Estate Planning Glossary
Estate-Planning-Glossary
Here’s a list of common estate planning terms along with definitions that can help clarify the process:
Beneficiary: A person or organization named to receive assets from an estate, trust, or account upon the death of the owner.
Executor: The person designated in a will to carry out the terms of the will and manage the estate through probate.
Trustee: The individual or organization responsible for managing and distributing assets in a trust according to the trust’s terms.
Probate: The court-supervised process of validating a will, settling debts, and distributing the estate’s assets to heirs or beneficiaries.
Will: A legal document that expresses a person’s wishes about how their property should be distributed after death.
Living Trust (Revocable Trust): A trust established during a person’s lifetime that allows them to manage and distribute assets; it can be altered or canceled at any time.
Irrevocable Trust: A trust that cannot be modified or revoked after its creation, often used for tax or asset protection purposes.
Power of Attorney (POA): A legal document giving someone authority to act on another’s behalf in financial or legal matters.
Advance Healthcare Directive (Living Will): A legal document outlining an individual’s preferences for medical treatment in situations where they cannot communicate their wishes.
Guardianship/Conservatorship: A court-appointed responsibility for a person or entity to care for a minor or an incapacitated adult.
Intestate: The status of dying without a valid will, resulting in assets being distributed according to state laws.
Probate: The legal process of validating a will and distributing the estate under court supervision, it can be time-consuming and expensive
Joint Tenancy: A form of property ownership by two or more individuals where, upon the death of one owner, the remaining owners inherit the deceased owner’s share.
Right of Survivorship: A provision in joint property ownership that ensures the surviving owner(s) automatically inherit a deceased co-owner’s share.
Community Property: A form of ownership where spouses equally share property acquired during the marriage in certain states.
Estate Tax: A tax on the transfer of the estate of a deceased person, imposed by the federal government and some states.
Gift Tax: A tax on money or property given during one’s lifetime, with certain annual and lifetime exemptions.
Step-Up in Basis: A tax benefit that adjusts the cost basis of an inherited asset to its fair market value at the time of the owner’s death.
Trust Fund: The assets placed in a trust to be managed and distributed by the trustee for the benefit of the beneficiaries.
Grantor: The individual who creates a trust and transfers assets into it, sometimes also known as a “settlor” or “trustor.”
Pour-Over Will: A will that directs any assets left out of a trust at death to be “poured over” into the trust, ensuring they’re distributed according to its terms.
Special Needs Trust: A trust designed to provide for a beneficiary with special needs without jeopardizing their eligibility for government benefits.
Charitable Remainder Trust (CRT): A trust that provides income to the grantor or other beneficiaries for a period, after which the remainder goes to a designated charity.
Durable Power of Attorney: A power of attorney that remains in effect if the person who granted it becomes incapacitated.
Executor's Bond: A type of insurance that an executor may need to post to protect the estate from potential mismanagement.
Marital Deduction:An estate and gift tax exemption that allows a person to transfer unlimited assets to their spouse without incurring taxes, as long as their spouse is a U.S. citizen.
This list covers many of the essential terms you'll encounter when planning an estate. Let us know if you'd like more details on any specific term!
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