Estate Planning Glossary
Administration or trust administration, is the process during which the executor collects and totals all of the decedent’s assets, validates and then pays outstanding debts and claims, and then distributes the residue of the estate according to the will, trust or the state law intestacy rules.
The administrator or trust administrator is an individual or fiduciary who manages the trust or estate and does the administration. If no executor has been appointed or if the named executor is unable or unwilling to serve, the court will appoint one.
Advance Healthcare Directive:
An advance healthcare directive / advance medical directive, sometimes also referred to as a living will, is a written legal document that specifies the medical treatments you would and would not want to be used to keep you alive in the case of incapacitation. An advance healthcare directive may also communicate additional medical preferences such as if you wish to be an organ donor or wish to donate your body to medical science. Commonly, a medical power of attorney or health care agent form is used in conjunction with an advance health care directive. A medical power of attorney is a legal document that allows you to appoint a person to make healthcare / medical decisions on your behalf in the event that you are unable to make them for yourself.
Ancillary probate is a secondary or additional probate court proceeding required in another state than the original probate court proceeding. This additional probate proceeding or ancillary probate is required where the decedent left real estate or assets in more than one state. Each state has their own set of probate laws and depending on the situation, an ancillary probate proceeding may be required.
Arbitration is the procedure in which a dispute is submitted, by agreement of the parties to one or more arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court.
An Attorney is a lawyer, a person appointed to act for another in business or legal matters. Attorneys often specialize in a specific type of law such as Trust and Estates or taxation.
Attorney in Fact:
An Attorney in Fact is the person named as agent under a power of attorney to handle the financial affairs of another.
A beneficiary is a person who will receive the benefit of property or real property from a trust or estate on behalf of a benefactor or settlor. For example, the beneficiary of a life insurance policy is the person who receives the payment of the amount of insurance after the death of the insured, or one of the beneficiaries of the estate received the decedent’s automobile.
In estate planning, a bequest refers to the act of giving or leaving something by will. A bequest can be real estate, personal property such as a collection or money.
A bridge loan is a sum of money lent by a bank to cover an interval between two transactions. In trust and estates, a trust loan or bridge loan may be made to a trust to provide the cash needed for an equal distribution of assets can be made. A bridge loan may be needed when a home is being inherited in a state such as California and the child inheriting the home is requesting a Parent to Child Transfer of property taxes / exclusion from reassessment from the County Assessors Office.
Charitable Lead Trust:
A charitable lead trust is a trust that first distributes a portion of its proceeds to a charity, for which you’ll receive a charitable donation tax deduction equal to those payments. The remainder of the principal is then distributed to the beneficiaries of the trust.
Charitable Remainder Trust:
A charitable remainder trust is a trust you choose to receive an income from the distribution of the non-income-producing assets you placed into the trust. You also receive a charitable donation tax deduction based on the present value of the remainder of the assets designated for the charity. At the end of the term or upon your death, your chosen charity receives the remainder of the assets in the trust.
A codicil is literally means little codex, or a small amount of writing used to add to or change a larger piece of writing. A codicil to a will can change the terms of the original will completely. A codicil to a will generally requires witnesses just like the will.
Community property is a form of ownership that occurs in certain US States, known as community property States. Community property is property acquired during a marriage and is considered by the state to be owned jointly. As of November, 2022, Community property states include: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. In these states, any assets acquired by a spouse throughout their marriage is labeled as community property, regardless of who buys it.
A conservator is an individual or a fiduciary appointed by a court to care for and manage the property of an incapacitated person.
The decedent is the individual who has passed away. In the case of a trust or estate, the person who has passed and left property behind.
A descendant, or descendants are the individual’s children, grandchildren, great grandchildren or relatives created from legal adoption. Descendants are only people who were adopted by or born of the decedent, a spouse, unadopted stepchild, parents, brother or sisters are not considered a descendant.
Durable Power of Attorney:
A durable power of attorney is a written legal document used to enable a person to designate another person as their attorney-in-fact or agent to act on their behalf while the principal (person who created the durable power of attorney) is still living. A durable
power of attorney is not terminated by the principal’s incapacitation, only upon death.
An estate is all property you own upon your death. Estates commonly include assets such as real estate, automobiles, collections, heirlooms, life insurance policies, investments and cash.
Estate administration is the process of taking an inventory of the decedents property / assets, collecting the assets, notification of creditors of the decedents passing, payment of all valid creditor claims, payment of due taxes and finally the distribution of remaining assets to the heirs per the will or state probate laws.
