Legal Definitions

The legal definitions here are provided for educational purposes only. They were assumed to be valid definitions at the time of this publication. However, you should verify the current legal definitions of each term by locating them in an appropriate legal dictionary or consulting with legal counsel.

Advance Rate: Amount of money provided immediately to the company factoring its Accounts Receivable expressed as a percentage of the total invoice amount. Advance Rates usually range from 75 to 95%.
Beneficiary: A beneficiary is the person who is named to receive assets.
Charitable Remainder Trusts: Irrevocable trusts that allow you to give assets to a charity, take a charitable tax deduction and receive an income for a period of time. These can have very favorable tax consequences actually saving an estate money.
Conservatorship: Established when individuals are unable to care for themselves or manage their assets. Thus a Conservatorship is designated either for estate or person, or for both the estate and person. The probate court oversees the Conservatorship and appoints the conservator, the person who acts in the best interest of the conservatee, to protect the person and/or estate of the conservatee. The conservator must report to the court and must act in the utmost good faith in dealing with the conservatee and his/her assets.
Discount Fee: Interest rate charged to the company factoring its Accounts Receivable. Discount fees area flat fixed percentage of the total invoice amount no matter how long the customer takes to remit payment.
Durable Power of Attorney: This power of attorney continues even though the principal becomes incapacitated or dies. Married couples sometimes execute durable powers of attorney for asset management purposes in case one of them becomes incapacitated.
Durable Power of Attorney for Health Care: The durable power of attorney for health care outlines your desires and allows someone else to make health care decisions for you if you are unable to convey your desires. Remember, you can always revoke or change your durable power of attorney for health care. Be sure to consider the extent of health care you want provided if you are unable to make decisions for yourself.
Estate: The total property owned by an individual prior to the distribution of that property under the terms of a will, trust or inheritance laws. An individual's estate includes all assets and liabilities.
Executor: An executor is the person designated in a will to administer the decedent's estate and is paid a statutory percentage of the value of the probate estate.
Factor: Company that provides businesses with operating capital by purchasing their Accounts Receivable.
Holographic Will: Is one in which you express your testamentary intent in your own handwriting, dating and signing each page. This is a valid will in California. A holographic will is appropriate for an emergency or temporary situation. No witnesses are required.
Insurance Trust: Irrevocable trusts which are funded by life insurance policies on the settler's life.
Irrevocable Trust: An irrevocable trust can not be revoked. It is used for the purpose of getting assets out of your estate wherein you have no ownership rights and therefore they are not part of your taxable estate when you die.
Limited Conservatorship: Is for developmentally disabled individuals and is established to give them as much individual freedom as possible.
Living Trust: A living trust is a revocable trust which holds and administers your assets before and after death. It can pass title to your beneficiaries after you die without court involvement.
Power of Attorney: A power of attorney gives your agent power to act on your behalf. These are powerful documents and must be used with great care.
Power of Attorney for Asset Management: This power of attorney is for a limited period of time and for a specific purpose. It will terminate when the principal becomes incapacitated or dies. Such a power might be given to an agent to run a principal's business if the principal were to be out of the country for an extended period of time.
Probate: Probate is a court procedure for conveying title, distributing property and paying debts after someone dies. The court oversees the distribution of property under probate proceedings. After a person dies he cannot convey title to his property so the court has to do that through probate. A trust is a separate entity which has trustees who convey title. A trust continues to exist after a person's death so probate is not needed for trusts.
Property: Property is described as either real or personal. Real property is real estate, and personal property is everything else. Personal property includes physical assets such as automobiles, equipment, household items, etc. Personal property also includes financial property, such as securities, notes or loans receivable, bank accounts, cash and insurance policies.
Real Property: Real property consists of items such as homes, land, income property (rentals, etc.). Considered another term for real estate.
Reserve or Holdback: Amount of money that is not immediately provided to the company factoring its Accounts Receivable. This a percentage of the total invoice amount (Advance Rate + Reserve = 100% or Total Invoice Amount). This money is transferred to the factoring company once payment is received by the factor.
Revocable Trust: A revocable trust can be amended and revoked by you, the settlor. You continue to exercise ownership over the trust assets. Although the assets are part of your taxable estate they can be distributed after the death of a settlor to maximize tax benefits for families.
Testamentary Disposition: Testamentary disposition is what happens to your assets after your death.
Trust: A separate entity that survives your death and therefore can continue to hold, manage and distribute assets after you die. A trust is not required to be filed with the court after you die and therefore is considered more private. On the death of the settlor, the trust must be administered and trust properties conveyed. Trustees should consult with tax advisors and attorneys in the event income taxes and/or estate taxes need to be paid.
Trustee: The person who administers your trust estate before and after your death. You may be the trustee of your estate. This person may be an individual or a corporation, such as the trust department of a bank, and may receive a fee. The trustee may pay money to your children's guardian for the support of your children.
Wills: A document that tells the world where you want your assets distributed after you die. In California, it is lodged with the court at the time of your death.
Witnessed Will: Requires that certain procedures be followed by the witnesses.