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Accounting: A
listing of all transactions that have occurred since the last accounting, or
beginning of the trust’s administration. A fiduciary accounting should
include 1) the cost bases of the assets on hand the at beginning of the
accounting period, 2) all receipts, disbursements, distributions, gains or
losses and changes to assets, and 3) the current value and the cost bases of
the remaining assets on hand at the end of the accounting period. An
accounting is not a brokerage statement.
Accrued
Interest: Interest that has been
earned since the date of the last payment, but has not been paid out. When
the grantor of trust dies, this amount is equal to income due but not paid
on the date of death.
Accrued
Dividend: A dividend that has
been declared but not paid out as of the grantor’s date of death; also known
as an accumulated dividend.
Amendment:
An addition, deletion, or change
in a legal document.
Annuitant:
The person upon whose life the
payments are based in an annuity contract.
Annuity:
An insurance contract written to
provide either income benefits for a specified period or to provide for life
payments, which can begin immediately, but sometimes are deferred to some
future date.
Appreciation: Increase in the
value of property; opposite of depreciation.
Asset(s):
The property owned by the trust, which can include real, personal and
intangible property.
Beneficiary: (1)
The person for whose benefit a trust is created. (2) The person to whom the
amount an insurance policy or annuity is payable.
Bond:
A certificate or evidence of debt
from a corporation or a governmental agency, which promises to pay the
bondholders a specified amount of interest for a specified period of time
and to repay the loan on the maturity date.
Bond
Power: A form of assignment
executed by the owner of registered bonds with contains an irrevocable
appointment of an attorney-in-fact to transfer the ownership of the bond.
Breach Of
Fiduciary Duty: Violation by a
trustee of a duty(s), which harms the beneficiary(s).
Capital Gain:
The sale of an asset for more than the asset’s cost basis.
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Capital
Loss: The sale of an asset for
less than the asset’s cost basis.
Commission: Compensation paid to
a trustee based on a percentage of the trust’s principal value or on the
income earned by the trust or on both.
Common
Stock: Class of corporate stock,
which represents the residual ownership of a corporation. Holders of common
stock have voting powers in the corporation and participate in the profits
of the corporation by way of dividends, but only after preferred
stockholders have been paid their dividends.
Complex
Trust: A term used in tax laws
for a trust in which the trustee is not required to distribute income
currently, or distributes amounts other than income, or makes a charitable
contribution; opposite of a simple trust.
Contingent
Beneficiary: The person who may
or will benefit if the primary beneficiary dies or otherwise loses rights as
a beneficiary.
Corpus
(body): The principal or capital
of a trust.
Cost
Basis: The original price or
cost of an asset usually based on the purchase price, or on the market value
at the owner’s date of death. Note: bases are the plural of basis.
Current
Beneficiary: The beneficiary who
is currently enjoying the benefits of the trust’s assets. Typically a
current beneficiary is entitled to all of the trust’s net income. A current
beneficiary may also be entitled to receive principal distributions based on
the terms of the trust agreement.
Depreciation:
Decrease in value of property; opposite of appreciation.
Disbursement: Money paid out for
a debt, fee or expense.
Dispositive
Provisions: The provisions of a
trust agreement relating to the disposition and distribution of the property
in the trust upon the death of the grantor.
Distribution: The amount paid or
credited to the beneficiaries of the trust. The payment may be in the form
of cash or property based upon the terms of the trust.
Diversification: Spreading of
investments among different security types and across different industries
to reduce the overall risk in a portfolio.
Dividend:
The payment to stockholders of
the current or accumulated earnings of a corporation, which is paid out
proportionally based on the number of shares outstanding. Dividends are
usually in the form of cash; however, they could be in the form of stock or
property.
Elective Estate:
In Florida, the value of ownership interests that the decedent had in
various property types. Some of the property included in the elective
estate: 1) all of the decedent’s probate estate and all of the decedent’s
revocable trust estate; 2) the decedent’s ownership percentage of joint
accounts; and 3) the cash value of life insurance policies.
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Elective
Share: In Florida, the surviving
spouse’s right to receive 30% of the deceased spouse’s elective estate.
Elective
Share Trust (EST): In Florida, a
trust created for the benefit of the decedent’s surviving spouse. This trust
can hold all or a portion of the surviving spouse’s elective share. The
trust must pay all out net income to the surviving spouse or allow the
surviving spouse to have use of the trust’s property until death.
