Thirteen Estate Planning Terms You Need to Know
dan • March 11, 2022
Estate planning
— it is an incredibly important tool, not just for the uber wealthy or those thinking about retirement. On the contrary, estate planning is something you are doing every time you acquire a new asset, open a new financial account, enter into a contract, or assume a new debt. Whether you are taking these actions in a deliberate, coordinated manner is another issue. Thoughtful, deliberate estate planning can help you accomplish any number of goals, including appointing guardians for minor children, choosing healthcare agents to make decisions for you should you become ill, minimizing taxes so you can pass more wealth onto your family members, and stating how and to whom you would like to pass your estate on to when you pass away.
While it should be at the top of everyone’s to-do list, it can be an overwhelming topic to dive into. To help you get situated, below are some important estate planning 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, investments, furniture, jewelry, art, clothing, and collectibles.
Beneficiary A person or entity (such as 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.
While it should be at the top of everyone’s to-do list, it can be an overwhelming topic to dive into. To help you get situated, below are some important estate planning 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, investments, furniture, jewelry, art, clothing, and collectibles.
Beneficiary A person or entity (such as 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.
Fiduciary A person with a legal obligation (duty) to act primarily for another person’s benefit, e.g., a trustee or agent under a power of attorney. “ Fiduciary " implies great confidence and trust, and a high degree of good faith.
Funding The process of transferring (re-titling) assets to a living trust. A living trust will only avoid probate at the trustmaker’s death if it is fully funded, meaning it contains all of the decedent’s assets.
Heirs at Law The people who would be entitled to receive a decedent’s assets if there were not a plan. Note that even if these people are not included in your plan, they might have a right to be notified about a probate process if one is taking place.
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.
Fiduciary A person with a legal obligation (duty) to act primarily for another person’s benefit, e.g., a trustee or agent under a power of attorney. “ Fiduciary " implies great confidence and trust, and a high degree of good faith.
Funding The process of transferring (re-titling) assets to a living trust. A living trust will only avoid probate at the trustmaker’s death if it is fully funded, meaning it contains all of the decedent’s assets.
Heirs at Law The people who would be entitled to receive a decedent’s assets if there were not a plan. Note that even if these people are not included in your plan, they might have a right to be notified about a probate process if one is taking place.
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
The court-supervised process of managing the assets of an incapacitated person. Conservatorship is another term used for this process.
Marital deduction A deduction on the federal estate tax return, it lets the first spouse to die 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.
Settle an estate The process of winding down the final affairs (valuation of assets, payment of debts and taxes, distribution of assets to beneficiaries) after someone dies.
Trust A fiduciary relationship in which one party, known as the trustmaker or settlor, gives another party, known as the trustee, the right to hold property or assets for the benefit of another party, the beneficiary. The Trust should be memorialized by a written trust agreement, outlining how the trust assets will be distributed to the beneficiary.
Will
Marital deduction A deduction on the federal estate tax return, it lets the first spouse to die 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.
Settle an estate The process of winding down the final affairs (valuation of assets, payment of debts and taxes, distribution of assets to beneficiaries) after someone dies.
Trust A fiduciary relationship in which one party, known as the trustmaker or settlor, gives another party, known as the trustee, the right to hold property or assets for the benefit of another party, the beneficiary. The Trust should be memorialized by a written trust agreement, outlining how the trust assets will be distributed to the beneficiary.
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 guardian for minor children.
What Next?
If you think it might be time to think through your estate plan, you can:
- Give us a call at 720-821-7604 to schedule a "Discovery Session" at which we can determine whether our firm would be a good fit for your needs. Or fill out our contact form to have us call you.
- Visit our estate planning page to learn more about how proactively thinking through your estate plan can protect you and your family, minimize hassle, lower the chance of family discord, and minimize or eliminate taxes.
- Get a copy of our estate planning checklist to see where you currently stand.
- Learn more by reading our blog or watching our videos.
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