ACCRUE, ACCRUED INTEREST and INCOME
Interest earned but not yet paid to the owner. Similarly, ACCRUED INCOME is income earned but not yet received.

ADJUSTED GROSS ESTATE
See Estate.

ADOPTED PERSON
An ADOPTED PERSON is the child of an adopting parent and of the adopted person's natural parents for inheritance purposes, unless divested. The adopted person and their descendants can inherit from both the adopted parent and natural parent. A child adopted by any person and the descendants by blood or adoption of such child is considered a descendant by legal proceeding while the child is under twenty one (21) years. The same applies to such adopting parents ancestors. Except by inheritance rights that are divested by a final order of relinquishment, or a final decree of adoption. Also, an order terminating the parent-child relationship under the laws of this state or of any other jurisdiction.

AFFIDAVIT, AFFIANT
An AFFIDAVIT is a written statement signed and sworn to before a notary public. An AFFIANT is the maker of an affidavit.

AGENT
An AGENT is a person or institution given authority by another person (the principal) to act in the principals place. The agent may act on the principals behalf on certain legal or financial matters. This authority expires on the death of the principal. If the agency is durable, it does not expire at death. The agent has the authority in a document called a Power of Attorney.

AGREEMENT, ANTE (PRE-) and POST-NUPTIAL AGREEMENT, BUY-SELL AGREEMENT
An AGREEMENT is an arrangement between two or more people (the parties). In an agreement the parties consent to act according to the terms of the agreement. If such an agreement is legally binding and enforceable, it is a contract.

An ANTE- (or PRE-) NUPTIAL AGREEMENT is a contract or agreement between a man and a woman executed before to their marriage. In a pre-nuptial agreement, they determine their rights to each other's property after their marriage. A POST-NUPTIAL AGREEMENT is an agreement executed after a marriage for the same purposes as an ante-nuptial agreement.

A BUY-SELL AGREEMENT is a contract executed by two or more parties that arranges for the transfer of property on a future event. The agreement states a surviving partner's or shareholder's right or responsibility to buy the decedent's share of the business for a certain price at death. A properly executed buy-sell agreement may also aid in establishing a value for a share of a business for estate tax purposes.

ANCILLARY, ANCILLARY EXECUTOR AND ADMINISTRATOR, ANCILLARY LETTERS TESTAMENTARY AND LETTERS OF ADMINISTRATION
ANCILLARY means related, but it is not directly a part of the estate, etc.

In the settlement of an estate, the descent may have owned real property in a state other than the state of legal residence. Such real property is under the jurisdiction of the probate court of the state where its located, and its transfer at the death of the non-resident owner will settle in that state.

ANTE-NUPTIAL AGREEMENT
See AGREEMENT.

APPORTIONMENT OF ESTATE TAXES
Unless otherwise provided in a Will, estate taxes shall be apportioned among all persons entitled to receive a distribution. The taxes are allocated in the ratio of distribution.

APPRAISE
To APPRAISE property is to place a value on it by disinterested persons with suitable qualifications.

APPRECIATE
When property APPRECIATES, it increases in value.

Compare to Depreciate.

ARMS LENGTH SALE or TRANSACTION
If a sale is conducted at ARMS LENGTH, no prior relationship between buyer and seller will affect any aspect of that sale. For example, if a mother sells an attribute to her daughter for $50 and that attribute is worth $1000 on an open market, the sale is not at arms length. The fair market value of the attribute is $1000, not $50.

ASSESS, ASSESSMENT
Similar to Appraise, to ASSESS property is to place a value on it for taxation. To assess can also mean to impose a tax.

An ASSESSMENT, then, can be the evaluation of property as well as the resulting amount taxed.

ASSET, ASSETS, TYPES OF ASSETS
As a financial term, an ASSET is something of value and is the property of an individual, and therefore available for the payment of debts. A person's ASSETS are those things of value that they own, as opposed to what they owe (their liabilities).

ASSIGN, ASSIGNMENT
To ASSIGN property is to transfer full or partial rights or interests in property to another person. An ASSIGNMENT is the act of such a transfer. The Assignee is that person to whom the property transfers. The person who transfers the property is the Assignor.

ATTEST, ATTESTATION
To ATTEST is to witness the signing of a document and then to sign it as a witness. ATTESTATION in Colorado requires two or more witnesses and is necessary for the validation of most Wills.

BENEFICIAL ACCOUNT, INTEREST, OWNERSHIP
To benefit from property is to use or enjoy it.

A BENEFICIAL INTEREST in property is a right to the use and the enjoyment of all or part of that property without necessarily having title to the property. Similarly, a Beneficial Owner of property has all rights to that property without actually holding title to it. For example, a stock broker may hold title to a customer's securities while the customer receives the income from them; the customer is the beneficial owner.

BENEFICIARY, TYPES OF TRUST BENEFICIARIES
A BENEFICIARY is a person named to receive the income and/or principal of a certain property. For example, the beneficiary named in a life insurance policy will receive the amount of the policy at the death of the insured. The BENEFICIARY of a trust receives income and/or principal from the trust.

A BENEFICIARY of a trust who receives only the income generated by the trust fund is an INCOME BENEFICIARY, LIFE BENEFICIARY, or LIFE TENANT. A person to whom the principal of a trust fund passes at the death of the life tenant is a REMAINDERMAN. A CONTINGENT BENEFICIARY or remainderman is a person or institution whose interest in (rights to) the income or principal of a trust depends upon (is contingent upon) a named future event.