Ex-Dividend
Date: The date on which the
right to the current dividend no longer accompanies a stock.
Fair Market Value:
The amount at which property would change hands between a willing buyer and
a willing seller, neither being under any compulsion to buy or sell and both
having reasonable knowledge of the relevant facts.
Fee
Schedule: The rate of
compensation paid to a corporate fiduciary based on their typical fees;
usually based on a percentage of the trust’s market value and also can be
based on a percentage of the trust’s income.
Fiduciary:
A trustee, personal
representative, guardian, or other person, whether an individual or
corporate entity, who by reason of a written agreement, will, court order,
or other instrument has the responsibility for the acquisition, investment,
reinvestment, exchange, retention, sale, or management of money or property
of another.
Fiduciary
Return: An income tax return
prepared by a fiduciary on behalf of a trust; known as IRS Form 1041.
Grantor: The
person who creates a trust, also known as a settlor.
Grantor
Type Trust: A term used in tax
laws for a trust in which the grantor retains ownership of the trust’s
assets and has the ability to amend the terms of the trust.
Guardian:
An individual or a trust
institution appointed by a court to care for the property or for the person
(or both) of a minor or an incapacitated person.
Heirs:
The people entitled to a decedent’s estate if he dies without a will; the
identity of these people is determined by Florida’s intestate succession
rules.
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Income: The
return in money or property derived from the use of the trust’s principal.
Income
Beneficiary: The person(s) who
is entitled to income currently payable or accumulated for distribution as
income.
Ineligible
Family Trustee: In Florida, the
decedent’s grandparents and any descendants of the decedent’s grandparents
who are not also descendants of the surviving spouse. This term is only
applicable to a Qualifying Special Needs Trust.
Intangible
Property: Property that has no
intrinsic value, but is merely the representative or evidence of value, such
stock certificates, bond certificates, promissory notes, copyrights and
franchises.
Intangible
Tax Return: A return required in
Florida for a tax imposed on the value of intangible assets owned as of
January 1st of each year; with the tax payable by June 30th of each year.
Inter Vivos:
Between living persons.
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Inter Vivos
Trust: A trust created during
the grantor’s lifetime, which becomes effective during the grantor’s
lifetime as opposed to a testamentary trust, which takes effect at the death
of the grantor. An inter vivos trust is also known as a living trust.
Intestate:
To die without a will or without a valid will.
Inventory:
A detailed list of property and
assets made by the trustee which includes a description of each item and
each item’s estimated fair market value as of a specified date.
Inventory
Value: The cost of property
purchased by the trustee or received by the trustee at the grantor’s date of
death; also known as carrying or book value and as cost basis.
Investment
Powers: The powers of a
fiduciary regarding the investments based on the trust instrument and on
Florida statutes.
Irrevocable
Trust: A trust which by its
terms (1) cannot be revoked by the grantor or (2) can be terminated by him
only with the consent of someone who has an adverse interest in the trust.
Joint Tenancy:
The holding of property by two or more persons in such a manner that upon
the death of one joint owner, the survivor or survivors take the entire
property.
Last Will and Testament:
A legal document in which a person makes a
disposition of his real and personal property, to take effect after his
death, and which is revocable by the person during his lifetime; the person
creating the will is known as a testator.
Life
Beneficiary: The person who
receives payments or other rights from a trust for his lifetime.
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Living
Trust: A trust created during the
grantor’s lifetime, which becomes effective during the grantor’s lifetime as
opposed to a testamentary trust, which takes effect at the death of the
grantor. A living trust is also known as an inter vivos trust.
Market Value:
The price property would command in the open market; the highest price a
willing buyer would pay and a willing seller accept, both being fully
informed and the property being exposed for a reasonable period of time.
Medallion
Signature Guarantee: The
guarantee of a person’s signature by a member of the Medallion Guarantee
Program, typically required for the transfer of ownership of securities.
Municipal
Bonds: Issued by a state or
local government as evidence of a debt obligation whose funds either may
support a government’s general financing needs or may be spent on special
projects.
Mutual
Funds: A type of managed
investment company in which the investor owns a share of the portfolio
assets equal to his number of shares in the fund.
Nominee: As
related to securities, one designated to act for another as his
representative in a limited sense; for example, stock held by a brokerage
firm in street name to facilitate transactions even though the customer is
the actual owner of the securities.
