Reference
Estate & Tax Glossary
Plain-English definitions for the terms your family will encounter.
A
Administrator
A person appointed by a probate court to manage a deceased person’s estate when there is no will or when the named executor is unable or unwilling to serve.
Advance Directive
A legal document that spells out your wishes for medical treatment if you become unable to communicate them yourself. Often combined with a healthcare power of attorney.
Annual Gift Tax Exclusion
The amount you can give to any one person each year without triggering a gift tax return. In 2024 the exclusion is $18,000 per recipient ($36,000 for married couples who split gifts).
Annuity
A financial product—typically issued by an insurance company—that pays a stream of income over time. After the annuitant dies, remaining value may pass to beneficiaries depending on the contract terms.
B
Basis (Cost Basis)
The original value of an asset for tax purposes, used to calculate capital gains or losses when the asset is sold. When someone dies, most inherited assets receive a step-up in basis to fair market value.
Read the step-up guide →Beneficiary
A person or entity designated to receive assets from a will, trust, insurance policy, or retirement account after the owner’s death.
BNPL
Buy Now, Pay Later. Short-term financing offered at checkout (e.g. Affirm, Klarna, Afterpay). Outstanding BNPL balances are debts of the estate and should be inventoried during settlement.
C
Capital Gains Tax
A tax on the profit from selling an asset that has increased in value. For inherited assets, the gain is usually measured from the stepped-up basis, not the decedent’s original purchase price.
Codicil
A written amendment to an existing will. Codicils must be executed with the same formalities as the original will (witnesses, notarization, etc.).
Community Property
A system of property ownership between spouses used in nine states: AZ, CA, ID, LA, NV, NM, TX, WA, and WI. Generally, assets acquired during marriage are owned equally by both spouses, which affects how property is distributed at death.
Crypto CPA
A certified public accountant who specializes in cryptocurrency taxation. If the decedent held crypto, a Crypto CPA can help navigate cost-basis tracking, on-chain transactions, and IRS reporting.
D
Dead Man’s Switch
A feature that automatically notifies your designated contacts if you miss a configurable number of check-ins. In Passed Plan, vault access still requires completed death verification.
See how it works →Death Certificate
An official document issued by a government authority certifying the date, location, and cause of death. Order at least 10 certified copies—banks, insurers, courts, and government agencies will each require an original.
Decedent
The legal term for a person who has died, particularly in the context of estate administration and probate proceedings.
Digital Estate
The collection of all digital assets a person owns or controls, including email accounts, social media profiles, cloud storage, cryptocurrency, domain names, and digital subscriptions.
E
EIN
Employer Identification Number. A nine-digit number assigned by the IRS to identify an estate or trust for tax filing purposes. You’ll need one before filing Form 1041.
Apply at IRS.gov →Estate
The total collection of a person’s assets, debts, and legal rights at the time of death. The estate is the legal entity through which the decedent’s affairs are settled.
Estate Tax
A federal tax on the transfer of property at death. In 2024 the exemption is $13.61 million per individual, meaning estates below that threshold owe no federal estate tax. Some states impose their own estate taxes with lower thresholds.
Estate Tax Return (Form 706)
The IRS form used to report the value of a decedent’s estate and calculate any estate tax owed. Required when the gross estate exceeds the exemption, or when the surviving spouse wants to elect portability.
Executor
The person named in a will to carry out its instructions, manage estate assets, pay debts and taxes, and distribute property to beneficiaries. Also called a personal representative in some states.
F
Fair Market Value (FMV)
The price an asset would sell for on the open market between a willing buyer and a willing seller, with both having reasonable knowledge of the relevant facts. FMV is used to determine the stepped-up basis of inherited assets.
FBAR
Report of Foreign Bank and Financial Accounts (FinCEN Form 114). Required when the decedent held foreign financial accounts with an aggregate value exceeding $10,000 at any point during the year. The executor must file the final FBAR.
Fiduciary
A person or institution legally obligated to act in the best interest of another party. Executors, trustees, and guardians are all fiduciaries.
