent.

Probate
The process through which the legal title to property is transferred from a decedent to the beneficiaries. If a person dies with a will (testate), the probate court determines if the will is valid, hears any objections to the will, orders that creditors be paid and supervises the process to assure that property is distributed by the Personal Representative or Executor according to the terms of the will. If a person dies without a will (intestate) the probate court appoints an Administrator who receives all claims, pays creditors, and then distributes all property according to the laws of the state.