The following words and terms, when used in this
chapter, have the following meanings:
Association-
(i) An unincorporated enterprise owned or
conducted by two or more persons, including, but not limited to, a partnership,
limited partnership, limited liability partnership or restricted professional
company that is deemed to be a limited partnership under
15 Pa.C.S. §
8997
(relating to taxation of restricted professional companies) or joint
venture.
(ii) The term does not
include an ordinary or living trust, limited liability company, decedent's
estate, tenancy in common, tenancy by the entireties or joint
tenancy.
Child-A son or daughter by either
natural birth or adoption. The term does not include:
(i) A stepson or stepdaughter.
(ii) A son or daughter of an individual whose
parental rights have been terminated.
Conservancy-An entity which possesses
a tax exempt status under section 501(c)(3) of the Internal Revenue Code
(26 U.S.C.A. §
501(c)(3)) and which has as
its primary purpose, the preservation of land for historic, recreational,
scenic, agricultural or open space opportunities.
Conversion-A change of an
entity's:
(i) Form of
organization.
(ii) Place of
organization.
(iii) Name or
identity.
Corporation-A corporation, joint-stock
association, limited liability company, business trust or banking institution
which is organized under the laws of the Commonwealth, the United States or any
other state, territory or foreign country or dependency.
Debt-A legally enforceable obligation
arising out of a genuine debtor-creditor relationship to pay a fixed or
determinable sum of money at a future date.
Document-A deed, quitclaim deed,
ground rent, lease, occupancy agreement, contract or other writing evidencing
an interest in realty other than:
(i)
A will.
(ii) A conventional
mortgage or assignment, extension, release or satisfaction thereof.
(iii) A contract for a deed or agreement of
sale for the sale of realty whereby the legal title does not pass to the
grantee until the total consideration specified in the contract or agreement
has been paid, and the consideration is payable over a period of time not
exceeding 30 years.
(iv) An
instrument which solely grants, vests or confirms a public utility
easement.
Entity-An association or
corporation.
Family farm realty-One of the
following:
(i) Realty devoted to the
business of agriculture which was transferred without tax to a family farm
corporation by document accepted after July 1, 1986, or recorded after July 31,
1986, by a member of the same family which directly owns at least 75% of each
class of the stock of that family farm corporation.
(ii) Realty which was transferred to a family
farm corporation without tax after February 15, 1986, under a document accepted
prior to July 2, 1986, and recorded prior to August 1, 1986, by a sole
proprietor family member.
Financing transaction-An arrangement
in which the following apply:
(i)
Realty is transferred by the debtor solely for the purpose of serving as
security for the payment of a debt.
(ii) No sale or gift is intended.
(iii) The debtor retains possession and
beneficial ownership of the real estate transferred before default.
(iv) The transferee obtains title or
ownership to the real estate only so far as is necessary to render the
instrument of transfer effective as security for the debt.
(v) The transferee or the transferee's
successor is obligated to return the transferred real estate at no or only
nominal consideration to the debtor upon payment of the debt before
default.
Living trust-An ordinary trust:
(i) Which, throughout the settlor's lifetime,
is wholly revocable by the settlor without the consent of an adverse
party.
(ii) Which vests no present
interest in any of the trust corpus or income in any person other than the
settlor or trustee until the settlor dies.
(iii) All the corpus and income of which can
be reached or materially affected by the settlor without revocation of the
trust or the consent of an adverse party.
(iv) From which no transfer of corpus or
income may be made by the trustee at any time prior to the death of the settlor
to any person in the capacity of a beneficiary other than the
settlor.
(v) Under which the
trustee exercises no discretion as to the disposition of the trust corpus or
income during the settlor's lifetime to any person other than the settlor
without the express direction of the settlor to make the specific
disposition.
(vi) Which the trustee
or, if the settlor was the trustee, the successor trustee is required under the
governing instrument to distribute the corpus and retained income upon the
death of the settlor.
Example 1. If a trust agreement
provides that the income of the trust is distributable one-half to the settlor
and one-half to another person, at least annually, the trust is not a living
trust because income of the trust is required to be transferred to someone
other than the settlor in the capacity as a beneficiary during the settlor's
lifetime.
Example 2. If a trust agreement
provides that during the settlor's lifetime, the trustee may in the trustee's
sole and absolute discretion, make distributions to members of the settlor's
family (or other persons), the trust does not qualify as a living trust because
someone other than the settlor can receive trust corpus or income without the
settlor's consent prior to the settlor's death.
Example 3. If a trust agreement
provides that during the settlor's lifetime, the trustee, solely at the
direction of the settlor, may transfer trust corpus or income to a person other
than the settlor, the provision will not in itself disqualify the trust as a
living trust. Because the trustee has the authority to distribute trust corpus
or income to someone other than the settlor only at the settlor's direction,
effectively the settlor is making the transfer. Thus, the settlor is the party
who is reaching and materially affecting the trust corpus or income. Further,
the transfer is not made to the other person in the capacity as a trust
beneficiary.
Ordinary trust-
(i) A private trust which takes effect during
the lifetime of the settlor of the trust and for which the trustees of the
trust take title to property primarily for the purpose of protecting, managing
or conserving trust assets, under the ordinary rules applied in the orphan's
court division of the court of common pleas or in other chancery or probate
courts, until distribution to the beneficiaries of the trust.
(ii) The term does not include:
(A) Business trusts organized under
Pennsylvania law or the law of any state or foreign jurisdiction, or any form
of trust that has either of the following features:
(I) The treatment of beneficiaries as
associates.
(II) Beneficial
interests in the trust estate or profits that are evidenced by transferable
shares, similar to corporate shares, or are otherwise treated as personal
property.
(B) Minors'
estates.
(C) Incompetents'
estates.
(D) A resulting or
constructive trust created by operation of law.
(E) A testamentary trust.
Settlor-One who creates and furnishes
the consideration for the creation of a trust by the transfer of property to
the trust.
Testamentary trust-A private trust
that is established by will or takes effect only at or after the death of the
settlor.
