Tax-Deferred Plan—A retirement savings plan (like an IRA, 401(k), pension, profit sharing, or Keogh) that qualifies for special income tax treatment. The contributions made to the plan and subsequent appreciation of the assets are not taxed until they are withdrawn at a later time—ideally, at retirement, when your income and tax rate are lower.
Taxable Gift—Generally, a gift of more than $15,000 in one year to someone other than your spouse. (This amount is tied to inflation and may increase from time to time.) Under current law, the value of the gift is applied to your federal gift/estate tax exemption, and no gift tax is required to be paid until the exemption has been exhausted.
Tenants-in-Common—A form of joint ownership in which two or more persons own the same property. At the death of a tenant-in-common, his/her share transfers to his/her heirs.
Tenants-by-the Entirety—A form of joint ownership in some states between husband and wife. When one spouse dies, his/her share of the asset automatically transfers to the surviving spouse.
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.
Title—Document proving ownership of an asset.
Transfer Tax—Tax on assets when they are transferred to another. The estate tax, gift tax, and generation-skipping transfer tax are all transfer taxes.
Trust—An entity that holds assets for the benefit of certain other persons or entities.
Trust Company—Institution that specializes in managing trusts. Also called corporate trustee.
Trustee—Person or institution who manages and distributes another’s assets according to the instructions in the trust document.
Totten Trust—A “pay-on-death” account. A bank account that will transfer to the beneficiary who was named when the account was established. The terms transfer on death (TOD), in trust for (ITF), as Trustee for (ATF), and pay on death (POD) often appear in the title.
Unified Credit—The amount each person is allowed to deduct from federal estate taxes that would be due if there were no estate tax exemption. For example, in 2021, the credit is $4,680,000 and is equal to a 40% tax on the first $11,700,000 of a taxable estate.
Uniform Transfer to Minors Act (UTMA)—Law enacted in many states that lets you leave assets to a minor by appointing a custodian. In most states, the minor receives the assets at legal age.
Unfunded—Your living trust is unfunded if you have not transferred assets into it.
Warranty Deed—Document that allows you to transfer title to real estate. With a warranty deed, the person guarantees that the title being transferred is clear (free of any encumbrances). If the title is defective, the person making the transfer is liable. Compare to quitclaim deed.
Will—A written document with instructions for disposing of assets after death. A will can only be enforced through the probate court.