e

Easement Back to Top

An easement is the right to use the property of another. A simple, and common, example is your house is landlocked and located behind another house. An easement is granted by that homeowner to you to enable you to build a driveway over a portion of his property to reach your house. If you are buying property subject to an easement you should be certain to fully understand the scope of the easement, whether its duration is limited, and conditions on its continuation, etc.

EGTRRA Back to Top

The tax legislation enacted under President Bush, the Economic Growth and Tax Relief Reconciliation Act of 2001 is often referred to as the "Busch tax cuts" or by the acronym "EGTRRA." EGTRRA made dramatic changes to the federal estate (and other) taxes. EGTRRA phased-out the estate and generation skipping transfer taxes until they were fully repealed in 2010.

Ejectment Back to Top

A legal action (suit) to recover the use of (possession) real property (land). It may also include a claim for damages (losses, costs) of your having not had access or use of the property, and having to sue to get that use/right back. This suit or action may be known as an action for eviction, action for forcible entry, or by other terms. State law will be critical to understand in planning and implementing such a case. If you need to address this be certain to hire a local real estate litigation specialist.

Election by Spouse Back to Top

A spousal right of election is a right a spouse may have under state law to a portion of your estate even if you provide in your will to the contrary. If you wish to make distributions that will provide your spouse less than that mandated under state law your spouse should sign a waiver of his or her right to the election to assure that the will is going to be respected. While many spouses opt not to pursue this formality there is no assurance that the right will not be asserted.

Elective Expensing Back to Top

The cost of furniture and equipment must be written off over seven years using the 200 percent declining- balance method of depreciation. If certain requirements are met, however, you may be able to write off up to $17,500 of certain furniture and equipment (personal property) immediately.

Eminent Domain Back to Top

A government has the power and authority to take private property (e.g., part of your backyard) for a public purpose of the state (e.g., expanding a state road). A range of issues arise when a government body exercises this authority. Will you be compensated and on what basis. What if there is a partial taking? For example high power lines are run across your property. While you still own and can use the property, practically speaking you may not be able to. How broadly can the government define public purpose? Can the government take your property for use in completing a private development? If you receive compensation for a taking of your property the tax laws have special provisions to enable you to reinvest the proceeds and avoid income taxation of them.

Employee Leasing Back to Top

Employee leasing is the indirect payment to another entity for the provision of employment services rather than hiring the same persons directly. Some offshore employee leasing transactions have been treated as abusive tax shelters by the IRS.

Employment Contract Back to Top

To hire someone to provide you services for a fee. From a tax perspective the person hired can be a consultant (more independent, responsible for their own payroll taxes and perhaps insurance, etc.) or an employee (with you as the employer being responsible for payroll taxes, insurance, etc.). Consider having a written employment or consulting agreement to document the agreed relationship, tax status, etc. This can be vital to avoid any misunderstandings between the employer and the employee/consultant, protect the intended tax status (although an agreement alone won't be binding on the IRS), and more. For example, how long is the term (time period) for which the person is hired? Can they legally contract for and bind your company or business? How will they be paid and when? Under what conditions can you fire them? An AT WILL employee can be fired at anytime, but this should be clearly documented in writing. What must you pay by way of severance if you fire the employee or consultant? What job functions must they perform.

Endowment Back to Top

A transfer or gift of assets to an institution, typically a charity, for a particular purpose For example, you can endow a scholarship at a college so that each year the earnings (or a unitrust payment, e.g. 5% of the principal) will be given as a scholarship to a qualifying student. The wonderful part of an endowment for your memory and the charity is that it can continue in perpetuity. An ideal way to benefit a charity you really care about is to endow your annual gift. So for example, if you gift $10,000 per year to a particular charity, you could buy a permanent life insurance policy for $200,000 so that following your death, 5% of $200,000 per year, or $10,000 will be continued in perpetuity as a gift in your memory to your favorite charity. An even better way is to endow a larger amount so that the $10,000 annual gift in perpetuity will be able to grow and keep pace with inflation. Thus, if you plan your endowment at a 3% or maybe 4% level, it will have a much greater likelihood of keeping its purchasing power intact.

Equalization Back to Top

In many estate planning documents the concept of equalization may warrant addressing. This means that a certain group of heirs or beneficiaries should be treated equally. For example, many (perhaps most) power of attorney forms permit your agent to make gifts. Most are silent as to whom gifts can be made to (although some limit them to specific family relationships), few if any standard forms address equalization. So, for example, if you have three children, must each receive an equal gift? If not specified your agent could gift $10,000 to two children and cut out the third.

