Definitions

Estate Tax or “Death Tax” – A tax on property owned or transferred by the decedent at death.  In 2024, assets worth $13.61 million or more per individual are subject to federal estate tax. Arizona does not have an estate tax.

Donor – A person making a gift.

Durable Power of Attorney – A document appointing someone else to make financial decisions for an incapacitated person.  Unlike a limited power of attorney, it does not become legally invalid at the onset of the principal’s incapacity.

Health Care Proxy – A document granting to the health care agent the power to make medical decisions on behalf of the principal.

Estate Planning – Planning for the conservation and efficient transfer of an individual’s wealth, often for tax advantages and avoidance of probate proceedings and special circumstances.

Fiduciary – A person in a position of trust and confidence; one who has a legal duty to act for the benefit of another. Examples include personal representative, trustee, attorney-in-fact and custodian.

Gift – A completed lifetime or deathtime transfer of property by an individual in exchange for any amount that is less than full consideration.

Gift Tax – A tax on a completed lifetime transfer of property for less than full consideration.

Guardian – A court-appointed fiduciary responsible for the person or property of a minor or, in some cases, an incompetent adult, or both.

Inter Vivos Trust – A trust taking effect during the life of the trustor. Also called a “living trust”.

Intestate – Dying without a Will.

Life Estate – An interest in property that ceases upon someone’s death.

Living Trust – A trust taking effect during the lifetime of a trustor. Also called an inter vivos trust.

By Right of Representation – A scheme of distribution from a will or trust requiring that certain issue of a decedent, as a group, inherit the share of an estate that their immediate ancestor would have inherited if he or she had been living.

Pour-Over Will – A will that distributes, at the testator’s death, probate assets to a trust that had been created during the testator’s lifetime.

Probate – The court administered process of transferring an estate of a decedent.

Settlor – The person who creates the trust and whose property usually winds up in it.  Also called grantor or trustor.

Step-Up In Basis – Also known as an “Adjusted Cost Basis”.  In income tax law, the upward adjustment in basis resulting from the acquisition of property from a decedent.  Differs from carry-over basis.

Taxable Gift – In federal gift tax law, for a given year, total gross gifts reduced by total deductions and exclusions.

Trust – A legal arrangement between a Settlor and a Trustee that divides legal and beneficial interests in property.  Frequently used to avoid probate court administration, pass assets immediately to beneficiaries, realize tax advantages, address estate/death taxation, manage money for minors and protect special needs individuals.