Estate Planning Terms to Know

Estate planning isn’t limited to the highly wealthy or those nearing retirement. It’s for everyone. Estate planning allows you to designate guardians for minor children, pick agents to help make your healthcare and financial decisions if you become incapacitated, minimize taxes to maximize your family’s inheritance, and direct the distribution of your estate upon your passing.

To help you get started with your estate plan, here are some key terms you should be familiar with:

Assets: Anything you own, including real estate, bank accounts, life insurance, investments, furniture, jewelry, art, and collectibles.

Beneficiary: An individual or entity (e.g., a charity) entitled to receive a beneficial interest in an estate, trust, account, or insurance policy.

Distribution: The disbursement of cash or assets to the entitled beneficiary.

Estate: The assets (and debts) that a person leaves behind at their death. 

Fiduciary: A person or entity with a legal duty to act in another person’s best interests, like a trustee under a trust, an executor under a will, or an agent under a power of attorney. “Fiduciary” implies trust, confidence, and good faith.

Guardian: The representative of a minor or of an adult under a legal disability.

Funding: The process of transferring assets into a living trust. A living trust must be fully funded to avoid probate upon the death of the trustmaker (also known as the settlor or grantor).

Incapacitated/Incompetent: An individual’s inability to manage their own affairs. Incapacitation or incompetence can be temporary or permanent and often involves a person’s lack of mental capacity.

Inheritance: Assets received from someone who has passed away.

Marital Deduction: A federal estate tax deduction that allows the first spouse to pass on unlimited assets to the surviving spouse free of estate taxes. But this deduction does not avoid taxes completely. Rather, if no other tax planning is used, the second spouse to die may pay estate taxes upon their death.

Settle an Estate: The process of winding up the affairs of a deceased person. It involves inventorying assets, valuation of assets, debt settlement, payment of income and estate taxes, and asset distribution to beneficiaries. Settling an estate may (or may not) involve probate, depending on the value of the estate, the type of assets in the estate, and whether the decedent had a fully funded revocable trust.

Trust: A fiduciary relationship in which the trustmaker entrusts assets to a trustee for the benefit of a beneficiary. Trusts should be governed by a written agreement that outlines how trust assets will be distributed to the beneficiary.

Will: A written document containing instructions for asset disposition after death, enforceable through probate court, and may also include the nomination of a guardian for minor children.

Please contact the Law Office of Greggory R. Walters, LLC, for assistance in creating a comprehensive estate plan tailored to your specific needs.

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