Estate Planning terms C

Capital Gain or Capital Loss: The profit or loss resulting from the sale of a capital asset.

Certification of Trust: A document that confirms the identity and dominion of the trust over the assets transferred to it. Keeps the identity of the beneficiaries, the distribution plan and the assets confidential. 

Charitable Gift Annuity: An arrangement where a donor bestows a gift to charity and receives a tax deduction and a lifetime income distribution based on the donor’s age.

Charitable Lead Trust: An arrangement where a charity receives regular income from a trust for a specified number of years, and the balance is paid to non-charitable beneficiaries (generally either the donor or his or her heirs).

Charitable Remainder Annuity Trust: A charitable trust arrangement where a donor or some other beneficiary is paid an annual fixed income, for 20 years or for life, between 5% and 50% of the initial fair market value of the property placed in the trust. A qualified charitable organization receives the remainder interest in the property after the death of the donor or beneficiary. The value of the remainder interest must be at least 10% of the initial fair market value of the property transferred to the trust.

Charitable Remainder Trust: An arrangement where the interest in a property passes on to a legal charity once the prior interest ends.

Charitable Remainder Unitrust: A charitable trust arrangement where a donor or some other beneficiary is paid an annual fixed income, for 20 years or for life, between 5% and 50% of annually revalued trust assets. A qualified charitable organization receives the remainder interest in the property after the death of the donor or beneficiary. The value of the remainder interest must be at least 10% of the initial fair market value of the property transferred to the trust.

Codicil: A legal document that is used to make small supplements or changes an existing will.

Community Property: Marital property system where property acquired during the marriage is presumed to be owned jointly by the husband and wife. Applies in Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

Community Property with Right of Survivorship: Ownership arrangement in a community property system where the surviving spouse automatically gains ownership of the decedent-spouse’s interest in the property.

Conservatee: A person whose affairs are managed by another because of their physical or mental limitations to effectively managing their financial or personal affairs.

Conservator: Person given the authority and responsibility of managing the financial affairs or personal affairs of another.

Conservatorship: An arrangement where another is given the authority and responsibility of managing another person’s financial affairs or personal affairs.  A Conservatorship can be granted “of the estate” for financial matters and “of the person” for personal or medical reasons.

Conservatorship Estate: The property of a conservatee that is under the management and control of another (the conservator).

Consideration: An exchange of values that binds parties to a contract. Values may include money, promises, property, etc.

Constructive Receipt Doctrine: A federal tax rule stipulating that when a taxpayer has the unrestricted ability to receive pecuniary benefits and there is no substantial risk of forfeiture, the benefits are viewed as having been received for income tax purposes regardless of whether they were actually received.

Contingent Beneficiary: A beneficiary of a life insurance policy who receives the proceeds from the policy if the primary beneficiary dies before the insured or if the primary beneficiary dies before receiving all of the promised payments.

Corpus of a Trust: The body of assets in a trust. Trust has title to all property held in the corpus.

Credit Shelter Trust: An estate planning device (also called a bypass trust, family trust, or B trust in "AB" plans where the A trust funds for the marital deduction) that minimizes the combined estate taxes payable by spouses. At the first spouse’s death, the estate is divided into two parts. One is placed in trust to benefit the surviving spouse without being taxed at the surviving spouse's death. The other goes directly to the surviving spouse or to a marital deduction trust. The maximum amount that can be transferred estate tax-free varies according to estate tax exemption amount in effect.

Crummy Trust: A trust granting beneficiaries limited power to withdraw income during a limited period each year. The power is non-cumulative. Generally limited to amounts excludable from gift tax liability under the annual gift tax exclusion ($5,000 or 5% of the trust property).

Cumulative Loan: The sum of the annual loans and loan interest, if accrued, to date.

Custodianship: Ownership arrangement where a custodian, instead of a child beneficiary, receives property management rights under `the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act. Custodian's duties are similar to a trustee’s except that the child beneficiary maintains legal title to the trust property. Ends when the child reaches the age of majority.

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