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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.
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Elective Share:
The surviving
spouse’s right to receive a portion of the deceased spouse’s estate.
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.
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: State law in some states 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.
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 2for1 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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