Beneficiary: The person who receives the benefit from an estate, trust, retirement account, life insurance policy, or Transfer on Death account.

Bypass Trust (Also known as Credit Shelter Trust): A trust designed to provide benefits to a surviving spouse and increased shelter from estate taxes for the estate.

Charitable Trusts: Trusts designed to combine benefits to a charity with a benefit to non-charitable beneficiaries. Pooled income funds, gift annuities and deferred gift annuities can achieve similar goals.

Codicil: An amendment to a will. It is a separate legal document, properly witnessed and executed.

Community Property: Method by which a married couple owns property in some States (Not North Carolina) whereby each spouse owns a one-half interest. Upon the death of one spouse, the survivor's half remains with the survivor, and the deceased's half becomes part of their probate estate.

Credit Shelter Trust: Have sizable assets and looking to shelter the maximum you can from your estate taxes? Then explore a credit shelter trust. Remember, if your estate exceeds a certain size, your surviving spouse's estate may be subject to estate taxes on that excess upon his or her death. So a credit shelter trust is typically used to pass an amount equal to the estate tax exemption into a trust when the first spouse dies. The credit shelter trust then can provide income to the surviving spouse or children. And upon the second spouse's death, it can pass assets on to the beneficiary free from estate taxes. This type of trust is designed to ensure that a married couple receives the benefit of both estate tax exemptions to which they are entitled.

Death Taxes: Amounts levied on the property of the deceased called estate taxes (federal) and inheritance (state) taxes.

Deed: A legal document that conveys title to a property.

Donor: Person who makes a gift; the person who receives the gift is known as the donee.

Donor-advised fund: A charitable giving program offered by an Internal Revenue Code Section 510(c)(3) public charity that allow you to receive federal income tax deduction for your irrevocable contributions in the year you make your donation to the charity while giving you the privilege to recommend grants to U.S. public charities of your choice.

Durable Power of Attorney: A legal document that enables an individual to appoint another person to act on their behalf in the event they become disabled or incapacitated.

Estate tax credit (or estate tax credit equivalent): Federal estate tax credit that is equal to the tax on the first $1,500,000 of the estate in 2004-2005. This credit is applied towards estate taxes upon your death.

Tenants by Entirety: A legal registration in which each owner has a full interest in the account or property. Upon the death of one owner, the account or property passes to the survivor. This registration is restricted to spousal accounts and is not available in all states.

Executor: (Also called a Personal Representative or executrix) Person named in the will who is responsible for managing the decedent's estate.

Family Limited Partnership: A partnership arrangement designed for the transfer of business, property or other assets from parents to children to minimize estate tax liability and provide protection from creditors.

Federal Estate Exclusion Amount: The amount an individual can exclude from his/her estate for federal estate tax purposes. In 2004-2005 it is $1,500,000 and rises to $3.5 million in 2009.

Footnote: If "Net to beneficiaries" is less than 0, this result may be caused by liabilities that exceed assets. For married couples, this result could be caused by entering individual liabilities while naming the spouse as the beneficiary of individually owned assets. As a practical matter, liabilities will be offset from assets in calculating your estate tax and will be settled from available estate assets. Consult with your professional with regard to your particular situation. You can rerun this illustration with different inputs to test alternative scenarios.

Generation-Skipping Trust: By using your generation-skipping tax exemption, this trust can permit trust assets to be distributed to your grandchildren without incurring either a generation-skipping tax or estate taxes on the subsequent death of your children.

Gift Annuity: Designed to exchange a charitable gift for a fixed, lifetime annuity to its donor, beginning immediately or at some future date (deferred gift annuity).

Gift Tax: Tax imposed on the transfer of property that exceeds IRS annual and lifetime limits on gifting.

Gifting Allowance: (Also known as Annual Gift Tax Exclusion) -- Currently $11,000/year-the amount you can give away each year to as many individuals as you choose without incurring federal gift tax or depleting your unified credit equivalent.

Grantor Retained Annuity Trust: Trusts designed for the transfer of business or property assets to shift future appreciation to children through use of gift tax rather than estate tax.

Guardian: Person named to represent the interests of a minor child.

