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Glossary of Terms
1031 Exchange: The sale or disposition of real estate or personal property (relinquished property) and the acquisition of like-kind real estate or personal property (replacement property) structured as a tax-deferred, like-kind exchange transaction pursuant to Section 1031 of the Internal Revenue Code and Section 1.1031 of the Treasury Regulations in order to defer federal, and in most cases state, capital gain and depreciation recapture taxes.
Administrator: Person named by the court to administer a probate estate. Also called an Executor or Personal Representative.
Advance Healthcare Directive: A legal document that gives another person legal authority to make health care decisions for you if you are unable to make them for yourself. Also called Durable Power of Attorney for Healthcare, Healthcare Surrogate or Medical Power of Attorney.
Amended Mortgage and Promissory Note: Amendments become necessary when the lender and borrower agree to amend or change provisions of the original mortgage and note.
Ancillary Administration: An additional probate in another state. Typically required when you own assets or real estate in a state other than the state where you live that is not titled in the name of your trust or in the name of a joint owner with rights of survivorship.
Assignment of Note and Mortgage: Assignments are executed in the event either the borrower or lender chooses to assign or transfer their interest in the mortgage to a third party.
Basis: What you paid for an asset. Value used to determine gain or loss for income tax purposes.
Beneficiary: An heir at law in an intestate estate and devisees in a testate estate.
Cotrustees: Two or more individuals who have been named to act together in managing a trust’s assets. A Corporate Trustee can also be a Cotrustee.
Corporate Trustee: An institution, such as a bank or trust company, that specializes in managing or administering trusts.
Decedent: A person who has died.
Devise: A testamentary disposition of real or personal property. To dispose of real or personal property by terms of a will or a trust.
Devisee: Person designated in a will or trust to receive a devise.
Disclaim: To refuse to accept a gift or inheritance so it may be transferred to the next recipient in line. Must be done within nine months of the date of death.
Domicile: A person’s usual place of dwelling, synonymous with residence.
Durable Power of Attorney for Financial Matters: A legal document that gives another person full or limited legal authority to act on your behalf in your absence. Valid through mental incapacity. Ends at revocation, adjudication of incapacity, or death.
Durable Power of Attorney for Healthcare: A legal document that gives another person legal authority to make health care decisions for you if you are unable to make them for yourself. Also called Healthcare Proxy, Healthcare Surrogate, Medical Power of Attorney or Advance Healthcare Directive.
Estate: The property of a decedent that is subject to administration.
Fiduciary: Person having the legal duty to act for another person’s benefit. Requires great confidence and trust, and a high degree of good faith. Usually associated with a Trustee or Personal Representative.
Funding: The process of re-titling and transferring your assets to your Living Trust. Also includes the re-designation of beneficiaries to include your Living Trust as a beneficiary.
Future Advance and Consolidation: A mortgage may provide provisions to secure not only existing indebtedness, but also future advances up to a predetermined amount. The advance shall be secured under the existing mortgage.
Grantor: One who creates or adds to a trust and includes “settler,” “trustor” or “trustmaker” and a testator who creates or adds to a trust.
Healthcare Proxy: A legal document that gives another person legal authority to make health care decisions for you if you are unable to make them for yourself. Also called Durable Power of Attorney for Healthcare, Healthcare Surrogate, Medical Power of Attorney or Advance Healthcare Directive.
Heirs or Heirs at Law: Those persons, including the surviving spouse, who are entitled to the property of a decedent under the statutes of intestate succession.
Inter Vivos: Latin term that means “between the living.” An inter vivos trust is created while you are living instead of after you die. A Revocable Living Trust is an inter vivos trust.
Irrevocable Trust: A trust that cannot be changed or canceled once it is set up. Opposite of Revocable Living Trust. Can be created during lifetime or after death.
Intestate: Dying without a Will.
Joint Ownership: When two or more persons own the same asset.
Joint Tenants with Right of Survivorship: A form of joint ownership in which the deceased owner’s share automatically and immediately transfers to the surviving joint tenant(s) or owner(s).
Life Estate: An estate for the duration of a person’s life where upon the death of the life estate holder, the remainder interest vests in a named beneficiary.
