For current Estate and Gift tax figures, click here.
Annual Gift Tax Exclusion:
The annual amount you can gift without having to file a gift tax return.
Charitable Remainder Trust:
A trust whereby donors transfer property to a charitable Trust and retain an income stream from the property transferred. The donor receives a charitable contribution income tax deduction and avoids a capital gains tax on transferred property.
Federal Estate Tax:
A tax levied by the federal government on the estate of a deceased person. The federal estate tax exemption amount transfers tax free, and any amount over the exemption amount is subject to estate tax.
Fractional Interest Gift:
Allows a donor to transfer partial interests in real property to donees and obtain fractional interest discounts for estate and gift tax purposes.
Funding:
Is the process of transferring assets you own as an individual into the name of your Trust.
Generation Skipping Tax:
This is a tax levied on assets that are given to individuals who are more than one generation away from the donor. An example would be a grandparent giving an asset to a grandchild either during the grandparent’s life or at death. Effective use of generation-skipping exemption allows the assets to avoid estate tax inclusion in the child’s taxable estate.
Guardianship/Conservatorship:
Conservatorship is a court-supervised proceeding that names an individual or entity to manage the financial affairs of an incapacitated person. A guardianship appoints an individual to make medical decisions for an incapacitated person.
Health Care Power of Attorney:
An instrument used to allow a person you name to make health care decisions for you if you are incapacitated.
Irrevocable Life Insurance Trust:
A Trust used to prevent estate taxes on life insurance proceeds received at the death of an insured.
Joint Tenancy:
When property is held in joint tenancy with rights of survivorship by two or more people, upon the death of one of the owners, all of his or her interest in the property is transferred automatically to the surviving owners.
Living Will:
Sometimes called an advanced directive, a living will is a document in which you give directions for life sustaining treatment should you become terminal or in a persistent vegetative state, and unable to communicate your wishes.
Pour Over Will:
A pour-over will protects against intestacy in the event any assets have not been transferred into the Trust at the death of the Trustor/Owner. Its function is to “pour” any assets left out of the Trust into it so they are ultimately distributed according to the terms of the Trust.
Probate:
Probate is the court procedure used to change title to assets from the name of an individual who has passed away into the name of the beneficiaries. Creditors of a decedent file claims in probate to collect their debts. An individual who passes away with a Will or no estate plan will likely go through probate.
Property Power of Attorney:
A Property Power of Attorney allows an agent you name to manage your property, while you are alive but incapacitated.
Revocable Living Trust:
A Revocable Living Trust avoids probate and provides management of your property, both during life and after death.
State Estate or Inheritance Tax
A state estate tax is a tax levied by a state government upon the estate of a deceased person. It is levied in much the same way as the federal estate tax. A state inheritance tax is a tax levied by a state government that varies depending upon the relationship of the inheritor to the deceased person. Nearly half the states have a separate state estate or inheritance tax which takes effect at a lower level than that of the federal government. Colorado does not have an estate tax or an inheritance tax.
Step-up in Basis:
A step-up — or step-down — in basis is an adjustment for income tax purposes at the date of the death of the owner. For example, if you bought a share of stock for $100 that increased in value to $500 at the time of your death, your tax basis was $100 but increases to $500 at the time of death.
Trustee:
A Trustee is the person or entity in charge of the assets in a Trust. While you are alive, you may act as Trustee of your trust. For married couples, either one or both spouses may act as Trustee or co-Trustees. The successor Trustee is an individual or corporate fiduciary whom you designate to be in charge of your disability or death.
Will:
A Will is a legally enforceable declaration of how a person wishes his or her assets to be distributed after death. In a Will, a person can also nominate a guardian for his or her minor or incapacitated children.
