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Legal Definitions

cropped-law-books-and-gavelThis section is updated when new terms are used in the Law Office of Stephen J. Reichert, LLC blog.

Ancillary Probate – If decedent had real property in another state (ancillary) probate is required in that state.

Bankruptcy Trustee – A person appointed by a bankruptcy court to supervise the affairs of a person or business which is in bankruptcy, determine both assets and debts, marshal (gather) and manage the assets if necessary, and report to the court. See also, Trustee.

Beneficiary Designation – The document that names a beneficiary of a contract such as an annuity, life insurance policy, or retirement account.

Breach of Contract – Failing to perform any term of a contract, written or oral, without a legitimate legal excuse.

Closely-Held Business – A business organization in which the ownership is held by a limited number of people often with the same family rather than owned by the public at large.

Conservatee – A person whose physical or mental lack of competence requires administration of her affairs.

Conservator – A person who is appointed by a court to manage the estate of a protected person who, because of age,
intellect, or health, is incapable of managing her own affairs.

Contract – An agreement with specific terms between two or more persons or entities in which there is a promise to do something in return for a valuable benefit known as consideration.

Corpus – Trust property; the principal sum as distinguished from interest or income.

Decedent – A deceased person. A person who is now dead.

Devise – When used as a noun, real or personal property given to another by will. When used as a verb, to dispose of real or personal property by will.

Encumbrance – A lien or claim attached to property, such as a mortgage on real property.

Estate – All that one owns in real estate and other assets. Commonly, all the possessions of one who has died and are subject to probate and distribution to heirs and beneficiaries, all the possessions which a guardian manages for a ward, or assets a conservator manages for a conservatee. Also an alternative term for real property interest which is used in conjunction with another defining word, like “life estate,” “estate for years,” or “real estate.”

Estate Tax – A federal and/or state tax on the transfer of a dead person’s assets to her heirs and beneficiaries. Although a transfer tax, it is based on the amount in the decedent’s estate and can include insurance proceeds.

Implied Contract – An agreement which is found to exist based on the circumstances when to deny a contract would be unfair and/or result in unjust enrichment to one of the parties. An implied contract is distinguished from an “express contract.”

Inter Vivos Trust – A trust created by a writing (declaration of trust) which commences at that time, while the creator (called a trustor or settlor) is alive, sometimes called a “living trust.” The property is then placed in trust with a trustee (often the trustor during his/her lifetime) and distribution will take place according to the terms of the trust—possibly both during the trustor’s lifetime and then upon the trustor’s death. This is different from a testamentary trust which is created by the terms of a will and places some assets from the dead person’s estate in a trust to exist from the date of death and until fully distributed.

Letter of Intent – See Memorandum of Understanding

Living Trust – Sometimes called an inter vivos (Latin for “within one’s life”) trust, a trust created by a declaration of trust executed by the trustor or trustors (also called settlor or settlors) during her/their lifetime, as distinguished from a “testamentary trust,” which is created by a will and only comes into force upon the death of the person who wrote the will.

LLC – Stands for Limited Liability Company and is a type of business entity that offers limited liability protection for its ownership and management.

Memorandum of Understanding – A document that expresses mutual accord on an issue between two or more parties. Memoranda of understanding are generally recognized as binding, even if no legal claim could be based on the rights and obligations laid down in them. To be legally operative, a memorandum of understanding must (1) identify the contracting parties, (2) spell out the subject matter of the agreement and its objectives, (3) summarize the essential terms of the agreement, and (4) must be signed by the contracting parties. Also called letter of intent.

Non-discretionary Trust – A trust in which the trustee is directed to invest only in specifically named securities and to diversify the investments among certain types of securities. The trustee has no discretion or personal decision-making power in the matter.

Power of Attorney – A written document signed by a person giving another person the power to act in conducting the signer’s business, including signing papers, checks, title documents, contracts, handling bank accounts and other activities in the name of the person granting the power.

Probate – The legal process in which a Will is reviewed to determine whether it is valid and authentic. Probate also refers to the general administering of a deceased person’s Will or the estate of a deceased person without a Will. The court appoints either an executor (or ‚Äúpersonal representative‚ÄĚ in Maryland) named in the Will (or an administrator if there is no will) to administer the process of collecting the assets of the deceased person, paying any liabilities remaining on the person’s estate and finally distributing the assets of the estate to beneficiaries named in the will or determined as such by the executor.

Quitclaim Deed – A quitclaim deed is a release by the grantor, or conveyor of the deed, of any interest the grantor may have in the property described in the deed. Generally a quitclaim deed relieves the grantor of liability regarding the ownership of the property. Thus, the grantor of a quitclaim deed will not be liable to the grantee, or recipient of the deed, if a competing claim to the property is later discovered. A quitclaim deed is not a guarantee that the grantor has clear title to the property; rather it is a relinquishment of the grantor’s rights, if any, in the property. By contrast, in a warranty deed the grantor promises that she owns the property with no cloud on the title.

Real Estate Investment Trust – (REIT) A real estate investment organization which finds investors and buys real property and gives each investor either a percentage interest in the property itself or an interest in a loan secured by a mortgage or deed of trust on the property.

Real Property Tax – A tax on the value of the land and improvements (structures) to the land.

S-Corporation (S-Corp) – One of two types of corporations defined by subchapter of the tax code they are governed by.

Simple Trust – A trust which requires that all income be distributed each year and not accumulated.

Tentative Trust – A bank account deposited in the name of the depositor “in trust for” someone else, which is a tentative trust until the death of the depositor since the money can be withdrawn at any time.

Testamentary Trust – A trust created by the terms of a will. A testamentary trust differs from an “intervivos” or “living” trust which comes into being during the lifetime of the creator of the trust (called trustor, settlor or donor), usually from the time the Declaration of Trust is signed.

Trustee – A trustee manages property that is held in trust. A trust is an arrangement in which one person holds the property of another for the benefit of a third party, called the beneficiary. The beneficiary is usually the owner of the property or a person designated as the beneficiary by the owner of the property. A trustee may be either an individual or a corporation.

Trust Fund – The principal or corpus of a trust, made up of its assets and, sometimes, accumulated profits.

Will Contest – A lawsuit challenging the validity of a will and/or its terms. Bases for contesting a will include the competency of the maker of the will (testator) at the time the will was signed, the “undue influence” of someone who used pressure to force the testator to give her substantial gifts in the will, the existence of another will or trust, challenging illegal terms or technical faults in the execution of the will, such as not having been validly witnessed. A trial of the will contest must be held before the will can be probated, since if the will is invalid, it cannot be probated.