An estate inventory is a ledger of all of the possessions of an estate. Items in an estate inventory often include the following:
- Real Estate including your primary residence, second home, investment properties or land
- Motor vehicles such as automobiles, motorhomes, boats, tractors and motorcycles
- Life Insurance Policies Distributions
- Retirement accounts such as 401K plans, IRAs and Roth IRAs
- Investments such as stocks, bonds, ETFs, mutual funds and crypto currency
- Cash and bank accounts such as checking accounts, online accounts such as PayPal, savings account and certificates of deposit
- Important personal property and possessions such as family heirlooms, collections, time pieces, jewelry, and furniture
- Business ownership interests
You can download a copy of a sample estate inventory here
An estate plan is a legal document or combination of legal documents such as a will, living trust, advance healthcare directive or spill-over will, used to plan for what happens to your estate upon your passing or for your care in case you become incapacitated. An estate plan is created prior to your death and usually lists your estate assets such as your real estate, automobiles, person property, insurance policy’s and investment accounts. The estate plan assigns your assets to your heirs / beneficiaries.
Estate Planning is the process by which an individual designs a strategy and executes a will, trust or other documents to provide for the administration of assets upon incapacity or death.
Estate tax or estate taxation is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death. You can view the IRS Estate Tax Thresholds here.
An executor is a person named in a will or appointed by the court to carry out the terms of the will and to administer the decedent’s estate.
A family trust is a trust that is established to benefit an individual’s spouse, children or other family beneficiaries. A Family Trust is a legally binding Estate Planning tool used to financially protect and benefit you and your family. Like other Trusts, a Family Trusts are often intended to avoid probate, delay or reduce taxes and protect assets.
A fiduciary is a person (or group of people) that is entrusted with the responsibility of acting in the best interests of another person or organization. In a fiduciary relationship, the fiduciary has an ethical responsibility to act solely in the interest of the person, client or organization that they represent as opposed to their own interests or the interests of a third party.
Here are some common examples of fiduciaries:
- An Estate Executor
- A Trustee or Trust Administrator
- A Guardian
- A person granted a Power of Attorney
- A Lawyer
- Certain financial advisors
Financial Power of Attorney:
A Financial Power of Attorney is a legal document that grants a trusted agent to act on your behalf in regards to financial matters. The Financial Power of Attorney can go into effect once you become incapacitated or at a specific time of your choosing and then become void upon your passing.
The gift tax is the tax charged on completed lifetime transfers from one individual to or for the benefit of another. The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether or not the donor intends the transfer to be a gift or not. The gift tax applies to the transfer by gift of any type of property. You make a gift if you give property, or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift and may be taxed accordingly.
A grantor is a person, including a testator, who creates, or contributes property to, a trust. If more than one person creates or contributes property to a trust, each person is a grantor. The grantor is also sometimes referred to as the settlor, trust maker or trustor.
A grantor trust is a trust over which the grantor retains certain control such that the trust is disregarded for federal and possibly state income tax purposes. The grantor is taxed individually on the trust’s income and pays the income taxes that otherwise would be payable by the trust or its beneficiaries. A grantor trust is a type of living trust in which the person creating the trust, the grantor, remains the owner of the assets and property in the trust for both income and estate tax purposes. A grantor trust is taxed at the grantor’s personal tax rate, which is usually lower than trust tax rates.
A guardian in the trust and estate, will, or trust sense is an individual or bank or trust company, appointed by a court to act on behalf of a minor or incapacitated person.
Guardianship, sometimes also referred to as conservatorship, is the court approved legal process utilized when a person can no longer make or communicate safe or sound decisions about their person and/or property.
Health Care Agent:
A health care agent is a person that has been legally authorized to make health care decisions on behalf of another person. In estate planning a health care agent is usually designated in an estate plan and granted authority with the use of durable power of attorney, advance healthcare directive or health care agent form. The health care agent should be a trusted person who understands your desires for healthcare and medical treatments should you become incapacitated.
An heir is an individual entitled to a distribution of an asset or property interest under applicable state law in the absence of a will.
Intestate refers to a situation when one dies without a valid will and the decedent’s estate is distributed in accordance with a state’s intestacy law.
In relation to trusts, will and estates, inventory refers to a list of the assets of a decedent or trust that is filed with the court.
An irrevocable trust is a trust that cannot be terminated, revoked or modified by the grantor. Grantors may choose to create an irrevocable trust with such limitations to limit estate taxes or to shield assets from creditors.
Joint tenants or joint tenancy is the ownership arrangement in which two or more persons own property, the share of each passing to the other or others on death.
