Estate planning can be a confusing, and somewhat intimidating, undertaking if you are unfamiliar with the terms and concepts used when planning an estate. In fact, one of the most common reasons people provide for not having an estate plan in place is that they become overwhelmed with unfamiliar legal jargon when they attempt to get started with their estate plan. At Kobrick & Moccia, we understand how frustrating it can be to feel lost when you are surrounded by unfamiliar concepts. With that in mind, we created the following list of estate planning terms along with their definitions. We hope that once you familiarize yourself with these terms you will gain enough confidence to get started on your own estate plan if you have yet to create one.
- Advanced Directive – a written statement of a person’s wishes regarding medical treatment, often including a living will, made to ensure those wishes are carried out should the person be unable to communicate them to a doctor.
- Agent – someone to whom you may grant the legal power or authority to act on your behalf. You may appoint an Agent in a power of attorney and/or in an advance directive.
- Annual Exclusion – Amount you can give someone each year without having to file a gift tax return or pay a gift tax. You may gift to an unlimited number of beneficiaries each year using the Annual Exclusion. Set at $14,000 per recipient ($28,000 if married and using the gift-splitting option).
- Beneficiary – someone to whom a gift has been made by you, or who will receive something pursuant to a designation by you on an account, policy, or other document.
- Codicil – written change or amendment to a Will.
- Conservator – one who is legally responsible for the care and well-being of another person or the individual’s estate. Most often, there is a Guardian of the person and a Conservator of the estate.
- Estate planning – at its most basic, estate planning is the act of preparing for the transfer of a person’s wealth and assets after his or her death. Comprehensive estate planning, however, will include much more.
- Executor – person or institution named in a Will to carry out its instructions and oversee the probate of an estate.
- Fiduciary – person having the legal duty to act primarily for another’s benefit. Implies great confidence and trust, and a high degree of good faith. A “fiduciary duty” requires you to act in the best interest of a beneficiary.
- Generation skipping transfer (GST) tax – a federal tax imposed on outright gifts and transfers in trust, whether during lifetime or at death, to or for beneficiaries two or more generations younger than the donor, such as grandchildren, that exceed the GST tax exemption. The GST tax imposes a tax on transfers that otherwise would avoid gift or estate tax at the skipped generational level.
- Guardian – someone appointed by a court to care for, and make decisions for, a minor or an incapacitated adult.
- Heir – someone who legally inherits from an estate under the state’s intestate succession laws.
- Incapacity – defined by state law; however, refers to a state wherein an individual is unable to safely make personal decisions and/or manage financial affairs.
- Intestate – dying without a Last Will and Testament (or other legal document such as a trust) in place to distribute estate assets.
- Irrevocable Trust – a trust that cannot be terminated or revoked or otherwise modified or amended by the grantor, absent special language and circumstances. You do not have control over the assets.
- Joint Tenants with Right of Survivorship – a form of joint ownership in which the deceased owner’s share automatically and immediately transfers to the surviving joint tenant(s).
- Last Will and Testament – a written document with instructions for disposing of assets after death.
- Living Trust – a trust created by an individual during his or her lifetime that activates during the Settlor’s lifetime. Legally, a living trust is referred to as an “inter vivos” trust.
- Living Will – a written document that states you do not wish to be kept alive by artificial means when the illness or injury is terminal.
- Marital Deduction – a deduction on the federal estate tax return that lets the first spouse to die leave an unlimited amount of assets to the surviving spouse free of estate taxes.
- Personal Representative – person who has volunteered, or been appointed by the court, to oversee the probate of an intestate estate. Has much the same duties and responsibilities as an Executor.
- Power of Attorney – legal agreement whereby the Principal (you) grant an Agent the authority to act on your behalf in legal matters. The extent of the authority you grant depends on the type of POA you create.
- Probate – the legal process that is typically required following a death during which time the decedent’s assets are inventoried, valued, and distributed.
- Settlor – person who creates a trust. May also be referred to as a “Grantor,” or “Trustor.”
- Revocable Trust – a trust in which the person setting it up retains the power to change (revoke) or cancel the trust during his/her lifetime. You have full control over the assets.
- Special Needs Trust – allows you to provide for a disabled loved one without interfering with government benefits.
- Testamentary Trust – a trust established in a person’s Will to come into operation after the Will has been probated and the assets have been distributed to it in accordance with the terms of the Will.
- Testate – refers to the estate of a decedent who left behind a Last Will and Testament.
- Trust – a separate legal entity that holds assets for the benefit of certain other persons or entities.
- Trustee – the person or institution appointed by the Settlor of a trust to administer the trust and manage the trust assets.
Contact Us
If you have specific questions regarding your estate plan, or if you are ready to get started on your first estate plan, contact an experienced estate planning attorney at the Law Offices of Kobrick & Moccia by calling 800-295-1917 to schedule your appointment.