Estate Tax Back to Top

On the death of a taxpayer, a tax may be due on the transfer of wealth to family and others. Exclusions are provided for transfers to the taxpayer's spouse, charities, and so forth. The tax rate for the estate tax can reach as high as 55 percent. A once-in-a-lifetime credit is permitted, which enables you to pass property worth up to $600,000 (and gradually up to $1,000,000 by the year 2006) to others without having to pay an estate tax. This figure is being increases in increments to $1,000,000.

Estate Tax Filings Back to Top

How many estates a year file federal estate tax returns? Consider the following. The number of deaths per year is estimated at approximately 2.6 million people. If the estate tax exclusion was left at the $1 million it was scheduled to be in 2011, approximately 105,000 estates would have filed a federal estate tax and less than half, or about 43,000, would have paid tax (the others presumably would have avoided tax because of the marital, charitable, or other deductions). If the exclusion were set to the $3.5 million it was in 2009 (and which most tax advisers thought the likely result for 2011-2012) somewhat under 16,000 estates would have filed returns and fewer than 10,000 would have paid estate tax. With the new $5 million exclusion, it is anticipated that under 9,000 estates will have to file a return and about 5,600 will owe an estate tax (Lackner, Vince, “Lackner's Federal Estate and Gift Tax: 2010 and 2011-12,” in Steve Leimberg's Estate Planning Email Newsletter, Archive Message No. 1734, December 17, 2010).

Estimated Tax Back to Top

Income taxes must be paid by certain individuals on a quarterly basis to avoid underpayment penalties.

Estimated Useful Life Back to Top

The period over which an asset, such as equipment used in a business, is expected to last. This concept historically was used to determine tax depreciation deductions for the purchase of assets. It may still have important relevance in valuing a business, or in negotiating the structure of a bonus for an executive or other employee. For example, if you have a pain center associated with your medical practice and you wish to compensate the pain physician for profits from the pain center, how do you calculate profits? If the tax laws permit you to deduct the purchase of equipment in the year of purchase do you deduct that full amount in calculating profits? In the alternative, would you include in the employment or partnership agreement that you would instead amortize that purchase price over the useful life of the equipment to more reasonably allocate the cost to each year? The argument in favor of this is that it is a better measure of economic profits. On the other hand, if the business has expended the cash in the year of the purchase, will you have the cash flow to pay a bonus to the pain physician. The same concept can be applied in a host of businesses. The key is to carefully think through how expenditures impact bonuses, and other compensation structures.

Estopped Back to Top

This is a legal concept that is applied to bar or prevent you from taking a position that contradicts your prior conduct. For example, if you act as if you are a particular persons partner, tell business contacts that the particular individual is your partner, you may be prevented, or "estopped" from arguing that he was not your partner if he obligated the two of you to a business transaction. The concept of estoppel will place you in the position as if the position you permitted to be implied, namely that the other person was your partner, is true. In a real estate context assume you sign a deed to transfer property, but at the time you signed the deed you did not really own the property (have title). If later you actually obtain the ownership of the property, you might be estopped from arguing that you really didn't transfer it with the deed you signed. See also "Estoppel Certificate".

Estoppel Certificate Back to Top

It is common in many business type transactions to request that another person give you a written signed statement confirming that a particular fact is true. This type of document can be called an "estoppel certificate". A common example is if you are buying a property, or making a loan on a particular property, you request that the tentant give you a written statement, an estoppel certificate, confirming that at a particular date the lease they are subject to is in force, and not in default. The tenant's signing an estoppel certificate would prevent them from later claiming to you that they are not bound by the lease which you relied on in making the deal. See "Estoppel".

Exclusion Amount Back to Top

In 2010 and for many prior years the gift tax exclusion, the amount which could be gifted without triggering any gift tax (over and above the annual exclusion amount which is $13,000 in 2010, plus direct qualifying tuition and medical payments) was $1 million. It is $5 million in 2011 and $5 million, indexed for inflation from 2010, in 2012. In 2013, absent future Congressional action, it will drop again to $1 million.

Executor Back to Top

Executor is the person that manages your estate. He, she or it (e.g. a bank) marshalls (collects) estate assets pays bills and taxes and distributes money. The executor may also be called a personal administrator.

Executor Fee Back to Top

The fee or commission paid to an executor (personal representative) of an estate (the assets of someone who died) are usually based on state law. Assets that pass outside the estate (e.g., in a revocable living trust or joint name) may not be subject to executor fees. Each state has its own schedule. You can find these on line on state law web sites that have state probate statutes.