Final Income Tax Return
The last Form 1040 filed on behalf of the decedent, covering income earned from January 1 through the date of death. The executor or surviving spouse is responsible for filing it.
Form 1041
The U.S. Income Tax Return for Estates and Trusts. Filed annually for any income the estate earns after the date of death (interest, dividends, rental income, etc.).
Form 1310
Statement of Person Claiming Refund Due a Deceased Taxpayer. Filed when someone other than a surviving spouse claims a tax refund on behalf of a decedent.
Form 4768
Application for Extension of Time to File a Return and/or Pay U.S. Estate Taxes. Grants an automatic six-month extension for filing Form 706.
FSA
Flexible Spending Account. Employer-sponsored accounts for pre-tax medical or dependent-care expenses. FSA funds are generally "use it or lose it" and may not transfer to beneficiaries, but eligible expenses incurred before death can still be reimbursed.
G
Gross Estate
The total fair market value of all assets owned by the decedent at the time of death, before deducting debts, expenses, and deductions. Used to determine whether a federal estate tax return is required.
H
HECM (Reverse Mortgage)
A Home Equity Conversion Mortgage, commonly known as a reverse mortgage. After the borrower dies, heirs typically have six months to repay the loan balance or sell the home. Acting quickly is critical to avoid foreclosure.
I
ILIT
Irrevocable Life Insurance Trust. A trust designed to hold a life insurance policy outside of the insured’s taxable estate, potentially saving significant estate taxes on the death benefit.
Income in Respect of Decedent (IRD)
Income the decedent earned or had a right to receive before death but that wasn’t included on the final income tax return. Common examples include unpaid salary, IRA distributions, and deferred compensation. IRD does not receive a step-up in basis.
Inheritance Tax
A state-level tax paid by the person who inherits assets, as opposed to estate tax which is paid by the estate itself. Six states currently impose an inheritance tax: IA, KY, MD, NE, NJ, and PA.
Intestate
Dying without a valid will. When someone dies intestate, state law determines how their assets are distributed among surviving relatives, which may not match their wishes.
J
Joint Tenancy with Right of Survivorship (JTWROS)
A form of property ownership where two or more people hold equal shares. When one owner dies, their share automatically passes to the surviving owner(s) outside of probate.
K
Kiddie Tax
A tax rule that applies a parent’s higher tax rate to a child’s unearned income above a threshold. Relevant when minors inherit assets that generate investment income.
L
Letters Testamentary
A document issued by the probate court that grants the executor legal authority to act on behalf of the estate—open bank accounts, access safe deposit boxes, transfer assets, and manage debts.
Living Trust
A trust created during the grantor’s lifetime that holds assets for the benefit of named beneficiaries. Assets in a living trust generally avoid probate and transfer directly to beneficiaries after death.
Living Will
A type of advance directive that specifies which medical treatments you do or do not want if you become terminally ill or permanently unconscious and cannot speak for yourself.
M
Medicaid Estate Recovery
A process by which a state seeks reimbursement from a deceased person’s estate for Medicaid benefits paid during their lifetime. States are federally required to pursue recovery for certain long-term care costs.
N
Non-Probate Asset
An asset that transfers directly to a beneficiary at death without going through probate. Examples include life insurance, retirement accounts with named beneficiaries, TOD accounts, and property held in joint tenancy.
O
Omnibus Budget Reconciliation Act (OBRA) Trust
A type of trust used to protect assets for a disabled beneficiary while maintaining their eligibility for Medicaid and other government benefits. Relevant when an inheritance could disqualify someone from need-based programs.
P
Per Stirpes
A Latin term meaning "by branch." A distribution method where a deceased beneficiary’s share passes down to their descendants rather than being redistributed among surviving beneficiaries.
Portability (Estate Tax)
A provision that allows a surviving spouse to use the deceased spouse’s unused estate tax exemption. To elect portability, Form 706 must be filed within five years of the decedent’s death, even if no estate tax is owed.