BOND
To provide a BOND or be bonded is to pledge good faith in keeping to a contract, responsibility, or obligation. A BOND must be backed up by an amount of money which is lost should the person making the pledge not follow through properly on their obligation. Such bonds are "performance" or "surety" bonds. Certain companies or individuals (bondsmen) specialize in guaranteeing payment of these bonds in case of forfeit.

CHILD
CHILD includes any person entitled to take as a child by intestate succession from the parent. It excludes any person who is only a stepchild, a foster child, a grandchild, or any more remote descendant.

CLAIM, CLAIMANT, CLAIMS PERIOD
As a term related to estates, a CLAIM is the calling in of a debt. An estate in probate court opens by legal notice to creditors (the CLAIMANTS) for a period of four months, the CLAIMS PERIOD. During this period, all persons and organizations that have a claim may file and prove their claims for that money with the personal representative of the estate. A claim includes liabilities of the decedent or protected person whether arising in contract, in tort, or otherwise. A claim also includes the liabilities of the estate which arise at or after the death of the decedent or after the appointment of a conservator, including funeral expenses and expenses of administration. The term does not include estate or inheritance taxes. It also does not include disputes about title of a decedent or protected person to specific assets allegedly included in the estate. No distributions from the estate is made during the claims period, except funeral and administration expenses and the family allowance to the surviving spouse and members of the immediate family to which the allowance may apply.

CLOSE or CLOSELY HELD CORPORATION
A CLOSE OR CLOSELY HELD CORPORATION is a corporation with very few stockholders. The stockholders are usually also the officers of the corporation.

CODICIL
A CODICIL is a formally executed addition to or change in the terms of a Will, not requiring the complete rewriting of the Will.

COMMON LAW, COMMON LAW OWNERSHIP
In the United States, COMMON LAW OWNERSHIP consists of legal rules or principles based on court decisions as they have established precedents through history.

Statutory law, on the other hand, results from legislative action. In states ascribing to COMMON LAW OWNERSHIP of property in marriage, each spouse owns his or her property separately, unless joint ownership was legally arranged. Compare to Community Property. Colorado is a Common Law State.

COMMUNITY PROPERTY
In a state in which a COMMUNITY PROPERTY law exists, each partner in a marriage owns one-half of all property collected during the marriage (except that coming from inheritance or gift), regardless of which partner was actually responsible for obtaining the property. Compare to Common Law Ownership.

COMPENSATION OF FIDUCIARIES
In Colorado any fiduciary is entitle to reasonable COMPENSATION OF FIDUCIARIES commensurate with the services actually performed and to reimbursement for expenses properly incurred. Fees may very in accordance with the complexity and variety of problems encountered in any given instance. For example, contested proceedings, involving litigation, might result in additional fees.

CONSERVATOR
CONSERVATOR is a person appointed by a court to manage the estate of a protected person. A protected person is a minor or other person for whom a conservator is appointed or other protection order is made.

CONTINGENT
To be dependent upon means to be CONTINGENT upon. When used to preface the titles "beneficiary," "remainderman," or "personal representative," for example, the word "contingent" provides that the titles will not happen unless a named future event occurs.

CONTINGENT TRUST
A CONTINGENT TRUST is a Trust that starts if a known future event occurs. For example, a Will may provide that a trust will be set up if children are under age 25 at death. If there are no children under age 25 at death, no trust is opened.

CONTRACT
A CONTRACT is an agreement between two or more people or institutions (the parties) that is legally binding and enforceable. Not all agreements are contracts. For example an agreement to make a gift with no consideration is not enforceable.

CORPORATE FIDUCIARY
A CORPORATE FIDUCIARY is an institution (as opposed to an individual) that assumes the responsibility for acting on another person's behalf. For example, a bank serving as a personal representative is a corporate fiduciary.

COURT

COURT is the division having jurisdiction in matters on the affairs of decedents. This court in this state is the district court, except in the city and county of Denver, it is the probate court.

DEATH CERTIFICATE
A DEATH CERTIFICATE is a legal document confirming an individual's death. A Copy of the death certificate is presented to various agencies (the state, the cemetery, the Veteran's Administration if benefits are due, for example) during estate settlement and other post-death formalities.

DEDUCTIONS, THE MARITAL DEDUCTION
A DEDUCTION is an amount of money subtracted from income before tax is calculated.
In the settlement of an estate, various deductions are allowable in determining the taxable estate. These deductions are: funeral expenses, administration expenses, expenses of a terminal illness, debts of the decedent, and charitable bequests.

The MARITAL DEDUCTION: Under the Internal Revenue Code a person can leave an unlimited amount to the surviving spouse. The amount passing to the surviving spouse is the MARITAL DEDUCTION.

However for the marital deduction to be allowed, certain conditions need to be met:

• The decedent must have been US citizen.
• The decedent must have a surviving spouse.
• The surviving spouse must be a US citizen unless the property passes to a qualified domestic trust.
• The property is included in the decedents estate.
• The property must pass to surviving spouse and must not be a terminable interest (an interest that may end and pass to another).

Not everyone qualified for the maximum marital deduction. If a Will or trust has not been amended since September 13, 1981 a reference to the maximum marital deduction is the greater of 250,000 or ½ of the adjusted gross estate.

DEED
A DEED is a document representing ownership of real property.

DEPRECIATION
When property DEPRECIATES it decreases in value. The system process of writing off an asset.

DESCENDANT
DESCENDANTS of a person means all his lineal descendants of all generations, with the relationship of parent and child at each generation determined by the definitions of child and parent.

