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General Partner Back to Top

A general partner is a partner (owner) of a partnership who is personally liable for all partnership debts and is permitted to participate in the management of the partnership. Every limited partnership must have one general partner. Often this general partner is a corporation to avoid any individual being personally liable.

General Partnership Back to Top

A partnership that has only general partners and no limited partners. This is the most common way for a few friends or investors to put their money together to buy a rental property. There is no limited liability.

General release Back to Top

A general release is the relinquishment or giving up of any claims or rights you have against someone or against a particular entity. For example, you terminate your employment and your employer is willing to give you $10,000 in exchange for a general release. This is a legal contract you would sign, in exchange for the money, in which you would acknowledge that you have no claims, suits, etc. against your employer. General releases are used in a host of business and other transactions. A general release is a broad release, in contrast with a limited release in which you may only indicate that you have no further claims against a particular person or entity with respect to the matter named and identified in the release.

Generation Skipping Transfer (GST) Tax Back to Top

A transfer tax generally assessed on transfers to grandchildren, great grandchildren, etc. Each taxpayer is given a $1 million exclusion from the GST tax. This fiqure is indexed.

Gift Back to Top

When you transfer property without receiving something of equal value in return, the federal government will assess a transfer tax where the value of the gift exceeds the annual exclusion and your unified credit is exhausted.

Gift Deed Back to Top

A deed (document of title for real estate) used to transfer an interest in real estate to another person as a gift (i.e., gratuitously without consideration).

Gift Equalization Back to Top

See "Equalization".

Gift Tax Back to Top

A tax that can be due when you give property or other assets away. You are allowed to give away a maximum of $10,000 per person (to any number of people) in any year without the tax applying. Above the $10,000 amount, you have a once-in-a-lifetime exclusion, which permits you to give away $600,000 of property without paying any gift tax. The gift tax and the estate tax are coordinated (unified) so that the $600,000 exclusion is only available once between them. The $600,000 is being increased in periodic increments to $1,000,000

Gift Tax Annual Exclusion Back to Top

Each person (donor) is permitted to gift anyone up to a specified amount each year with no gift tax consequences. The amount in 2006 is $12,000 and it is increased by inflation in future years. You can also gift unlimited amounts for tuition and medical expenses if paid directly to providers.

Many powers of attorney (a document in which you designate an agent to handle your affairs if you cannot) include express provisions permitting your agent to make annual gifts.

Gift To Minors Act Back to Top

State law provides that if you gift money or property to a minor (non-adult) the property can be held under the terms of that state law for the benefit of the minor Uniform Gift To Minors Act ("UGMA"). When such an arrangement is established an adult to be in charge of it is designated (called custodian). You can sometimes designate a successor custodian in case the first or primary custodian cannot serve. Not all types of property can be held under an UGMA. Some states have enacted a Uniform Transfers To Minors Act ("UTMA") that may permit other types of property to be held. Be cautious that if a parent is named custodian and dies the UGMA assets will be taxed in the parents estate. Depending on state law the minor may have the legal right to demand that you account for what has been done with the account from age 14 onward. At age 18, 21 (or perhaps another age if permitted under your state law) the minor obtains control over the assets. Compare using a trust, or 529 college savings plan.

Good Cause Back to Top

Good cause can be defined as reasonable basis for taking an action, a legally sufficient reason. For example, an employment agreement may provide that you can be terminated for "good cause" or simply "cause". You should be certain to understand what the words mean under the laws applicable in your state.

Good Faith Back to Top

Acting in good faith means to conduct yourself in a manner that is based on honest belief, without malice or ill will, not to seek and unfair or unconscionable advantage, and so on. For example, a contract may say that you will make a "good faith" effort to perform your responsibilities under the contract. While the term is used frequently in documents, because it is inherently vague, you should endeavor to obtain more detailed performance terms that clarify to everyone what is expected, as well.

Grantor Back to Top

When you establish a trust and transfer assets to it, you're called the grantor of that trust.