Last Will and Testament:
A last will and testament, is a legal document that provides instructions for what should happen to a person’s assets after death. This term “last will and testament” is commonly used to mean the same thing as a “will”, but to be exact, a last will and testament refers to the most recent version of a will. A will is commonly used to distribute a personal property, real estate, investments or business interests. It may also be used to appoint legal guardians. If a person dies without a will, they are said to be intestate, and state intestacy laws govern the distribution of the property of the person who passed.
Legal Pronouncement of Death:
A legal pronouncement of death is a declaration of the time and date when a person was pronounced dead. The pronouncement of death is typically recorded in the patient’s medical record by the attending provider of health care if one was present.
A life beneficiary is an individual who receives income or principal from a living trust or life estate for the duration of their life.
A life estate is the interest in property owned by a life beneficiary with the legal right under state law to use the property for their lifetime, after which title fully vests in the remainderman.
A living trust is a legal tool for estate planning that allows a person (known as the Trustee) to hold another person’s (known as the Settlor or the creator of the trust) property for the benefit of someone else (the Beneficiary). It is an estate planning tool that can help family members and beneficiaries avoid a potentially lengthy probate process. A living trust is a legal document which lays out the terms of the trust and the assets that the grantor has assigned to it.
A living will is a written legal document that specifies the medical treatments you would not and would want to be used to keep you alive if you are unable to communicate in the situation. A living will is sometimes also referred to as an advance health care directive and specifies the medical treatments you would and would not want to be used to keep you alive in the case of incapacitation. A living will may also communicate additional medical preferences such as if you wish to be an organ donor or wish to donate your body to medical science. A medical power of attorney is often used in conjunction with a living will. A medical power of attorney is a legal document that allows you to appoint a person to make healthcare / medical decisions on your behalf in the event that you are unable to make them for yourself. You should consider and write out a variety of possible care decisions in your living will to account for all possibilities that are important to you. Some of the most common situations include:
- Cardiopulmonary Resuscitation or CPR – the attempt to restart a persons heart should it stop beating
- Mechanical Ventilation – if you will desire to be placed on a ventilator should you stop being able to breath on your own
- Dialysis – if your kidneys are no longer able to function, would you want a dialysis process to be used to keep you alive
- Tube Feeding – would you choose to be fed via tube if you are no longer able to consume food on your own and if so, at what point
- Palliative Care – the degree to which you want to receive pain medications or avoid invasive treatments to extend your life
- Organ Donation – your wishes on organ and tissue donation, should you have any
Making these decisions in a living will can be helpful in a couple different ways. The more specific you can be both helps ensure that your wishes are carried out and also prevents the stress and grief on your loved ones who may be forced to make these difficult decisions on your behalf.
Marital property is a legal term that refers to property acquired during the course of a marriage. Property that an individual owns before a marriage is considered separate from marital property. Inheritances or third party gifts given to an individual during a marriage may also be considered separate from marital property.
Per stirpes is a Latin phrase meaning “per branch”. In trusts and estate matters, per stripes is a method for distributing property according to the family tree whereby descendants take the share their deceased ancestor would have taken if the ancestor were living. Each branch of the named person’s family is to receive an equal share of the estate. If all children are living, each child would receive a share, but if a child is not living, that child’s share would be divided equally among the deceased child’s children.
A personal representative is the individual chosen to administer the estate of a deceased person. The personal representative in probate is also sometimes referred to as the executor or administrator. The personal representative is either designated by the decedent or court appointed.
A pour-over will, or pour over will, is a legal document that ensures an individual’s remaining assets will automatically transferred to a previously established trust upon their death. Sometimes after a living trust is created, the Settlor will forget to properly add new assets to the trust. A pour-over will helps resolve that issue and may also help to avoid the need for probate.
Power of Attorney:
A power of attorney, also sometimes referred to as a letter of attorney, is a written legal document authorizing one person to represent or act on another’s behalf in private affairs, business, or some other legal matter. The person authorizing the other to act is typically referred to as the principal or grantor.
The owner of an estate is sometimes referred to as the principal. Principal may also refer to the property placed into a trust and may include money, real property, investments or possessions.
Probate is a court administered process that transfers the estate of a deceased individual to named or remaining heirs. An estate is made up of the decedents real estate, personal property, life insurance, bank accounts, investments and personal belongings.
In probate court, an executor (if there is a will) or an administrator (if there is no will) is appointed by the court as a representative to collect the assets, settle any debts and then distribute any remaining assets to the beneficiaries. All matters of probate are reviewed by the court. Each state has their own probate laws. Depending on your state, area and the complexity of the estate; probate can take anywhere for seven months to two years to complete.