DESCENDANT BY REPRESENTATION

If DESCENDANT BY REPRESENTATION is called for, then the distributable property is to be divided into as many shares as there are, at the time of such distribution, descendants in the nearest degree of kinship and then-deceased descendants in the same degree who left then-living descendants. Each then-living descendant in the nearest degree shall receive one share and the share of each then-deceased descendant in the same degree shall be divided among his or her descendants in the same manner.

DESCENT AND DISTRIBUTION LAW
Laws of Descent and Distribution are the laws of each state governing how the real and personal property in an estate will pass to heirs of the decedent if there is no Will, or if the Will is declared invalid or renounced by the surviving spouse.

TABLE OF DESCENT AND DISTRIBUTION

Great-Great
Grandparents

Great Grandparents
Great Grand Uncles & Aunts

Grandparents
Great Uncles & Aunts
First Cousins Twice Removed

Parents
Uncles & Aunts
First Cousins Once Removed
Second Cousins Once Removed

Person Deceased
Brothers &
Sisters
First Cousins
Second Cousins
Third Cousins

Children
Nephews &
Nieces
First Cousins Once Remove
Second Cousins Once Removed
Third Cousins Once Removed

Grand Children
Grand Nephews
& Grand Nieces
First Cousins Twice Removed

Second Cousins Twice Removed
Third Cousins Twice Removed

Great-Grand Children
Great-Grand Nephews & Nieces
First Cousins Thrice Removed
Second Cousins Thrice Removed
Third Cousins Thrice Removed

DEVISE, DEVISOR, DEVISEE
To DEVISE is to give property by Will. The giver is the DEVISOR; the recipient is the DEVISEE.

DISTRIBUTE, DISTRIBUTEE
To DISTRIBUTE property is to pass it on to those entitled to it. The trustee of a trust fund distributes or passes income or principal from the trust fund on to the beneficiary of the trust, sometimes called the DISTRIBUTEE. DISTRIBUTEE means any person who has received property of a decedent from the personal representative other than as a creditor or purchaser.

DIVERSIFY, DIVERSIFICATION
An investment portfolio in several or many different types of properties to minimize the risk of loss should one investment fail. DIVERSIFICATION is the process of spreading investments.

DOMICILE

A person's DOMICILE is the principal home, generally accepted as that place which is the address and place to return after being absent. A domicile is often where a person votes, spends most of their time, and conducts personal business. A person may have several residences but only one domicile.

ELECTION AGAINST THE WILL - STATUTORY SHARE
The term ELECTION AGAINST THE WILL refers to the choice a surviving spouse has in Colorado about the decedent spouse's estate. This choice is the spouse's Right of Election. Colorado allows a surviving spouse who challenges the Will to choose to receive not more than fifty percent (50%) of the decedent spouse's augmented estate rather than the share allocated to the surviving spouse by the Will. The process of electing against a Will is renouncing the Will.

ESCHEAT
Property in ESCHEAT goes to the state because it is abandoned or there is no legitimate heir to it.

ESTATE, PROBATE ESTATE, ESTATE TAX, DISTRIBUTABLE ESTATE
ESTATE is all of a persons real and personal property. A decedent's PROBATE ESTATE is that part of the estate which passes by the Will.

Certain types of jointly owned property are not part of a decedent's probate estate but rather pass according to the terms on the title to the property. The most common example is a house owned by both husband and wife as joint tenants with the right of survivorship.

A decedent's Gross Estate is the total property for estate tax purposes, and the Adjusted Gross Estate or Taxable Estate is the gross estate less certain deductions. The estate pays an Estate Tax based upon the taxable estate. Thus, a decedent's estate is itself a taxpayer, managed as such by the personal representative.

The DISTRIBUTABLE ESTATE is all property remaining in the estate after deductions and taxes. The Colorado estate tax is part of the Federal Tax.

ESTATE PLANNING
ESTATE PLANNING is the process of creating and preserving one's property during one's lifetime and arranging for its transfer at one's death. Most frequently, the term is associated with advantageous investment and tax planning without sacrificing personal and family security and welfare.

EXECUTE
As a legal term, the word EXECUTE has two different contexts:
(1) the act of signing a document, and
(2) the act of carrying out the terms of a document. Thus, to execute a Will or contract may mean either to sign it or carry out its terms.

EXECUTOR, EXECUTRIX, CO-EXECUTOR - see personal representative

EXEMPT PROPERTY ALLOWANCE

A surviving spouse of a decedent who is domiciled in Colorado, receives an EXEMPT PROPERTY ALLOWANCE of fifteen thousand dollars. If there is no surviving spouse, each child under twenty-one years of age and each dependent child of the decedent receives an exempt property allowance amounting to fifteen thousand dollars.

The EXEMPT PROPERTY ALLOWANCE is exempt from and has priority over all claims against the estate. The exempt property allowance is in addition to any share passing to the child. The term "dependent child" means a child who was in fact being supported, or was legally entitled to support, by the decedent.

FAIR MARKET VALUE
Assuming that all pertinent facts about a property is known and that buyer is not forced when buying and the seller not forced to sell, the FAIR MARKET VALUE of a property is the amount of money a willing buyer would pay for the property to a seller willing to sell it in an arms length transaction. An armslength transaction is a transaction unaffected by any relationship between buyer and seller. Frequently, to determine the fair market value of a property one must refer to the price at which similar property is selling in an open market.

