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Trusts & Estates Glossary: C
CAPITAL GAINS (and Losses):
The difference between purchase price and selling price in the sale of assets. The computation is used primarily in tax computations.
CAPITAL STOCK:
The total amount of stock, common and preferred, that a corporation is authorized to issue under its certificate of incorporation or charter.
CARRYING CHARGES:
Generally expenses incident to the continued ownership or use of property, as taxes on real property; specifically, charges made for carrying a debtor, as interest charged on a margin account with a broker.
CASH METHOD OF Accounting:
A system used especially in computing income tax in which income is not credited until it is actually or constructively received and expenses are not charged until they have been paid; to be distinguished from the accrual method in which income is credited when the legal right to the income occurs and expenses are charged when the legal liability becomes enforceable.
CASH SURRENDER VALUE:
The cash value of a life insurance policy contract if redeemed before the death of the insured.
CAVEATOR:
An interested party who gives notice to some officer not to do a certain act until the party is heard in opposition—as the caveator of a Will offered for probate.
CEMETERY TRUST:
A trust which has as its purpose the upkeep of a grave, burial plot, or cemetery.
CERTIFICATION:
A formal attestation of a matter of fact.
CESTUI QUE TRUST:
(pl., cestuis que trustent): A person for whose benefit a trust is created; a beneficiary.
CHARGE:
The price fixed or demanded by a trust institution for service- compensation which a trust institution has a legal right to fix (in the form of either a commission or a fee), in contrast to an allowance which is granted by a court. See also Allowance; Commission; Fee.
CHARITABLE BEQUEST:
A gift of personal property to a legal charity by Will.
CHARITABLE DEVISE:
A gift of real property to a legal charity by Will.
CHARITABLE LEAD (or Up-front) TRUST:
A trust for a fixed term of years wherein a charity is the income beneficiary and the remainder goes to a noncharitable beneficiary.
CHARITABLE REMAINDER TRUST:
An arrangement wherein the remainder interest goes to a legal charity upon the termination or failure of a prior interest.
CHARITABLE REMAINDER ANNUITY TRUST:
A trust which provides a sum certain, not less than five percent of initial fair market value of all property placed in trust, to be distributed at least annually to a noncharitable beneficiary, with remainder to a qualified charity.
CHARITABLE REMAINDER UNITRUST A trust which provides a fixed percentage, not less than five percent of net fair market value of property, valued annually, to be distributed at least annually to a noncharitable beneficiary, with remainder to a qualified charity.
CHARITABLE TRUST:
A trust created for the benefit of a legal charity.
CLAIM AGAINST ESTATE:
A demand made upon the estate to do or to forbear some act as a matter of duty. A common example would be-the claim submitted by a creditor for a debt owed him by the decedent at the time of his death.
CLAIMS:
The right to any debts, privileges, or other things in possession of another; also, the titles to anything which another should concede to, or confer on, the claimant.
CLASS GIFT:
A gift to members of the same class, as, for example, the class consisting of the children of the same parents.
CLOSE CORPORATION:
One whose entire stock is held by one or by a few persons, as the members of a family.
CLOSED-END INVESTMENT:
An investment fund which allows only the original prescribed number of shares to be distributed.
CLOSED MORTGAGE:
A corporate trust indenture under which bonds have been authenticated and delivered (as an original issue) to the extent authorized under the indenture. Compare Open-EndMortgage.
CLOUD ON TITLE:
A defect in the owner’s title to property arising from a written instrument or judgment or from an order of court purporting to create in someone else an interest in or lien upon the property and therefore impairing the marketability of the owner’s title.
CODICIL:
An amendment or supplement to a Will executed with all the formalities of the Will itself.
COLLATERAL:
Specific property, commonly securities, given by a borrower to a lender as a pledge for the payment of a loan or other obligation.
COLLATERAL HEIR:
A person not in the direct line of the decedent from whom he inherits real property, as, for example, a nephew of the decedent who receives a share of his uncle’s estate. See also Direct Heir; Heir.
COLLATERAL TRUST NOTES:
Bonds secured by the deposit of other bonds or stocks, usually issued by holding companies, investment trusts, and railroads.
COMMINGLED FUND:
A common fund in which the funds of several accounts are mixed.
COMMISSION:
A percentage of the principal or of the income or of both which a fiduciary receives as compensation for its services; to be distinguished from allowance, charge, and fee.
COMMITTEE FOR INCOMPETENT:
An individual or a trust institution appointed by a court to care for the property of the person (or both) of an incompetent; similar to a guardian, conservator, or curator.
COMMON TRUST FUND:
A fund maintained by a bank or a trust company exclusively for the collective reinvestment of money contributed to the fund by the bank or trust company in its capacity as trustee, executor, administrator, or guardian and in conformity with the rules and regulations of the Comptroller of the Currency pertaining to the collective investment of trust funds by national banks, as well as with the statutes and regulations (if any) of the several states.
COMMUNITY PROPERTY:
Property in which a husband and wife have each an undivided one-half interest by reason of their marital status; recognized in all civil law countries, in certain states of the Southwest and Pacific Coast area of the United States, and in Wisconsin.