Power of Attorney
A legal document authorizing someone to act on your behalf in financial, legal, or healthcare matters. A power of attorney terminates at death—after that, the executor takes over.
Probate
The court-supervised legal process of validating a will, inventorying assets, paying debts and taxes, and distributing the remaining property to beneficiaries. Probate can take months to years depending on the state and complexity of the estate.
Q
QTIP Trust
Qualified Terminable Interest Property Trust. Provides income to a surviving spouse for life while preserving the remaining assets for other beneficiaries (often children from a prior marriage).
R
Required Minimum Distribution (RMD)
The minimum amount that must be withdrawn annually from certain retirement accounts (traditional IRAs, 401(k)s). After the account holder dies, beneficiaries must continue or accelerate distributions under rules that changed with the SECURE Act.
Reverse Mortgage
A loan that lets homeowners aged 62+ convert home equity into cash. After the borrower dies, heirs must repay the loan—typically by selling the home—within about six months.
S
SECURE Act 2.0
Legislation passed in 2020 that changed the rules for inherited retirement accounts. Most non-spouse beneficiaries must now withdraw the entire balance within 10 years of the original owner’s death, eliminating the former "stretch IRA" strategy.
Step-Up in Basis
THE most important tax concept for heirs. When you inherit an asset, its cost basis is "stepped up" to the fair market value on the date of death. This can eliminate decades of unrealized capital gains and dramatically reduce the tax owed when the asset is eventually sold.
Read the step-up guide →Successor Trustee
The person designated to take over management of a trust when the original trustee dies, becomes incapacitated, or resigns. The successor trustee distributes trust assets according to the trust document.
T
Tenancy in Common
A form of property ownership where each owner holds a separate, transferable share. Unlike joint tenancy, a deceased owner’s share passes through their estate (via will or intestacy) rather than automatically to the surviving co-owners.
Testator
The person who creates and signs a will. The testator must generally be of legal age and of sound mind at the time the will is executed.
TOD (Transfer on Death)
A designation on a financial account or vehicle title that names a beneficiary to receive the asset automatically at the owner’s death, bypassing probate entirely.
Trust
A legal arrangement in which a trustee holds and manages assets on behalf of one or more beneficiaries according to the terms set by the grantor. Trusts can be revocable or irrevocable and serve a wide range of estate-planning purposes.
Trustee
The person or institution responsible for managing trust assets and carrying out the terms of the trust. A trustee has a fiduciary duty to act in the best interests of the beneficiaries.
U
Unified Credit
The tax credit that effectively exempts a certain amount of estate and gift transfers from federal taxation. In 2024 this credit shelters up to $13.61 million from the combined estate and gift tax.
Unclaimed Property
Financial assets (bank accounts, uncashed checks, insurance payouts, stocks) that have been turned over to a state because the owner could not be located. Search missingmoney.com and each relevant state’s unclaimed-property database.
Search missingmoney.com →V
Vault (Passed Plan)
Your encrypted digital estate inside Passed Plan. The vault stores account information, platform instructions, and messages for your trusted contacts—all protected by zero-knowledge encryption so that not even Passed Plan can read it.
W
Will (Last Will and Testament)
A legal document that expresses your wishes for how your property should be distributed after death, who should serve as executor, and (if applicable) who should be guardian of minor children. A will must go through probate to be enforced.
X
X (Twitter) Memorialization
The process of requesting that a deceased person’s X (formerly Twitter) account be deactivated or memorialized. Requires submitting proof of death through X’s support channels.
Y
Year-of-Death RMD
If the decedent had not yet taken their required minimum distribution for the year they died, the beneficiary must withdraw that remaining amount before year-end to avoid a penalty.
Z
Zero-Knowledge Encryption
An encryption architecture where the service provider cannot access or read user data—mathematically, not just by policy. Passed Plan uses zero-knowledge encryption so that your vault is unreadable to anyone who doesn’t hold your vault password, including us.