FAMILY ALLOWANCE, EXEMPT PROPERTY ALLOWANCE
In addition to the right to an EXEMPT PROPERTY ALLOWANCE, if the decedents domicile was in this state, the surviving spouse and children under twenty-one years of age and dependent children become entitled to a FAMILY ALLOWANCE which shall be a reasonable allowance in money out of the estate for their maintenance during the period of administration. The allowance may not continue for longer than one year if the estate is not adequate to discharge allowed claims.

Unless otherwise provided, the FAMILY ALLOWANCE is unchargeable against any benefit or share passing to the surviving spouse or children by the Will of the decedent.

FIDUCIARY
A FIDUCIARY is a person or institution that takes the responsibility of acting on behalf of another person. In reference to Wills, estates, and trusts, the following act in a fiduciary capacity for the makers of a Will, for estates, and for beneficiaries: attorney(s), personal representative(s), trustee(s), and guardian(s). All are bound by faith and trust.

A SUCCESSOR FIDUCIARY is that person or institution named to replace an acting fiduciary should he no longer be willing or able to act.

An institution acting as fiduciary is sometimes referred to as a corporate fiduciary.

FIDUCIARY INCOME TAX RETURN
When a fiduciary files an income tax return for an estate, or trust, that return is a FIDUCIARY INCOME TAX RETURN.

FISCAL, FISCAL YEAR
FISCAL means financial, and the term often is in reference to taxation.

While the calendar year ends on December 31, a FISCAL YEAR may end on the last day of any month. A fiscal year is an annual accounting period for income tax purposes. An estate may have a fiscal year. A trust must end its year on December 31.

FUND

To FUND is to provide money or property. A fund is a pool of such money or property. A testamentary trust funds by the passing of that part of a person's estate so directed into the trust. A living trust acquires its funds by transferring property to the trust while the settlor is alive.

GENERATION SKIPPING TRANSFER TAX (GST)
There is a tax on certain transfers of assets through the FIRST and on TO the second generation heirs of the person who arranged the transfer. For example, the assets of a trust that directly go to the grandchildren of the creator of the trust on the death of the grantors children are subject to a GENERATION SKIPPING TAX. The GENERATION SKIPPING TAX is on amounts passing in excess of one million dollars. A properly planned Generation Skip can save substantial taxes. The regulations involved are complex, and consultation with our office is strongly recommended.

GIFT, GIFT TAX, GIFT TAX EXCLUSION
A GIFT is a voluntary transfer of property from one person to another who accepts it without the giver receiving anything in return. If the gift is to an individual a GIFT TAX may apply. If a GIFT TAX applies, the tax figures on the Fair Market Value of the property. The donor (the giver) pays the tax, and the donee (the recipient) does not have to include the amount of the gift in his income.

A GIFT TAX EXCLUSION applies to annual gifts valued at $11,000 or less from one individual to another as long as the gifts are of a present interest (that is, as long as the gift is ready immediately for use). Such a gift is not subject to gift tax, and there is no restriction on the number of such gifts to different individuals. The exclusion is $22,000 annually on the gift given mutually by husband and wife. Additionally, one may give lifetime gifts of up to $1,000,000, in value tax-free. (These figures are effective in 2002.)

GRANTOR, GRANTEE, GRANTOR TRUST
A GRANTOR is a person who transfers property to another (the GRANTEE). The term GRANTOR sometimes used with the trustor or settlor, the person who transfers property in a trust.

The term GRANTOR TRUST describes a trust in which the GRANTOR retains such a degree of control over the principal or income of the trust that the grantor is the owner the of the assets in the trust and the income of the trust. In such a trust, the GRANTOR is taxed on the trust income even if distributed to someone other that the GRANTOR.

GUARDIAN, GUARDIAN AD LITEM
A GUARDIAN is a person appointed by the court to control and manage another person's affairs and that person's property. Most typically, a guardian must manage the affairs of a minor until they reach their majority or manage the affairs of an adult who is not capable of doing so.

The court that appoints the guardian also limits their power. The guardian must submit regular accountings of their actions to the court and must follow the court's direction.

A GUARDIAN AD LITEM is guardian appointed for the purpose and duration of a law suit or similar legal action.

HEIR

An HEIR is one who is given property (their inheritance). The property is given either through a Will or through state laws (see descent or distribution) regarding the distribution of a decedent's property.

HEIR means those persons, including the surviving spouse, entitled under the statutes of intestate succession to the property of a decedent.

INCOME, TYPES OF INCOME, INCOME BENEFICIARY
INCOME is the gain earned from capital, labor, or both. Gross Income is income before adjustments and deductions are taken and taxes are paid.
• Taxable Income is gross income minus allowable adjustments and deductions, with the resulting amount being subject to tax.
• Net Income is the money left after deductions and taxes.
• Ordinary Income is money or property earned that is subject to federal ordinary income tax rates;
• Capital Gain Income, is income from the sale of capital assets. It is subject to tax at special capital gain rates.
• Fixed Income (as from a bond paying a certain rate of interest) is money earned at a rate that will neither increase nor decrease in the future.
• Tax Exempt Income is income not at all subject to taxation (for example, interest income from a municipal bond);
• Tax Deductible expenditure from income is an expenditure that is subtracted from gross income before taxation rates (for example, a gift out of income to a charity or income spent to prepare an income tax return).
• Distributed Income is that money earned by the principal of the trust fund that the trustee passes to the beneficiaries of the trust. A recipient of such distributions is an Income Beneficiary.
• Undistributed Income is money earned by the trust fund that does not pass on to beneficiaries but rather reinvested, thus becoming part of the principal or capital value of the trust.

