15 Estate Planning Terms That You Need To Know

Estate planning can be intimidating, confusing and sometimes overwhelming, but it’s also an extremely important tool. With the right estate planning lawyer by your side, we can ease some of the burdens. Contrary to the belief that it’s primarily for those planning to retire or for the wealthy, it’s actually something that every adult should do. It not only helps plan for the future of your investments, accounts and assets, it also helps achieve various goals such as decision-making should you become ill and guardianship of your minors.

To help you better understand the terminology, here are some important terms you should know as you think about your own estate plan.

Assets

Generally, anything a person owns, including a home and other real estate, bank accounts, life insurance policy value, investments, furniture, jewelry, art, clothing, and collectibles.

Beneficiary

A person or entity (e.g., a charity) that receives a beneficial interest in something, such as an estate, trust, account, or insurance policy.

Distribution

A payment in cash or asset(s) to the beneficiary, individual, or entity who is entitled to receive it.

Estate

All assets and debts left by an individual at death.

Estate Administration

The process of winding down the final affairs (valuation of assets, payment of debts and taxes, distribution of assets to beneficiaries) after someone dies.

Fiduciary

A fiduciary is an individual or organization that acts in the best interest of a particular individual.

Funding

The process of transferring (re-titling) assets to a living trust. A living trust will only avoid probate at the trust maker’s death if it is fully funded, meaning it contains all of the decedent’s assets.

Incapacitated/Incompetent

Unable to manage one’s own affairs, either temporarily or permanently; often involves a lack of mental capacity.

Inheritance

The assets received from someone who has died.

Living probate (Conservatorship)

The court-supervised process of managing the assets of an incapacitated person.

Marital deduction

A deduction on the federal estate tax return. It allows the first spouse to die to leave an unlimited amount of assets to the surviving spouse free of estate taxes. However, if no other tax planning is used and the surviving spouse’s estate is more than the amount of the federal estate tax exemption in effect at the time of the surviving spouse’s death, estate taxes will be due at that time.

Mediation

A confidential form of dispute resolution in which the parties work with a neutral third party, the Mediator, to reach an agreement or an accord that resolves their differences.

Power of Attorney

A legal document that gives a designated person (the agent or attorney-in-fact) the power to act for another person, known as the principal.

Trust

A fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to beneficiaries.

Will

A written document with instructions for disposing of assets after death. A will can only be enforced through a probate court. A will can also contain the nomination of a guardian for minor children.

Contact AmySue Taylor if you have any additional questions about estate planning or would like to consult an estate planning lawyer. We can make sure you have a comprehensive plan that is tailored to your unique needs and goals.