Grantor Retained Annuity Trust Back to Top

A Grantor Retained Annuity Trust is a special type of trust designed to minimize or eliminate gift tax on the transfer of a large value of assets or property. For example, you could gift a large amount of securities to a GRAT which is intended to exist for 15 years and pay you 5% of the initial principal balance every year. At the end of the 15 year (or whatever other period you establish) the GRAT ends your heirs (typically children, but generally not later generations) will receive the trust assets. Because the children have to wait 15 years and you receive a periodic annuity payment back to you from the trust, the value of the assets transferred into the trust is reduced substantially for gift tax valuation purposes.

Grantor Trust Back to Top

A Trust is classified as a "grantor" trust for income tax purposes if the grantor (the person who sets up the trust) retains certain powers or rights over the trust the income from the trust will be taxed to him or her. This can be done on purpose (called and intentionally defective grantor trust) or accidentally (by failing to carefully review the trust terms or operations).

GRAT Back to Top

See Grantor Retained Annuity Trust.

Gross Estate Back to Top

The total value of the assets you own at death or are included in your estate. The value is determined at the date of your death or as of the alternate valuation date, which is six months following the date of death.

Gross Income Back to Top

All of your earnings from all sources including, for example, wages, rents, royalties, dividends, interest, and so forth.

GRUT Back to Top

A "GRUT" is a Grantor Retained Uni-Trust. It is similar to a GRAT (defined elsewhere but we'll explain it here to!) but the payment is based on a percentage of the value of the assets held in the trust each year, not a fixed dollar figure. A GRUT is similar in concept to a charitable remainder uni-trust ("CRUT"). Except in a CRUT the remainder interest (what is left after your or other named individuals receive payments) goes to chairty, whereas in a GRAT or GRUT the remainder interest (what is left after you receive an annuity or uni-trust payment, respetively) goes to your heirs (children, partner, etc.).

If you used a GRUT you would contribute property to a trust you established. The trust would be taxed as a grantor trust (all income reported on your personal income tax return). The trust would pay you a fixed percentage (it can vary within statutory limits) each year (or more frequently) based on the value of the asset. So if you contributed a $1 million asset to a GRUT structured to pay you 5%, you would receive $50,000 in the first year. If the value of the assets doubled to $2 million in the next year, your 5% uni-trust interest would require that you get a $100,000 payment. At the end of the GRUT term the assets would be transferred either outright or in further trust to te people you specified in the trust document.

The problem with a GRUT is that the goal of this technique is to remove assets from your estate in a tax advantage manner, yet the increasing percentage payout each year if the assets you transferred appreciated, would result in more of the assets value being paid back to you. This, sometimes called "leakage", is why this technique is not really used to any significant degree. Understanding this concept will help you better utilize GRUT and other planning.

GST Non-Exempt Trust Back to Top

An irrevocable trust (cannot be changed) to which generation skipping transfer (GST) tax exemption is not allocated. This trust then will be subject to GST tax if a taxable termination or distribution should occur. A common example is when trusts are structured under your will, GST exemption is allocated to protect trusts to the maximum feasible and the remaining trust assets are held in a separate trust to which no GST exemption is allocated. The reason for this is then the GST exempt trust can grow without ever having GST tax imposed on it. The remaining assets are held in a trust and typically spent down/distributed first since they do not have the same protection.

A common life insurance trust (ILIT) is often not protected with the allocation of GST exemption if it only holds term life insurance. This is because less than 2% of term insurance policies are ever paid off (collected) so that in most cases it would be an inefficient or nonproductive use of the GST exemption.

Guardian Back to Top

A guardian is a person in a position of trust, a fiduciary, charged with the management of the person or property of a minor or incompetent (or both). A guardian can be appointed by a court to protect someones interest (guardian ad litem) or under your will for a minor child.

When naming a guardian in a will for your child, consider a number of points. You might wish to set up a trust for the child and have someone independent of the guardian be a trustee (manage the money for the child held in the trust) so that you have checks and balances on the guardian of the child's person. When you name a guardian, be sure to name several successors. When naming a guardian carefully consider naming a single individual not a couple. If you name a couple consider what happens if they divorce? Also consider writing a letter of instruction for your guardian addressing how you want your child raised.