INHERIT, INHERITANCE, INHERITANCE TAX
To INHERIT property is to receive it by Will or by Colorado descent and distribution laws at the death of the owner of that property. The property itself is the Inheritance. Taxes on property passing at death are the responsibility of only the estate, unless the estate is unable to pay the tax.

INTERESTED PERSON
INTERESTED PERSON includes heirs, devises, children, spouses, creditors, beneficiaries, and any others having a property right in or claim against a trust estate or the estate of a decedent, ward, or protected person is affected by the proceeding. It also includes persons having priority for appointment as personal representative, and other fiduciaries representing interested persons. The meaning as it relates to particular persons may vary from time to time. It is determined according to the particular purposes of, and matter involved in, any proceeding. Generally, only an INTERESTED PERSON has a right to the inventory of an estate. The inventories of estates are not matters of public record.

INTESTATE, INTESTACY
To die INTESTATE is to die without having left a Will. Intestacy is the state of being without a Will. If a person dies intestate, the person's property passes to their heirs as required by the applicable Colorado laws of descent and distribution, (see descent and distribution laws) regardless of how the person who died may have intended the property to pass.

INTESTATE ESTATE
INTESTATE Share of the Spouse.

• If there are no descendants of decedent the surviving spouse gets 100% of the estate.
• If there are descendants who are descendants of the surviving spouse also,
• $25,000
PLUS
• ½ of the balance of the intestable estate.
• If there are descendants who are not descendants of the surviving spouse ½ of the
INTESTATE ESTATE.

INVASION OF TRUST
A TRUST FUND is invaded when money is taken from the principal amount (the body or corpus) of the trust. Taking money from the principal amount of a trust fund will naturally reduce the income producing potential of the fund.

INVENTORY, SUPPLEMENTAL INVENTORY
At death, all of a decedent's property is valued (appraised) and a list is made for tax purposes. This list is the INVENTORY. A SUPPLEMENTAL INVENTORY is a list of items not included in the original inventory and is added to the INVENTORY. An Inventory must be prepared within three months and given to interested persons who request it. (See INTERESTED PERSONS.)

JOINT AND SURVIVOR
JOINT OWNERSHIP is the shared ownership of property by two or more people. The most common types are:

1. Joint Tenancy: Most of the property is wholly owned by each person, and it passes on the death of one to the surviving owner(s). The entire value of the property is part of the decedent's estate and taxed as such.

2. Tenancy in Common (Co-Tenancy): Each person owns a part of the property and has no interest in (right to) the other's share. Each may sell, give, or will their part as they wish. At the death of one owner, only the value of their share of the property is taxed on their estate.

JOINT WILL
See Will.

LETTER OF LAST INSTRUCTIONS

A person may write a document separate from their Will in which is given certain information and instructions, including, for example, a request for a certain type of funeral, the location of their Will and other important documents, lists of property, and a description of benefits that are due at their death. Such a document is sometimes called a LETTER OF LAST INSTRUCTIONS; it is not legally binding. We have available an estate planning book which functions as a letter of last intent. Please contact our office if you are interested.

LETTERS OF ADMINISTRATION
A probate court authorizes the administrator of an estate to begin their duties by issuing a formal order or certificate called LETTERS OF ADMINISTRATION. The LETTERS OF ADMINISTRATION allow the personal representative to act.

LIFE ESTATE (INTEREST), LIFE TENANT, LIFE BENEFICIARY
A person with a LIFE ESTATE (OR LIFE INTEREST) in property has a right to use the property during their own lifetime. Such a person is a Life Tenant. After the death of the life tenant, the property passes to a predetermined person or persons; it does not pass under the life tenant's will. Frequently, for example, a person gives their spouse a life estate in their real property, with the property going to the children at the death of the spouse.

The LIFE BENEFICIARY of a trust receives income and/or principal amounts from that trust for the duration of their own or another designated person's life. The life beneficiary has no authority to direct to whom the principal will pass at their death.

MAKER
The MAKER of a document is the person who signs it. The maker of a note (an I.O.U.), for example, is the person who agrees to pay back the amount borrowed. The maker of a Will is also call a testator (male) and testatrix (female).

THE MARITAL DEDUCTION
One of the most basic estate planning techniques is proper utilization of the MARITAL DEDUCTION. A deduction is allowed for the full value of qualifying property passing to one's spouse.

MEMORANDUM OF DISPOSITION
In Colorado, a MEMORANDUM OF DISPOSITION of personal property is made by the maker of a Will to arrange for the transfer of specific pieces of personal property. References are made to the letter in a Will (and usually kept with the Will) and is changed without formally changing the Will. The letter is dated and signed by the maker of the Will.

Money, evidences of indebtedness, documents of title, and securities, and property used in trade or business is not listed. You may list a motor vehicle not used in a trade or business even though ownership of the motor vehicle evidenced by a document of title. For this section, the term "motor vehicle" includes self-propelled vehicles. The term shall not include trailers, semitrailers, trailer coaches, or motor homes. To be admissible as evidence of the intended disposition, the writing must either be in the handwriting of the testator or signed by the testator and must describe the items and the devises with reasonable certainty.

MINOR
MINOR means a person who is under eighteen years of age.

OPTIMUM MARITAL DEDUCTION

Since the marital deduction is unlimited, a bequest of all property to one's surviving spouse will completely defer federal estate taxes until the survivor's subsequent death.

However, in certain instances, utilization of the maximum marital deduction may actually result in a higher overall estate tax. This is because estate taxes are like income taxes in that higher marginal rates are charged as the estate's size increases. Utilization of the maximum marital deduction has the effect of lumping all of the assets into the estate of the second spouse to die. Therefore, it may be better to utilize only the amount of marital deduction which will reduce the overall estate tax efficiently using each spouse's unified credit.