Remainder interest is a future interest a person has in an asset. A remainderman can exercise their right to use and hold property in a trust once the trust has be dissolved.
A remainderman is the person who inherits or is entitled to inherit the principle of a trust once it is dissolved.
Residue is the property remaining in an estate after payment of the estate’s debts, taxes, expenses and distributions directed by the will.
A revocable trust is a trust created during lifetime over which the grantor reserves the right to terminate, revoke, modify, or amend. Upon death the revocable trust will become an irrevocable trust.
Self Proving Will:
A self-proving will is a will that permits a probate court to accept it as the genuine will of the decedent (person who passed). A will is proved and is admissible to probate provided that it was properly prepared and executed according to the laws of the state where the person resided. At the time that the last will and testament was signed, the decedent must have been of sound mind, and must not have been under any undue influence.
A settlor is the person who establishes or settles a trust. Sometimes the settlor is also referred to as a trustor or grantor.
Special Needs Trust:
A special needs trust is a trust established for the benefit of a disabled individual. The special needs trust is designed to allow the beneficiary to be eligible for government financial aid by limiting the use of trust assets for purposes other than the beneficiary’s basic care.
A successor trustee is the person (or group of people) who takes over the management of a living trust when the original trustee has died or become incapacitated. The successor trustee is typically named by the Grantor / Settlor of the trust in the trust documents. The responsibilities of a successor trustee may also be specified in the language of the trust documents.
Tenancy By the Entirety:
Tenancy by the entirety means that when one spouse dies, the other inherits the deceased spouse’s interest in the tenancy by the entirety and ends up with 100% of the property interest. This occurs automatically, by law and there is no need for probate or take any court action.
Tenancy In Common:
Tenancy in common is a co-ownership arrangement under which each owner possesses rights and ownership of an undivided interest in the property, which may be sold or transferred by gift during lifetime or at death.
Testamentary means relating to or bequeathed or appointed through a will.
A testamentary trust is a type of trust that is created after the grantor dies. The testamentary trust is 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. The only way to execute the provisions laid out in a decedent’s will in California is to enter the document into probate.
The testator is a person who dies leaving a will or testament in place.
A trust is an arrangement whereby property is legally owned and managed by an individual or fiduciary as trustee for the benefit of another who is referred to as a beneficiary, who is the owner of the property.
Trust administration is the process of managing and distributing the assets of a trust. When a person creates a revocable living trust and passes, that trust typically becomes irrevocable and enters a phase requiring trust administration so that the assets held in the trust can be distributed to the beneficiaries of the trust. The creator of the living trust, usually referred to as a trustor, settlor or grantor; transfers ownership of their assets to the trust. Typically while the trustor is alive, they also act as the the trustee (the person managing the trust) but designate a successor trustee (the person or people who will administer the trust when they pass or if they become incapacitated) in the trust documents. The successor trustee is responsible for carrying out the terms of the trust and managing the trust assets according to the instructions set forth in the trust document by the trustor. In the process of trust administration, the trustee has a number of duties.
A trust instrument is a legal document executed by a grantor that contains terms under which the trust property must be managed and distributed. A trust instrument is sometimes also referred to as a trust agreement or a declaration of trust.
A trust loan is a sum of money lent by a bank to a trust. In most cases the money is being lent to an irrevocable trust. A trust loan provide cash to a trust to that improvements can be made to a home in preparation for sale or so that an equal distribution of assets can be made. A trust loan may be needed when a home is being inherited in a state such as California if multiple beneficiaries are involved and the child inheriting the home is requesting a Parent to Child Transfer / exclusion from reassessment from the County Assessors Office.
The trustee is an individual or bank or fiduciary designated to hold and administer trust property. The trustee takes legal ownership of the assets held by a trust and assumes fiduciary responsibility for managing those assets and carrying out the purposes of the trust. The trustee has the duty to act in the best interests of the trust and its beneficiaries and in accordance with the terms of the trust instrument.
A trustor is the person who establishes or settles a trust. Sometimes the trustor is also referred to as a settlor or grantor.
A ward is a person or thing under guard or protection. A minor subject to wardship or a person who by reason of incapacity is under the protection of a court either directly or through a guardian appointed by the court.
A will is a legal document that provides instructions for what should happen to a person’s assets after his or her death. This term “last will and testament” is commonly used to mean the same thing as a “will”, but to be exact, a last will and testament refers to the most recent version of a will. A will is commonly used to distribute a personal property, real estate, investments or business interests. It may also be used to appoint legal guardians. If a person dies without a will, they are said to be intestate, and state intestacy laws govern the distribution of the property of the person who passed.