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Trusts & Estates Glossary: S
SCHEDULE OF DISTRIBUTION:
A list showing the distributive shares of an estate.
Evidence of a fractional part of a bond or a share of stock.
A beneficiary whose interest in a trust is postponed or is subordinate to that of the primary beneficiary.
A provision of the Internal Revenue Code intended to eliminate the transfer tax benefits of estate freeze techniques, by causing the post-freeze appreciation to be taxable to the owner of the frozen interest upon a disposition of that interest or upon the owner’s death. Sec. 2036(c) also eliminates the transfer tax benefits of grantor retained income trusts that do not meet certain safe-harbor requirements.
A form of employee benefit in which an employer establishes an irrevocable trust to provide non-qualified deferred compensation to certain key employees. In contrast to a rabbi trust, the trust is not subject to claims of the employer’s creditors. Employer contributions in which the employee is vested are immediately taxable as income to the employee upon contribution. Any income earned prior to distribution to the employee is taxed to the trust, rather than the employer.
SECURITIES DEPOSITORY (Clearing Agency):
A physical location or organization where securities certificates are deposited and transferred by bookkeeping entry.
The property which one person owns free from any rights or control of others; as the property owned by a married woman independent of her husband.
Bonds of the same issue maturing at fixed intervals, over a period of years rather than all at one time.
(1) The winding up and distribution of an estate by an executor or an administrator; to be distinguished from the administration of an estate by a trustee or a guardian. (2) A property arrangement, as between a husband and wife or a parent and child, frequently involving a trust.
A plan usually found in insurance contracts by which the beneficiary of an insurance contract may receive payment in a lump sum or in installments or a combination of both, which is usually for a fixed number of years, or for the life of the beneficiary with or without a fixed number of payments to be made if the beneficiary dies within the fixed period. There are a number and variety of settlement options.
A person who creates a trust, such as a living trust, to become operative during his lifetime; also called donor, grantor, and trustor. Compare Testator.
A certificate by the proper officer of a court as to the appointment and authority of a fiduciary, as distinguished from a full certified copy of letters testamentary, administration, or trusteeship.
A sale of securities which are not owned by the seller at the time of sale but which he intends to purchase or borrow in time to make delivery.
SHORT-TERM INVESTMENT FUND:
A collective investment fund consisting of highly liquid and readily marketable interest-bearing securities.
A term known only in tax laws to describe a trust that is required to distribute all of its income currently and that does not provide for any charitable distribution; opposed to complex trust.
SIMPLIFIED EMPLOYEE PENSION PLAN ("SEP’):
An arrangement meeting the requirements of Sec. 408(k) of the Internal Revenue Code under which an employer makes contributions to an individual retirement account or individual retirement annuity of an employee. Under a SEP, the employer deducts contributions made to the SEP and includes such amounts in the employee’s gross income on Form W-2. The employee, in turn, is entitled to an offsetting deduction on his or her tax return.
The death of two or more people under such circumstances that the order of death cannot be proved.
SIXTY-FIVE DAY ELECTION:
In the case of distributions made during the first 65 days following the close of a complex trust’s taxable year, a fiduciary of a complex trust may elect to treat part or all of the distribution as having been made on the last day of the preceding taxable year.
With respect to a generation-skipping transfer, a recipient or beneficiary who is at least two generation levels below that of the transferor.
An administrator appointed by the court to take over and safeguard an estate pending the appointment of an executor or administrator; sometimes known as a temporary administrator.
A guardian appointed by a court for a particular purpose connected with the affairs of a minor or an incompetent person; sometimes a guardian ad litem is known as a special guardian.
SPECIAL USE VALUATION:
Valuation of family-owned farms or other business operations involving real estate based on actual use rather than highest and best use for estate tax purposes. An executor may elect special use valuation if a variety of conditions are met, that are intended to insure that the qualifying special use of the property continues after the decedent’s death.
The actual accomplishment of a contract by the party bound to fulfill it. An action to compel the performance of a contract according to its term—that is, to do the thing contracted for—usually brought where the payment of money damages would not adequately compensate the aggrieved party.
The provision in a Will or trust instrument which limits the right of the beneficiary to dispose of his interest, as by assignment, and the right of his creditors to reach it, as by attachment.
A trust in which the interest of a beneficiary cannot be assigned or disposed of by him or attached or otherwise reached by his creditors.
Type of trust which by its terms is merged with or added to another trust or estate upon the happening of a certain event.
A gift made by a husband or wife to a third person may be treated as having been made one-half by each if the other spouse consents to the gift.