Notary
Public: A state licensed public
officer who administers oaths, certifies documents and performs other
specified functions. A notary public’s signature and seal may be required to
authenticate signatures on certain legal documents.
Payable Date:
The day on which a corporation actually mails the dividend checks to the
stockholders.
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Per Capita
(by the head): A term used in
the distribution of property which requires the distribution to be split
among the number of individuals to share and share alike; opposite of per
stirpes; for example, if a trust (or will) specifies that the trust estate
is to be divided between Joe and Trudi, per capita and if Joe predeceases
the grantor (or testator), then Trudi will receive the entire estate.
Personal
Property: In a broad sense, all
property other than real estate.
Personal
Representative: The fiduciary
appointed by the court to administer an estate; also referred to as an
administrator or executor.
Per Stirpes
(by the branch): A term used in
the distribution of property which requires the distribution to persons as
members of a family and not as individuals; opposite of per capita; for
example, if a trust (or will) specifies that the trust estate is to be
divided between Joe and Trudi, per stirpes and if Joe predeceases the
grantor (or testator), then the estate will be split between Trudi and Joe’s
children.
Portfolio:
A collection of securities or investments.
Pour-Over
Will: A simple will used with a
living trust in which the person devises any property titled in his sole
name to his trust at his death. If there are any such assets, then a probate
administration will be required.
Powers of
Trustees: The authority or right
to do or to refrain from doing a particular act based on the terms of the
trust agreement and Florida law.
Power of
Attorney: A document,
authorizing the person named therein to act as the agent, called the
attorney-in-fact, for the person signing the document. A durable power of
attorney remains in effect even if the principal becomes incapacitated. The
ability of the attorney-in-fact to use the power of attorney terminates when
the principal dies.
Power of
Sale: Power expressed or implied
in a trust agreement permitting the trustee to sell the investments
comprising the trust.
Preferred
Stock: A class of stock with a
claim on the company's earnings before payment may be made on the common
stock and usually entitled to priority over common stock if the company
liquidates; preferred stockholders are usually entitled to dividends at a
specified rate.
Principal:
The property that has been set aside by the owner so that it is held in
trust eventually be delivered to the remainder beneficiary(s), while the
return or use of the principal is in the meantime paid out to an income
beneficiary(s).
Principal
and Income Act: Florida law that
determines if an item is principal or is income or is a combination of both.
In the trust agreement, the grantor may provide for deviations in the
determination of principal and income from this law.
Proxy:
(1) A person empowered by another
to act as his agent in voting shares of stock. (2) The instrument evidencing
the authority of the agent to vote.
Prudent
Investor Rule: The duty imposed
on a fiduciary to invest and manage the trust’s assets as a prudent investor
would considering the purposes, terms, distribution requirements, and other
circumstances of the trust. This standard requires the exercise of
reasonable care and caution and is to be applied to investments, not in
isolation, but in the context of the investment portfolio as a whole and as
part of an investment strategy that should incorporate risk and return
objectives suitable to the trust.
Qualifying Special Needs Trust (QSNT):
In Florida, a trust established for a
disabled surviving spouse with court approval. The assets of this trust will
consist of at least the surviving spouse’s elective share. The trustee has
complete discretion to make income or principal distributions to the
surviving spouse. Less than half of the trustees of a Qualifying Special
Needs Trust can be ineligible family trustees.
Real Property:
Land and anything permanently affixed to the land, such as buildings, fences
and fixtures; also known as real estate.
Record
Date: The date that a
corporation declares a dividend to the stockholders.
Remainder
beneficiary(s): The person(s)
entitled to the trust’s principal, possibly including income that has been
accumulated and added to principal, after the death of the income
beneficiary(s).
Revocable
Trust: A trust which may be
amended or terminated by the grantor or by another person; opposite of an
irrevocable trust.
Roll-Over:
The procedure of repeated
investment of the proceeds of short-term securities upon maturity back in
the same investment vehicle.
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Settlor: The
person who creates a trust; also known as a grantor.
Sibling:
Children of the same parents.
Simple
Trust: A term used in tax laws
to describe a trust that is required to distribute all of its income
annually to a beneficiary(s) who cannot be a charity; opposite of a complex
trust.
Sole Name:
Assets owned only in one individual’s name.
