For current Estate and Gift tax figures, click here.
Annual Gift Tax Exclusion:
Technique to allow gifts without the imposition of estate or gift taxes and without using lifetime exclusion.
Children’s or Grandchildren’s Irrevocable Education Trust:
A Trust used by parents and grandparents for a child’s or grandchild’s education.
Charitable Remainder Interest Trust:
This estate planning device involves establishing a trust that will have the donor transfer property to a charitable Trust in a way that allows the donor to keep 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.
Family Limited Partnership:
This estate planning device involves establishing an entity used to:
- Provide asset protection for partnership property from the creditors of a partner
- Provide protection for limited partners from creditors
- Enable gifts to children and parents maintaining management control
- Reduce transfer tax value of property
Federal Estate Tax:
A tax levied by the federal government upon the estate of a deceased person. The federal government gives certain exclusions and deductions and then taxes everything above a set level.
Fractional Interest Gift:
This estate planning device 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 that entails transferring assets you own as an individual into the name of your Trust.
Generation Skipping Tax:
This is a federal 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:
These are the terms used in other states for court-supervised proceedings that name an individual or entity to manage the affairs of an incapacitated person. A guardianship may also include the duty to care for the incapacitated person. Many people have heard about the lawsuits involving Brittany Spears and her guardian. In the Louisiana Code of Civil Procedure, the term “Curator” is the technical name for the person appointed by the court to manage the affairs of an incapacitated adult. The Louisiana Code of Civil Procedure uses the term “Tutor” to designate the person who manages the affairs of a minor. If Ms. Spears had been “interdicted” in Louisiana, she would have been caught up in what we call the “Curatorship Nightmare” instead of being tied up with a Guardianship under California court supervision.
Health Care Power of Attorney:
This estate planning device is used to allow you to designate a person you name to make health care decisions for you should you become incapacitated. The Louisiana Civil Code calls this type of arrangement a form of “mandate.” Mandates may be general or very specific. Louisiana law has rules for mandates that apply to business and mandates that deal with health and medical issues.
Irrevocable Life Insurance Trust:
A Trust used to prevent estate taxes on 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 immediately to the surviving owners. Louisiana does not recognize “joint tenancy with right of survivorship” as a legal form of ownership for land. In some situations, an account with a stock broker or out-of-state bank may be titled in “joint tenancy” but Louisiana residents have to be very careful about the consequences of accidentally titling property in “joint tenancy.”
Living Will:
This is a misleading term for a legal document that is technically called an “Advance Directive” under Louisiana law. This is a document in which you give directions for life sustaining treatment should you become unable to communicate your wishes. Some states have combined this kind of instrument into that state’s version of advanced health care directive or proxy. In Louisiana, an Advance Directive can be used as a supplement to a comprehensive Health Care Mandate (power of attorney) but these two devices are not the same and the comprehensive Health Care Mandate is the best device to use.
Pour Over Will:
This is the common name used to describe a back-up will or testament that is an accessory part of an estate plan with a revocable trust as the primary planning device. The “pour over” will or testament can designate a Tutor for minor children. The “pour over” will or testament protects against intestacy if you have assets that were not transferred into the Trust. (When you use a trust as the centerpiece of your estate plan, you really need to make sure that EVERYTHING you own is titled in the name of trust but sometimes thing slip through the cracks and are left outside of the trust.) The function of the “pour over” testament is to “pour” any assets left out of the trust into the trust so they will ultimately be distributed according to the terms of the trust.
Private Foundation:
An entity used by higher-wealth families to receive charitable income, gift, or estate tax deduction while allowing the family to retain some control over the assets in the foundation.
Probate:
This Is the term commonly used for the court procedure that changes title to assets from the name of an individual who has passed away into the name of the beneficiaries. It is also where all creditors of a decedent file claims to collect their debts and where interested parties can “contest” a Testament. (The technical term for what most people call a “Will” is Testament.) An individual who passes away with a Testament or with no estate plan at all will go through this process. In the Louisiana Code of Civil Procedure, the term “probate” technically refers to the process of proving a Testament is valid. However, the term “probate” has ended being commonly used to describe the entire process.
Property Power of Attorney:
This estate planning device is a written instrument used to allow an agent you name to manage your property. The Louisiana Civil Code calls this type of arrangement a form of “mandate.” Mandates may be general or very specific. Louisiana law has rules for mandates that apply to business and mandates that deal with health and medical issues.
Revocable Living Trust:
This estate planning device is a trust established while you are alive that contains provisions allowing you to revoke or amend the trust. The revocable trust becomes irrevocable when you die. This kind of trust is used to provide management of your property, both during life and after death and provides a way for you to designate who will manage your property if you become incapacitated — revocable trusts are more powerful tools for “incapacity planning” than Powers of Attorney but they are also more complicated and more expensive to set up. One benefit of a revocable trust is that it can be used to bypass probate. Other benefits of revocable trusts are discussed on other page on this website.
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. Louisiana repealed its inheritance tax years ago but nearly half of the other states have a separate state estate or inheritance tax which kicks in at a lower level than that of the federal government. If a Louisiana resident dies owning property in a state with a state inheritance tax, then his estate or family will probably have to address the state taxes on that property.
Step-up in Basis:
A step-up — or step-down — in basis is an adjustment for income tax purposes to an asset’s fair market value at the date of the death of the owner of the asset. 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:
The person or entity in charge of the assets in a Trust. A very common estate planning practice is to have someone establish a Trust and serve as Trustee of their own trust. For married couples, either one or both spouses may act as Trustee or co-Trustees. The successor Trustee is an individual or corporation fiduciary whom you designate to be in charge of your Trust in the event of disability or upon death.
Will:
A legally enforceable declaration of how a person wishes his or her property to be distributed after death. In Louisiana, the technical term for what most people call a “will” is “testament” and the people who receive things as beneficiaries of the testament are called “testamentary legatees.” Testaments can include provisions that affect more than just how property is distributed. For instance, a Testament can include the designation of a Tutor for minor children and administrative instructions that can make probate less expensive and less inconvenient.