Allowance made to the surviving husband or wife by the court having jurisdiction over a decedent’s estate, usually for the purpose of providing him or her with funds for living expenses during the period of settlement of the estate.
Trusts in which the income or principal is distributed among the members of a designated class in amounts and proportions as may be determined in the discretion of the trustee. Also called spraying trusts.
An unfunded, inter vivos trust usually executed in conjunction with a durable power of attorney, to which property of the grantor may subsequently be transferred upon the occurrence of a disability.
STATUTE OF FRAUDS:
A statute designed to prevent many fraudulent practices by requiring proof of a specific kind, usually in writing, of the important transactions of business, declaring that no action shall be brought or that no contract shall be allowed to be good when the transaction is not so evidenced. For example, the original statute declared that all trusts of land shall be in writing. While each state has its own statute of frauds designed to serve the same general purpose as the original statute, many of these statutes differ greatly from the original statute, but the general purpose of all of them is to prevent fraudulent transactions by requiring that obligations to be enforceable be in writing.
STATUTE OF USES:
An English statute enacted in 1536 which provided that the legal as well as the beneficial title to land held for the use of a person vested in that person. There were certain exceptions to this vesting which opened the way for the development of the law of trusts.
STATUTES OF DESCENT:
Laws, rules, or statutes governing the descent of real property under intestacy.
STATUTES OF DISTRIBUTION:
Laws rules, or statutes governing the distribution of personal property under intestacy.
STATUTES OF MORTMAIN:
Several early English statutes, dating back as far as the Thirteenth Century, restricting the alienation of land to a corporation, particularly to an ecclesiastical corporation. Mortmain means dead hand. In the early English law an ecclesiastic was deemed civilly dead; hence the origin of the term dead hand.
STATUTES OF WILLS:
Statutes (the first one was passed in 1541) providing that no will shall be valid and no devise or bequest shall be valid unless the Will is in writing, signed, and attested in the manner provided by the statute.
Specified articles of personal property and a specified amount of cash left by decedent which are set apart for his immediate family and which may not be subjected to the claims of creditors.
A grantor retained income trust that meets the statutory safeharbor requirements of Internal Revenue Code Sec. 2036(c) and avoids the application of that section. A statutory GRIT creates a qualified trust income interest in the grantor.
An investment which a trustee is specifically authorized to make under the terms of the statutes of the state having jurisdiction of the trust.
A trust established by a corporation to enable its employees to receive benefits in the form of the corporation’s own stock as a reward for meritorious service or as a means of sharing in the profits of the enterprise.
SUBCHAPTER S CORPORATION:
An election available to a corporation to be treated as a partnership for income tax purposes. To be eligible to make the election, a corporation must meet certain requirements as to kind and number of shareholders classes of stock, and sources of income.
The substitution of one person for another with reference to a lawful claim or right and frequently referred to as the doctrine of substitution. It is a device adopted or invented by equity to compel the ultimate discharge of a debt or obligation by him who in good conscience should pay it.
A term applied to the order for the purchase of new securities, when, as, and if issued.
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; to be distinguished from a successor trustee.
The art or fact of a person’s becoming entitled to property of a deceased person, whether by operation of law upon his dying intestate or by taking under his Will.
(1) A tax upon the transmission of property by a deceased person, in which case it will be charged upon the whole estate, regardless of the manner in which it is to be distributed, in which case it is called a probate or estate tax. (2) The more common form of tax on the privilege of taking property by Will or by inheritance or by succession in any other form upon the death of the owner, and in such case it is imposed upon each legacy or distributive share of the estate as it is received. It is then usually called a legacy or succession tax.
(1) Beneficiaries who take one after another by succession. Thus, under a Will in which property is left to A for life, then to B for life, and then to C outright, B and C are successive beneficiaries. (2) The inheritance of property by descent or transmission to the next in a succession—as from parent to child and so on down the direct line.
A trustee following the original or a prior trustee, the appointment of whom is provided for in the trust instrument; to be distinguished from a substituted trustee.
Popular name for the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"), the primary federal environmental liability law.
An amendment to an agreement setting forth additional terms to the agreement.
An amount which the fiduciary is required by court decree to make good because of negligence or other failure of duty. The term is also used as a verb; as, the court surcharged the trustee.
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; as the surety on an administrator’s or a guardian’s bond.
A bond or guarantee usually given by a bonding company to answer for the debt, default, or miscarriage of another. The surety (company) binds itself to pay if the obligor shall default in his obligation.
(1) The part of the accumulated profits of a corporation which has not been capitalized. (2) The balance of income in a trust which, at the end of the fiscal year, may be paid to the beneficiary.
A group of investment dealers organized for the purpose of distributing a new issue of securities.