Definitions of Legal Terms
AGGREGATE EXCLUSION AMOUNT (Federal Credit)
A “federal credit” worth hundreds of thousands of dollars against estate taxes to a widow/er. (Each U.S. citizen has one such credit, and it can be "sheltered" after death in a credit shelter trust.) This credit is the equivalent of an exemption from federal estate taxes on the following amounts of individual wealth: $1,000,000 (2002); $1,500,000 (2004); 2,000,000 (2006); and $3,500,000 (2009). Under 2001 legislation, the federal credit becomes unlimited in 2010, then reverts (“sunsets”) to 1,000,000 in 2011.
CREDIT SHELTER TRUST (a.k.a. Bypass Trust, “B” Trust, Family Trust)
An irrevocable trust for couples (which can work together with or independent of a living trust) that is created specifically to contain wealth up to the equivalent of the federal credit and to thus preserve each spouse's federal credit. This married trust can save a married couple hundreds of thousands of dollars in estate taxes, and does not need to be funded until after the death of the first spouse.
ESTATE PLANNING
Ordering your affairs to protect, preserve, and distribute assets upon incompetency or death, and to maximize the well being of beneficiaries.
HEALTH CARE PROXY
Your authorization to another person to act for you relative to your medical treatment once a physician has determined that you are incapable of making your own medical decisions.
INCOMPETENCY (Legal)
The condition of being adjudicated unable to manage your affairs.
LIVING TRUST
A revocable trust created and funded during your lifetime to hold title to your assets. So long as you live you retain complete control of your assets, but at death your assets avoid probate. A living trust DOES NOT shield assets from estate taxes or from creditors.
LIVING WILL
Your directions regarding your health care while incompetent and the disposition of your body once deceased.
MARITAL DEDUCTION
The unlimited right of spouses to transfer as much wealth between themselves as often as they wish (and once more at the death of the first to die) without federal estate or gift tax consequences. This deduction DOES NOT preserve the federal credit of the first spouse to die. An estate tax may be due and payable on the death of the second spouse to die.
POWER OF ATTORNEY
Your authorization to another to act for you relative to your assets with full powers. Should be “durable”
PROBATE
The state-court post-mortem lawsuit which retitles assets out of the name of a deceased person and into the name of that person's rightful successor(s), whether by will or by intestacy.
SPECIAL NEEDS TRUSTS
These trusts can take many forms to address your particular concerns: income generation, minors, spendthrifts, philanthropy, et cetera.
WILL
Your directions to the probate court regarding the distribution of your personal estate after your death. Any asset of yours with another person’s name on it or which you endorsed to another at your death is not subject to your will.
