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Thirteen Estate Planning Terms You Need to Know

By Howard C. Stross
October 20, 2020

In honor of Estate Planning week, the week of October 19, 2020, we are providing a crib sheet for knowing the definition of and referring to common estate planning terms. Estate Planning is an important tool, not just for the ultra-wealthy or those thinking about retirement. Estate planning is something every adult should do. Estate planning can help you accomplish several goals, including appointing guardians for minor children, choosing healthcare agents to make decisions for you should you become ill and unable to decide for yourself, minimizing taxes so you can pass more wealth onto your family members, and stating how and to whom you would like your estate to pass upon your death.

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 important terms to know as you think about your own estate plan.

  • Assets – Generally, anything a person owns, including your homestead and other real estate, bank accounts, life insurance, investments, furniture, jewelry, art, clothing, and collectibles.
  • Beneficiary – A person or legal entity (such as a charity) that receives a beneficial interest in something, such as assets in a deceased person’s probate estate, trust assets, bank and investment accounts with beneficiary designations, or the proceeds of a life insurance policy.
  • Distribution – A payment in cash or asset(s) to the beneficiary, individual, or entity entitled to receive it.
  • Estate – All assets and debts left by an individual at death.
  • Fiduciary – A person with a legal obligation (a duty) to act primarily for another person’s benefit, e.g., a trustee or power of attorney. “Fiduciary” implies great confidence and trust, and a high degree of good faith.
  • Funding – Transferring ownership (re-titling) or control of a person’s assets to a trust you establish during your lifetime, sometimes called a living trust. A trust will only avoid probate at the trustmaker’s death if it is fully funded, meaning the person’s trust contains all of the decedent’s assets.
  • Incapacitated/Incompetent – Unable to manage one’s own affairs, either temporarily or permanently. Incapacity often involves a person’s lack of mental capacity.
  • Inheritance – The assets received from someone who has died.
  • Guardianship (a/k/a/ Living Probate) – The court-supervised process of managing the assets of an incapacitated person. Conservatorship is another term used for this process.
  • Marital deduction – This deduction is used on the federal estate tax return. It lets the first spouse to die to leave an unlimited amount of assets to the surviving spouse free of federal estate taxes. If no other tax planning is used and the surviving spouse’s estate is more than the federal estate tax exemption in effect at the time of the surviving spouse’s death, estate tax may be due upon the passing of the surviving spouse.
  • Settle an estate – Winding down the final affairs (valuation of assets, payment of debts and taxes, distribution of assets to beneficiaries) after someone dies. Probate is the court-supervised process of settling an estate.
  • Trust – A fiduciary relationship in which one party, known as the trustmaker, settlor or grantor, gives another party, known as the trustee, the right to hold property or assets for the benefit of another party, known as the beneficiary. The trust should be memorialized by a written trust agreement, stating how the trust assets will be distributed to or for the benefit of the beneficiary.
  • Will – A written document with instructions for disposing of assets after death. A will can only be enforced through a probate proceeding and a will only operates after the person’s death. A will can also contain the nomination of a guardian for minor children.

If you have questions about estate planning, or would like to consult an estate planning attorney, please contact our office at (813) 852-6500. We can make sure you have a comprehensive plan tailored to your unique needs and goals.

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