COMMUNITY TRUST:
A trust ordinarily composed of gifts made by many people to a trustee for educational, charitable, or other benevolent purposes in a community. The property of the trust is trusteed, and distribution of the funds is under the control of a selected group of citizens who act as a distribution committee. There may be one trustee or, as is more often the case, several trustees (usually trust institutions of the community), each serving under identical declarations of trust in the administration of the property committed to its care and management. Some community trusts are known as foundations. See also Foundation.
COMMUTATION:
A power in a trustee or other individual to convert the interest of a beneficiary of a trust into the right to receive a fixed payment from the trust and thereby terminate that interest. Such a power, in particular situations such as a grantor retained income trust, could be used to reduce the value of the grantor’s retained interest for federal estate tax purposes.
COMPENSATION:
A general term covering four specific terms—allowance, charge; commission, and fee, which should be differentiated from one another.
COMPLEX TRUST:
A trust in which the trustee is not required to distribute income currently, or distributes amounts other than income, or makes a charitable contribution.
CONSANGUIMTY:
Blood relationship; to be distinguished from affinity.
CONSENT TRUST:
A trust in which the consent of the settlor or some designated person is required before specified action by the trustee.
CONSERVATOR:
(1) Generally, an individual or a trust institution appointed by a court to care for property. (2) Specifically, an individual or a trust institution appointed by a court to care for and manage the property of an incompetent person, in the same way as a guardian cares for and manages the property of a minor.
CONSIDERATION:
Something of value given by one party to another in exchange for the promise or act of such other party.
CONSOLIDATION:
The surrender of two or more small denominations of a security for a larger denomination. This type of transaction frequently follows the receipt of small lots of securities resulting from stock dividends or the exercise of rights.
CONSTRUCTIVE RECEIPT DOCTRINE:
Income, although not actually reduced to a taxpayer’s possession, which is credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time; used in determining what is included in the gross income of a taxpayer using cash method accounting.
CONSTRUCTIVE TRUST:
A trust imposed by a court of equity as a means of doing justice, without regard to the intention of the parties, in a situation in which a person who holds title to property is under a duty to convey it to another person; to be distinguished from an express trust and a resulting trust.
CONSULT ACCOUNT:
A trust in which the trustee is required by the instrument to consult a designated party before taking action; to be distinguished from consent trust.
CONTEMPLATION OF DEATH:
Act of considering and acting upon the possibility of death. For federal estate taxes, transfers made within three years of the date of death are considered transfers in contemplation of death and as such, along with gift taxes paid, are taxable in the estate.
CORPORATE FIDUCIARY:
A trust institution serving in a fiduciary capacity, such as executor, administrator, trustee, or guardian.
CORPORATE TRUST:
A trust created by a corporation, typical of which is a trust to secure a bond issue.
CORPORATE TRUSTEE:
A trust institution serving as a trustee.
CORPORATION SOLE:
A one-man corporation, the authority, duties, and powers of which are attached to and go with the office and not the natural person who for the time being holds the office.
CORPUS (Body):
The principal or capital of an estate, as distinguished from the income.
CREDIT FOR TAX ON PRIOR TRANSFERS:
Federal estate tax credit allowed for federal estate tax already paid on the transfer of property to the present decedent from a transferor who died within ten years before, or within two years after, the present decedent’s death.
CREDIT SHELTER AMOUNT:
The amount of taxable property that will generate a federal gift or estate tax exactly equal to the amount of the unified credit. For gifts made, and decedents dying, after 1986, the credit shelter amount is $600,000.
CREDITOR’S NOTICE:
In probate, the notice published stating the decedent’s death and the name of the executor or administrator to whom claims should be presented for payment.
CROSS REMAINDERS:
Dispositive provisions of a Will or trust agreement wherein there is provision that surviving life beneficiaries shall be entitled to receive or share in the income of the deceased beneficiary.
CRUMMEY POWER:
A limited, usually noncumulative power of withdrawal over trust property that ordinarily lapses within a specified period of time. This power gives a trust beneficiary a present interest over property transferred to a trust. Since property transferred to a trust may not otherwise create a present interest in a beneficiary, a Crummey power is used to secure an annual exclusion for the donor of the property, permitting trust management of the property for the benefit of the beneficiary as contrasted with an outright gift.
CUMULATIVE:
An arrangement whereby a dividend or interest which, if not paid when due or received when due, is added to that which is to be paid in the future.
CURATOR:
An individual or a trust institution appointed by a court to care for the property of a minor or an incompetent person. In some states, a curator is essentially the same as a temporary administrator or a temporary guardian.
CURTESY:
(1) The life estate of a widower in the real property of his wife. See Dissent. (2) At common law curtesy took effect only if a child capable of inheriting the property had been born of the marriage. See Dower.
CUSTODIAN:
One whose duty it is to hold, safeguard, and account for property committed to his care.
CUSTODY ACCOUNT:
An agency account concerning which the main duties of the custodian (agent) are to safekeep and preserve the property and to perform ministerial acts with respect to the property as directed by the principal. The agent has no investment or managerial responsibilities. To be distinguished from managing agency account and safekeeping account.
CY-PRES DOCTRINE:
Cy-pres means "as nearly as may be." The doctrine, applied in English and Scots law and in some of the states of the United States, that, where a testator or settlor makes a gift to or for a charitable object that cannot be carried out to the letter, the court will direct that the gift will be made as nearly as possible, in its judgment, in conformity with the intention of the donor.