It appears that most married individuals will choose to utilize the unlimited marital deduction to eliminate all estate taxes upon the death of the first spouse to die. That is, all property in excess of the equivalent exemption will be left to the surviving spouse either outright or in a qualifying trust. The primary benefit of such a plan, of course, is to provide the survivor with the use of funds which otherwise would have been paid by the decedent's estate in the form of U.S. estate taxes.

In order to provide additional planning flexibility, the decedent's Will may also give the spouse or his/her executor the right to disclaim the bequest in whole or in part. This will allow the survivor to consider all important factors and to adjust the size of the marital deduction bequest, if necessary. If your Will was drawn up before September of 1982 have it reviewed immediately.

PER CAPITA
PER CAPITA literally means "by the head." If an estate is distributed per capita, each named individual will receive an equal share of the estate property. Compare to descendants by representation.

PER STIRPES
PER STIRPES means distributable assets are to be divided into as many equal shares as there are surviving children and deceased children who left surviving descendants. Each surviving child is allocated one share. The share of each deceased child is divided in the same manner, with subdivision repeating at each successive generation until the property is fully allocated among surviving descendants.

PERPETUITY, RULES AGAINST
If something exists in PERPETUITY, it exists forever. Trusts with individual beneficiaries by law are prohibited from existing in perpetuity. By common law, the life of a trust is limited to the lives of those beneficiaries now living, plus twenty-one years, plus nine months (any period of gestation that is in existence at the end of the twenty-one years).

PERSONAL REPRESENTATIVE / EXECUTOR
A PERSONAL REPRESENTATIVE is the person, 21 years or older, or institution appointed to settle (or administer) an estate. In Colorado, the probate court issues letters of administration to the Personal Representative which officially appoint and empower the Personal Representative to act.

The Administration of an estate involves collecting and making an inventory of the estate assets, meeting claims by creditors, providing for estate taxes, investing and managing the assets of the estate, and distributing the remaining assets to those legally entitled to them.

A Personal Representative is by law entitled to payment for their services. The amount varies according to size of estate, and difficulty of settlement. A Personal Representative may waive all or part of the fee. In other states a personal representative is also an executor.

The prefix "CO-" attached to any of the terms above means that more than one person or institution holds the office in common with another.

POWER OF ATTORNEY
If one person (Principal) gives another person (Agent) POWER OF ATTORNEY, he authorizes the Agent by written document to act in his place in some or all legal matters. The scope of authority granted is in the document. Power of attorney terminates on the death of the Principal.

PRE- AND POST-NUPTIAL AGREEMENT
See Agreement.

PRINCIPAL

• The PRINCIPAL value of property is the value of the property not including income or debts.
• The principal amount of a loan is the amount borrowed, not including interest due.
• In a trust, the principal amount is all the capital: the property that produces income. It may also be the trust fund, corpus, or res.
• In an agency arrangement, the Principal is the person who authorizes the agent to act.
• In an investment, a principal is a major or original investor.

PROBATE, PROBATE COURT
The court process of PROBATE specifically involves the validation of a Will as the genuine carrying out of the directions. The steps in probate are as follows:
1. Determine Validity of Will
2. Appoint Personal Representative
3. Collect Assets
4. Prepare Inventory
5. Prepare Tax Returns
6. Sell Property
7. Pay Claims and Creditors
8. Distribute Property
9. Close Estate
The probate process in Colorado can be conducted as an administrative proceeding. An estate may have an informal probate of the Will, appointment of the personal representative, administration and closing. This is all done by sworn statement. Sometimes circumstance warrant a formal proceeding for the protection of persons interested in the estate. This can be done for all or any part of the probate procedure.

PROPERTY
A person's PROPERTY is that which they own.
• Real Property (also known as real estate or realty) is land and the buildings or other fixed improvements on that land.
• Tangible Personal Property (personalty) is all property that one owns except real property. That is the property itself, not just evidence of it. For example, autos, jewelry, art, and furs, furniture, etc.
• Intangible Property is an evidence or symbol of ownership or debt: for example, stock certificate, a bond, a deed or title, or a life insurance policy.

PROVISIONS
The statements in Wills or trust agreements directing how property is to be managed and distributed.

PRUDENT MAN RULE
Trustees (as fiduciaries) must manage trust property in accordance with the PRUDENT MAN RULE. This requires the trustees to handle the trust property under the same circumstance. If a trustee is accused of mismanaging the assets, the court will often judge the conduct by applying the prudent man rule as the standard against which to measure their actions.

QTIP
The law allows the gift or estate tax marital deduction for the value of "qualified terminable interest property" (QTIP) if the donor or decedent's personal representative so elects. Qualified terminable interest property is property passing from the decedent to a spouse who is entitled to all income from the property for life, payable at least annually. This income interest is known as a "qualified income interest." No person, including the spouse, can have the power to appoint any part of the property subject to the qualified income interest to any person other than the spouse during the spouse's life.

The QTIP solves the dilemma faced by many testators who have second spouses. It is possible that certain property could be diverted away from heirs. With the QTIP a person may leave a surviving spouse only an income interest in the property, with the principal going to such person's heirs at the survivor's death, and still allow the estate to avail itself of the marital deduction.

If this election is made, the property will be subject to transfer tax at the earlier of (1) the date on which the spouse disposes of all or part of the qualifying income interest (by gift, sale or other disposition, or (2) the date of the surviving spouse's death.