Health Care Proxy: (or Durable Power of Attorney for Health Care) -- A type of power of attorney that limits a designated individual's decision-making power to your medical affairs. more information

Intestate: Dying without a will. When this happens, all property and assets that would otherwise be governed by a will are passed to the deceased's heirs according to state laws of intestacy. (read North Carolina law regarding Property Distribution without a Will)

Irrevocable Life Insurance Trust: A trust that cannot be modified or revoked once it is created, funded by a life insurance policy, and designed to avoid estate tax and provide liquidity to the beneficiaries.

Irrevocable Trust: An "irrevocable" trust that transfers your assets out of your estate - and potentially out of the reach of estate taxes. An irrevocable trust cannot be altered after it has been executed. One specific type of irrevocable trust is called a "trust under will." This simply means that your retirement plan assets will be transferred to a trust that is specified in your will.

Joint Tenants with Right of Survivorship: When two or more individuals jointly own assets, the interest of a deceased individual owner automatically passes to the survivor(s) upon his/her death.

Life Insurance Trust: An irrevocable trust that is designed to avoid estate tax and provide liquidity to the beneficiaries.

Liquidity: The ability to buy or sell an asset quickly or the ability to convert to cash quickly.

Living Trust: (Also called revocable trust) - A trust that gives you the ability to pass trust assets to your beneficiaries without the delay or expense of probate.

Living Will: (Also called health care directive) - specifies what, if any, life-saving measures should be taken in the event you become terminally ill or incapacitated. more information

Pooled Income Fund: A fund designed to accept a charitable donation and pay out lifetime income to the donor or the donor and spouse.

Private Foundation: A tax-exempt organization created for the purpose of ongoing charitable giving. You are limited to a tax deduction of 30% of your income for cash gifts and 20% of your income for most property gifts compared to 50% and 30% limitations for contributions to a public charity.

Probate: The legal process of settling an estate during which the validity of the will is proven, the deceased's assets are collected and accounted for, debts and taxes are paid, and remaining probate estate assets distributed. more information

Qualified Personal Residence Trust (QPRT): A trust designed for the transfer of ownership of a residence to reduce estate tax. The transaction may, however, incur gift tax.

Qualified Terminable Interest Property (QTIP) Trust:  In general, this type of trust is used to provide income for your surviving spouse. Upon the spouse's death, the assets would then go to the children from the first marriage. A QTIP trust qualifies for the marital deduction for federal estate tax purposes.

Revocable Trust (Living Trust): A trust that gives you the ability to pass trust assets to your beneficiaries without the delay or expense of probate. Want to retain control of your assets during your lifetime? Then consider a "revocable" trust. Just remember that because the assets in the trust remain under your control while you are alive, they're subject to estate taxes when you die. Upon your death, the trust becomes irrevocable. more information

Roth IRA: A special type of IRA where income taxes have been paid on the assets contributed and withdrawals (subject to certain requirements) can be made income tax-free. However, assets in a Roth IRA are subject to estate tax.

Gift Tax: Tax imposed on the transfer of property that exceeds IRS annual and lifetime limits on gifting.

Tenants in Common: Describes a situation where two or more people own property without rights of survivorship. In this case, each tenant's ownership interest can be distributed to the beneficiaries they designate in their will.

Testacy: Dying with a valid Will in place. All property controlled by the Will passes through probate.

Transfer on Death (TOD): A registration in which a securities account is transferred directly to the designated transferee(s) upon the owner's death.

Trust: A legal arrangement for the transfer of property to a trustee for the benefit of a beneficiary.

Trustee: Person or institution responsible for managing the assets placed into a trust.

Uniform Gifts to Minors Act (UGMA): A state law that allows adults to contribute to a custodial account in the name of a minor beneficiary without having to establish a trust or name a legal guardian. Funds transferred to an UGMA or UTMA account are irrevocable gifts to the minor and may only be used for the benefit of the minor. See also Uniform Transfers to Minors Act.

Uniform Transfers to Minors Act (UTMA): A state law that extends the coverage of the Uniform Gifts to Minors Act so that transfers to a custodial account in the name of the minor beneficiary may be simplified. Funds transferred to an UGMA or UTMA account are irrevocable gifts to the minor and may only be used for the benefit of the minor.

Unlimited Marital Deduction: Under current federal law, the amount one spouse can transfer to another free of estate tax (provided the recipient is a US citizen) is unlimited.

Will: Legal document that defines how you want your assets distributed at death; names an executor for the estate and guardianship for minor children. more information