Like-Kind Property: Property that is exchangeable with another property. Refers to the nature or character of the property and not to its grade or quality.
Living Trust: A legal entity created during your life, to which you transfer ownership of your assets. Contains your instructions to control and manage your assets while you are alive and well, plan for you and your loved ones in the event of your mental disability, and give what you have, to whom you want, when you want, the way you want at your death. Avoids guardianship of the property and probate only if fully funded at incapacity and/or death. Also called a Revocable Inter Vivos Trust.
Living Will: A legal document that sets forth your wishes regarding the termination of life-prolonging procedures if you are mentally incapacitated and your illness or injury is expected to result in your death.
Medical Power of Attorney: A legal document that gives another person legal authority to make health care decisions for you if you are unable to make them for yourself. Also called Durable Power of Attorney for Healthcare, Healthcare Surrogate or Advance Healthcare Directive.
Mortgage: A temporary, conditional pledge of property to a creditor as security for performance of an obligation or repayment of a debt.
Note: A legal document that obligates a borrower to repay a mortgage loan at a specified interest rate during a specified period of time or on demand.
Personal Guarantor Agreement: Financial institutions often require that credit risky loans are further secured by a personal guarantor to ensure that in the event of default, the lender can pursue this additional avenue for repayment of the debt.
Personal Representative: Another name for an Executor or Administrator.
Pour Over Will: An abbreviated Will used with a Living Trust. It sets forth your instructions regarding guardianship of minor children and the transfer (pour over) of all assets owned in your individual name (probate assets) to your Living Trust.
Power of Attorney: A legal document that gives another person legal authority to act on your behalf for a stated purpose. Ends at revocation, incapacity (unless it is a durable power of attorney) or death.
Probate: The legal process of validating a Will, paying debts and distributing assets to beneficiaries after death.
Probate Estate: The assets owned in your individual name at death (or beneficiary designations payable to your estate). Does not include assets owned as joint tenants with rights of survivorship, payable-on death accounts, insurance payable to a named beneficiary or trust, and other assets with beneficiary designations.
Probate Fees: Legal, executor, court and appraisal fees for an estate that requires probate. Probate fees are paid from assets in the estate before the assets are fully distributed to the heirs.
Probate of Will: All steps necessary to establish the validity of a will and to admit a will to probate.
Promissory Note: A promissory note is executed in accordance with the mortgage and sets forth the terms and conditions under which the mortgage is to be paid.
Qualified Intermediary: An unrelated party (Midwest 1031 Exchange Co., Inc.) who participates in the tax-deferred, like-kind exchange to facilitate the disposition of the Exchanger’s relinquished property and the acquisition of the Exchanger’s replacement property. The Qualified Intermediary has no economic interest except for any compensation (exchange fee) it may receive for facilitating the exchange as defined in Section 1031 of the Internal Revenue Code. The Qualified Intermediary is the correct technical reference pursuant to the Treasury Regulations, but the Qualified Intermediary is also known as the Accommodator, Facilitator or Intermediary.
Satisfaction of Mortgage: Satisfactions are executed and recorded as evidence that the debt has been satisfied.
Spendthrift Clause: Protects assets in a Trust from a beneficiary’s creditors.
Successor Trustee: Person or institution named in a trust document that will take over should the first Trustee die, resign or otherwise become unable to act.
Tenancy by the Entirety: An estate created for husband and wife. Under the law, the marriage is the owner of the property. In the event of death of one spouse, the surviving spouse would own the entire interest.
Tenants in Common: An estate for two or more people in which their interests may or may not be equal. If a tenant should die, his or her heirs would receive the interest in the property subject to probate administration.
Testamentary Trust: A Trust in a Will. Can only go into effect at death. Does not avoid probate.
Testate: One who dies with a valid Will.
Trust Administration: The legal process required to administer trust assets after incapacity or death. Includes the management of trust assets for the named beneficiaries, the payment of debts, taxes or other expenses and the distribution of assets to beneficiaries according to the trust instructions. Generally requires the services of an attorney.
Trustee: Person or institution who manages and distributes another’s assets according to the instructions in the Trust document.
Will (or Last Will & Testament): A written document with instructions for disposing of assets after death. A Will can only be enforced through probate court