QUALIFYING PROPERTY
A marital deduction is available even if the property passes to a trust, managed by an experienced trustee, as long as the trust assets will be included in the spouse's estate at death and the spouse has the right to receive annual or more frequent income distributions of the entire income.

RELEASE
A RELEASE is the giving up of a right, claim, or privilege by one person to another person against whom it might have been demanded or enforced. Frequently when disputes are settled the conflicting parties exchange releases.

REMAINDERMAN, CONTINGENT and VESTED REMAINDERMAN
The REMAINDERMAN of a trust receives the principal (the income producing capital) of that trust when the income beneficiary or life tenant dies. A Contingent Remainderman receives the principal of the trust only on the occurrence of a specified future event, for example, if that person named remainderman before him dies first. A Vested Remainderman is one whose future right is fixed and unalterable.

REPRESENTATION
If REPRESENTATION is called for, the estate is divided into as many shares as there are surviving heirs in the nearest degree of kinship and deceased persons in the same degree who left descendants who survive the decedent, each surviving heir in the nearest degree receiving one share and the share of each deceased person in the same degree being divided among his descendants in the same manner.

RESIDUE, RESIDUAL (or RESIDUARY) CLAUSE, RESIDUAL ESTATE
The RESIDUE is what remains. A Residual Estate is what remains of an estate after all claims and taxes have been paid and all distributions have been made. A Residual (or Residuary) Clause in a Will arranges for the specific distribution of property left in the residue of the estate.

See also: Trust for Residual Trust.

REVERT, REVERSION, REVERSIONARY TRUST/INTEREST
If an arrangement is made so that property in a trust REVERTS, that property goes back to the creator of the trust (the grantor) or his heirs when the person originally names as beneficiary dies. The process of the property's return is called Reversion, and a trust in which such an arrangement is made is called a Reversionary Trust.

A Reversionary Interest in property is any ownership right to property that will at a future time return to the original owner.

REVOKE, REVOCATION OF A WILL
To REVOKE is to take back or undo an action. To Revoke a Will is to make the Will ineffective: for example, by making a new Will that is inconsistent with the first, by destroying the Will, or by disposing of all of the property referred to in the Will. A Will or any part thereof is revoked by a subsequent Will which revokes a prior Will or part thereof expressly or by inconsistency.

A Will is revoked by being burned, torn, canceled, obliterated, or destroyed with the intent and for the purpose of revoking it by the testator or by another person in his presence and by his direction. If after executing a Will the testator is divorced or his marriage annulled, the divorce or annulment revokes any disposition or appointment of property made by the Will to the former spouse, any provision conferring a general or special power of appointment on the former spouse, and any nomination of the former spouse as executor, trustee, conservator, or guardian, unless the Will expressly provides otherwise. Property prevented from passing to a former spouse because of revocation by divorce or annulment passes as if the former spouse failed to survive the decedent, and other provisions conferring some power of office on the former spouse are interpreted as if the spouse failed to survive the decedent. If provisions are revoked solely by the statute, the provisions are revived by testator's remarriage to the former spouse.

SAFE DEPOSIT BOX, ENTRY
A SAFE DEPOSIT BOX is not sealed at death in Colorado. Before the appointment of a Personal Representative the box may be opened to find a Will. After the appointment of a Personal Representative the Personal Representative shall be permitted to enter the box the same as the decedent could.

SECURITY
SECURITY includes any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in an oil, gas, or mining title or lease, collateral trust certificate, transferable share, voting trust certificate, or , in general, any interest of instrument commonly known as a security, or any certificate of interest or participation, any temporary or interim certificate, receipt, or certificate of deposit for or any warrant or right to subscribe to or purchase any of the foregoing.

SELF PROVING WILL
Any Will may be simultaneously executed, attested, and made SELF-PROVED by the acknowledgment thereof by the testator and the affidavits of the witnesses, each made before an officer authorized to administer oaths under the laws of the state where execution occurs and evidenced by the officer's certificate, under official seal.

SETTLE, SETTLEMENT OF AN ESTATE
To SETTLE an estate is to meet all claims on the estate and make all distribution from the estate as the Will and the law direct. "Settlement", in reference to a decedent's estate, includes the full process of administration, distribution, and closing.

SETTLOR
The SETTLOR of a trust agreement is the person who set up the trust. A settlor is also known as a trustor or grantor.

SOUND MIND
Colorado requires that the maker of a Will (the testator) be of SOUND MIND (also called testamentary capacity) at the time the Will is signed. This means that the testator knows how much property he has, knows that he is making a Will, knows his family members.

SPENDTHRIFT CLAUSE
Also known as "Protection from Claims by Strangers," a SPENDTHRIFT CLAUSE in a trust agreement provides that the named beneficiary has a right to trust income only and thus cannot voluntarily dispose of the capital assets (principal) of the trust or the income before it is earned and paid. As a result the trust principal and unpaid income are protected from creditors of the beneficiary.

"SPRINKLING," "SPRINKLE AND SPRAY" TRUST
A provision for SPRINKLING in a trust agreement allows the trustee to use their own judgement in distributing income from the trust fund. The trustee controls the timing

and the amount of the distributions and decides which beneficiaries will receive those distributions. A trust with such a provision is sometimes referred to as a "Sprinkle and Spray" Trust.

STATE

STATE includes any state of the United States, the District of Columbia, the commonwealth of Puerto Rico, and any territory or possession subject to the legislative authority of the United States.

