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Glossary

Definitions of common trust and estate terminology:

Children's Trust - A document that controls when your children will be able to access the money you've left them. Frequently, the trust provides for equitable payment of college costs for each child. Then assets are distributed as you direct. Many times parents will choose to stagger when the money is paid out - for instance, one third at age 25, one third at age 30, and the final third at age 40.

Executor - An individual or corporation named in your will who settles your estate. The executor should be sensitive to the needs of your beneficiaries, competent to handle financial and legal matters, and available and willing to take on responsibilities.

Family Trust - Also known as a "B" trust, or credit shelter trust, a family trust is funded with up to the maximum assets that can pass with no tax due. These assets are taxed at death, but since each person has a unified credit, no tax is actually due. Once these assets have been taxed (with no tax due), they are free to grow to any amount and will never be taxed again for estate purposes.

Guardian - The individual or Corporation appointed by the court to manage a minor or incapacitated adult.

Health Care Proxy - You appoint an agent who will act on your behalf to make sure your wishes are followed.

Irrevocable Life Insurance Trust - A document that removes the value of your life insurance from your taxable estate. You choose a trustee to make sure the policy premiums are paid and that your beneficiaries receive proceeds at your death.

Living Trust - A trust that's established while you are alive. It is used to assist in management of your property during your lifetime, as well as provide how your assets, and income earned by the trust is distributed at your death. A living trust in not subject to probate.

Living Will - A document that clearly states what your wishes are if you find yourself needing medical care and you can't represent yourself.

Marital Trust - Also known as an "A" trust, the marital trust provides management for assets passing to your spouse. The alternative is to leave assets for your spouse outright (no trust). A trust can add a level of comfort that someone is available to manage the assets. If no restrictions are placed on what happens to the assets after the second spouse dies, it's called a general power appointment. If you choose to control what happens after the second death, you need to establish a Qualified Terminable Interest Property trust or "QTIP" trust (a stricter form of marital trust).

Power of Attorney (Durable) - A document that establishes who will act on your behalf (your "agent") in financial matters if you are incapacitated. The agent can manage your assets, sign a tax return, pay your bills, or even sell property. He or she can also fund a "living trust".

Probate - A court supervised process that ensures all your final debts are paid and that your will is followed. Probate can be a long and costly process, but not always. There are several techniques available to transfer property without going through probate, including the use of living trusts.

QTIP Trust - A Qualified Terminable Interest Property trust, often used in second marriages where children are involved. A QTIP trust allows the creator of the trust to determine where his or her assets will ultimately go after the second spouse dies.

Special Needs Trust - A type of trust that can be set up for a disabled person. By specifying that assets are to be used only for items/expenses not normally covered by government aid, the trust allows the disabled person to continue being eligible for government financial assistance.

Taxable Estate - The total assets that will be taxed at your death. To calculate your taxable estate, you first determine your "gross estate", then subtract all allowable deductions and exemptions.

Testamentary Trust - This trust isn't established until you die. Your will typically includes the language to establish this trust at your death.

Trust - A separate legal entity that holds property for the benefit of the grantor (creator) of the trust or his or her heirs. A trustee manages the assets that are placed in the trust and makes sure that the terms of the trust are followed.

Trustee - An individual or Corporation responsible for the management of the assets in the trust. This person or institution acts as the business manager for trust assets. When choosing a trustee for your trust, look for someone who is financially capable, responsible, and sensitive to your family's needs.

Unlimited Charitable Deduction - Allows anyone to bypass estate tax by gifting property to a qualified charity.

Unlimited Martial Deduction - Allows one spouse to pass an unlimited amount of assets tax-free to the other spouse in life or death (unless one spouse is not a U.S. citizen).

Will - A document that controls the distribution of your property, such as jewelry, family heirlooms, and assets held in your name alone. It does not control what passes by beneficiary designation (life insurance, IRAs, retirement plans, Transfer on Death agreements), by contract (joint tenancy with rights of survivorship), or by trust.

Important note
Non-deposit investment products available through MEMBERS Trust Company are not deposits of or guaranteed by the trust company, a credit union or credit union affiliate, are not insured or guaranteed by the NCUA, FDIC or any other governmental agency, and are subject to investment risks, including possible loss of the principal amount invested. MEMBERS Trust Company, owned and managed by America's credit union's, is a special purpose federal thrift chartered and regulated by the Office of the Comptroller of the Currency.