Special
Needs Trust (SNT): A trust
created by a grantor for the benefit of a person receiving public benefits
to provide for that person’s additional needs that are not covered by public
benefits. The trustee has complete discretion in making distributions to or
for the beneficiary; however, the trustee must be extremely careful that any
distributions from the trust do not result in the beneficiary’s loss of
public benefits assistance.
Stock:
A certificate evidencing
ownership in a corporation. The stock of a corporation is usually divided
into two classes, common and preferred.
Stock
Dividend: A dividend payable in
stock rather than cash.
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Stock
Power: A form of assignment
executed by the owner of stock which contains an irrevocable appointment of
an attorney-in-fact to transfer the ownership of the stock.
Stock
Split: The result of a
corporation dividing its shares into more shares with a corresponding
decrease in par value; for example, if a corporation declares a 2‑for‑1
stock split, then all shareholders of record will receive one additional
share for each share they currently own.
Stock
Transfer Agent: The agent of a
corporation appointed for the purpose of completing transfers of stock from
one stockholder to another by the actual cancellation of the surrendered
certificates and the issuance of new certificates in the name of the new
stockholder.
Substituted
Trustee: A trustee appointed by
the court (not named or provided for in the trust instrument) to serve in
the place of the original trustee or of a prior trustee.
Successor
Trustee: A trustee following the
original or a prior trustee; the appointment of whom is provided for in the
trust instrument.
Surcharge:
A court required payment from a trustee’s personal funds because of the
trustee’s negligence or intentional violation of his duties, which results
in a loss to the trust’s beneficiary(s).
Surety:
An individual or a company that,
at the request of another usually called the principal, agrees to be
responsible for the performance of some act in favor of a third person in
the event that the principal fails to perform as agreed.
Tangible Property:
Property which can be touched or realized
with the senses; can be real or personal property.
Tax Cost:
The figure used as the starting
point upon which a gain or loss on a sale or exchange of property is
determined; typically, the purchase price of the item or the market value of
the item on the grantor’s death of death; also known as cost basis or
inventory value.
Tenancy By
The Entirety: A tenancy which is
created by a husband and wife in which they hold title to an asset with the
right of survivorship, so that upon the death of first spouse, the surviving
spouse takes the whole ownership of the asset.
Tenancy in
Common: The holding of property
by two or more persons in such a manner that each has an undivided interest;
and upon the death of one of the owners, his share of the ownership of the
asset will pass to his heirs or devisees and not to the surviving owner(s).
Testate:
To die with a valid will.
Testator:
The person who creates a will, which disposes of his property after his
death.
Title:
A document establishing the ownership of an asset, such as a deed, bank
signature card, motor vehicle certificate, stock certificate.
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“Totten”
Trust: Trust created by the
deposit of one person’s money in his own name as trustee for another. The
asset belongs to the depositor, who during his life holds it on a revocable
basis for the named beneficiary. At the death of the depositor a presumption
arises that an absolute trust was created as to the balance on hand at the
death of the depositor, which now belongs to the named beneficiary. Also
called “Pay On Death” account or “In Trust For” account.
Trust:
A legal entity created by a
grantor for the benefit of designated beneficiaries; the trustee holds a
fiduciary responsibility to manage the trust’s assets and income for the
benefit of all beneficiaries.
Trust
Agreement: A written agreement
between a grantor and a trustee providing the terms of a trust.
Trustee:
An individual or a trust
institution, which holds the legal title to the trust’s property.
Trust
Estate: All the property owned
by a trust.
Trust
Fund: Technically, only money
held in the trust; but frequently applied to all the property held in the
trust.
Trust Under
Agreement: A trust created by an
agreement between the grantor and the trustee.
Trust Under
Will: A trust created by a valid
will, to become effective only on the death of the testator; also known as a
testamentary trust.
Ultimate Beneficiary:
A beneficiary of a trust who is entitled to
receive principal of the trust property at final distribution; also called
remainderman.
Underproductive Property: When
the principal of the trust does not in any year yield a net income of at
least 3 percent of its market value as of the beginning of the year.
Vested Beneficiary:
(1) The beneficiary(s) who receives an
immediate, fixed right to the trust’s income or principal or both for a
specified period of time, typically until the death of that beneficiary(s).
(2) The beneficiary(s) who receives the future possession and enjoyment of
trust’s assets upon the death of the life beneficiary(s).
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