SUCCESSOR
A SUCCESSOR is one who follows another in a particular office.

In a trust agreement, a Successor Trustee or Successor Advisor is a person named to follow the originally named trustee or advisor if the originally named trustee or advisor if the originally named individual or institution can no longer hold the office.

Successor personal representative means a personal representative, other than a special administrator, who is appointed to succeed a previously appointed personal representative.

SUCCESSORS
SUCCESSORS means those persons, other than creditors, who are entitled to property of a decedent under his Will or this code.

SURETY
SURETY is a financial guarantee that an act will be carried out or a debt will be paid by another person. To post bond is to provide such surety.

SURVIVORSHIP
The legal right of the survivor of persons having joint interests in property to take the interest of the person who has died.

TAX, TAXES
In regard to estates:
1. The Taxable Estate is the value of an estate after all claims have been met and all allowable deductions and exemptions have been taken.
2. Federal Estate Tax is a tax on the transfer of property from a decedent. State Estate Tax is collected by the state in which the descendent lived. Some states also impose an estate tax on the real property owned by the decedent in that state even though the decedent did not live in that state.

TENANT
Commonly, a TENANT is one who rents space in a building for business or personal use. In broader terms, a tenant is one who owns certain rights to property, such as a joint tenant or a life tenant.

TESTAMENT, TESTAMENTARY CAPACITY
A person's TESTAMENT is the final disposition of his or her personal property. TESTAMENTARY CAPACITY is the legal competence to make a Will (see Sound Mind).

TESTATE, TESTATOR, TESTATRIX
To be TESTATE is to have a Will. A TESTATOR is a maker of a Will. A TESTATRIX is a female testator.

TRUST, TRUSTS

Property in TRUST is held and managed by a person or institution (the trustee) for the benefit of persons or institutions (the beneficiaries). The creator of a trust is commonly referred to as the settlor, grantor or trustor.

Trusts that are created and go into effect while the settlor is still alive are called Living or Inter Vivos Trusts. Trusts established by a maker of a Will that go into effect at death are called Testamentary Trusts.

Living trusts are of two general types, Revocable and Irrevocable. In a revocable living trust, the trust is subject to amendment or revocation by the settlor. An irrevocable trust cannot be changed by the settlor.

A Simple Trust requires that all income be distributed currently to the beneficiary(ies). A Complex Trust grants the trustee discretion as to the distribution of income and principal to the beneficiary. Also see spray and sprinkle trusts.

Of the many different types of trusts, those most common are:
• A Marital or Estate Trust is one in which property passes to the trustee for the benefit of the spouse and which qualifies for a marital deduction.
• A Unified Credit Trust (sometimes called a Family Trust). Property in such a trust is taxed as part of the decedent's estate, but is not generally taxed again at the death of the income beneficiary. A spouse is frequently the beneficiary.
• A Charitable Trust has a beneficiary that is a qualified non-profit organization or the public.
• A Charitable Remainder Trust distributes income generated by the trust principal to a non charity beneficiary, with the principal passing to a qualified non-profit organization when the beneficiary dies.
• A Grantor Trust is a trust in which the grantor (settlor) retains such a degree of control over the principal or income of the trust that he is considered to be the owner of the trust. Thus the grantor is taxed on the trust income even if it is distributed to someone other than the grantor.
• An Insurance Trust designates a trust fund as beneficiary of one or more life insurance policies which fund the trust at the settlor's death. If certain conditions are met, the proceeds of the insurance policies pass to the trust and the trust beneficiaries without being included in the settlor's estate.

TRUST AGREEMENT
A TRUST AGREEMENT is the document explaining the purpose, provisions, and directions of a trust. Trust Agreement is also known as a trust instrument, deed of trust, or trust indenture.

TRUST FUND
A TRUST FUND is the producing property in a trust.

TRUSTEE, CONTINGENT AND SUCCESSOR TRUSTEE, SUBSTITUTED TRUSTEE
A TRUSTEE is that person or institution named in a trust agreement to hold, manage, and distribute trust property.

A CONTINGENT TRUSTEE serves as trustee on the occurrence of a specified future event. A SUCCESSOR TRUSTEE replaces a current trustee should that trustee become unwilling or unable to act.

A SUBSTITUTED TRUSTEE is a trustee appointed by the court to replace an earlier trustee.

VALUATION DATE, ALTERNATIVE VALUATION DATE
For estate tax purposes, all property in a decedent's estate must be valued for what it is worth on the date of his death - the VALUATION DATE.

An ALTERNATIVE VALUATION DATE is also allowed six months after the date of death. At this time the value of the state is again determined, and the personal representative(s) of the estate may choose which value of the two to use as the basis on which estate taxes will be paid.

VEST, VESTED INTEREST
A VESTED INTEREST in property is a fixed or established right to that property.

WILL
• A WILL is a legal document by which a person who is 18 years old and of sound mind can direct to whom their property will pass at death, how it will pass, and by whom it will be managed as it passes. A Will shall be in writing signed by the testator.
• A Self Proving Will is accepted in Colorado. The probate court automatically affirms the Will as valid because the signatures of the maker of the Will and the witness have been officially notarized at the time of the execution (signing) of the Will.
• A Joint Will is one in which the same document is the Will of two or more persons. A joint Will is very dangerous and should be revised by our office.
• A Holographic Will is a Will written with the material provisions and signatures by hand. Such a Will is valid in Colorado.

WITNESS
Any person generally competent to be a WITNESS may act as a witness to a Will. A Will or any provision therefore is not invalid if the Will is signed by an interested witness.

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