This estate planning terminology list serves as a valuable resource by compiling and explaining common terms frequently encountered in the realm of estate planning. By providing definitions and explanations of these terms, the list aims to empower individuals in making well-informed decisions about the management and distribution of their assets.
| Abatement – In the context of a will, abatement refers to the reduction or proportional decrease in the distribution of bequests or legacies outlined in the will when the estate lacks sufficient assets to satisfy all the specified gifts. Abatement typically occurs when the deceased person’s estate is insufficient to cover all debts, expenses, and bequests as specified in the will. In such cases, the beneficiaries may receive a reduced share of their designated inheritance to ensure fair distribution among all creditors and beneficiaries. The process of abatement helps address financial constraints within the estate and adheres to a hierarchy established by law or the terms of the will to determine the order in which bequests are reduced or eliminated. |
| Administrator – In the context of a will, an administrator refers to an individual appointed by the court to manage and settle the estate of a deceased person when there is no appointed executor or when the named executor is unable or unwilling to fulfill their duties. The administrator, sometimes referred to as the personal representative, is responsible for handling various tasks, including identifying and inventorying assets, paying debts and taxes, and distributing the remaining assets to the heirs or beneficiaries according to the laws of intestacy or the terms of the will. The role of an administrator is similar to that of an executor but is typically designated by the court in cases where there is no valid will or a named executor cannot perform the duties. |
| Advance Directive – A legal document that outlines an individual’s preferences and instructions regarding their healthcare treatment in the event they become unable to communicate or make decisions for themselves. It provides guidance to healthcare providers and family members about the individual’s medical treatment preferences, including end-of-life care. Types of advance directives include living wills, which specify the kind of medical interventions an individual desires or refuses, and durable power of attorney for healthcare, which designates a trusted person to make healthcare decisions on behalf of the individual. Advance directives aim to ensure that a person’s healthcare wishes are respected and followed, even if they are unable to express those wishes directly. |
| Agent – A Representative, alternatively referred to as a Power of Attorney (POA) or an Attorney-in-Fact, is the individual you formally appoint to possess the legal authority to act on your behalf. |
| Ancillary Probate – Ancillary probate refers to a legal process that occurs in addition to the primary probate proceeding when a deceased person owned real estate or assets in a state other than their primary residence. The primary probate process typically takes place in the state where the deceased person was domiciled, while ancillary probate is necessary to address the transfer of assets located in other states. |
| Ancillary Probate – Ancillary probate refers to a legal process that occurs in addition to the primary probate proceeding when a deceased person owned real estate or assets in a state other than their primary residence. The primary probate process typically takes place in the state where the deceased person was domiciled, while ancillary probate is necessary to address the transfer of assets located in other states. During ancillary probate, the executor or personal representative must initiate a separate legal proceeding in each state where the decedent owned property. The purpose is to ensure that the assets located in those states are properly transferred to the designated beneficiaries or heirs according to the terms of the will or applicable laws. Ancillary probate can add complexity to the overall estate settlement process, as it involves navigating the legal requirements and procedures of multiple jurisdictions to settle the entirety of the deceased person’s estate. |
| Annuity – An annuity is a financial product or contract that provides a series of periodic payments to an individual in exchange for a lump-sum payment or a series of premium payments. Annuities are often used as a means of creating a steady income stream, typically in retirement. The individual who receives the annuity payments is referred to as the annuitant. Annuities can be classified into various types, including fixed annuities, variable annuities, and indexed annuities, each with distinct features and potential investment risks. The structure and terms of an annuity depend on the specific contract and the preferences of the annuitant. |
| Ambiguity (in a will) – refers to situations where the language or terms used in the will are unclear, open to multiple interpretations, or subject to different meanings. Ambiguous language in a will can create confusion and may lead to disputes among beneficiaries, executors, or other parties involved in the administration of the estate. Common sources of ambiguity in a will include:
Resolving ambiguity in a will may require legal interpretation or, in some cases, court intervention. The goal is to ascertain the true intent of the testator (the person who created the will) and ensure that the estate is distributed according to their wishes. In situations where ambiguity is identified, interested parties may seek legal advice to determine the best course of action. This could involve negotiations among the beneficiaries, seeking a declaratory judgment from the court, or pursuing other legal remedies to clarify the terms of the will. |
| Appraisal – An appraisal of assets is the process of determining the fair market value of various properties, possessions, or investments. This assessment is typically conducted by a qualified appraiser and involves evaluating the condition, characteristics, and market conditions related to the assets in question. Appraisals are commonly performed for various purposes, such as estate planning, taxation, insurance coverage, or when buying or selling real estate. The goal is to establish an accurate and impartial estimate of the value of the assets, providing valuable information for financial planning and decision-making. |
| Assets – Assets refer to valuable resources owned by an individual, company, or entity. These resources can include tangible items like property, equipment, and cash, as well as intangible elements such as patents, trademarks, and investments. Assets are typically seen as items of value that contribute to the net worth of an individual or organization. |
| Attorney-in-Fact – Also known as an agent or power of attorney, is an individual legally authorized to act on behalf of another person. This designation grants the agent the authority to make decisions and conduct legal transactions on behalf of the principal, who confers this power through a legal document known as a power of attorney. The attorney-in-fact is entrusted with specific responsibilities and can manage financial, legal, or other affairs as specified in the power of attorney document. |
| Beneficiary Deed – A beneficiary deed, also known as a transfer-on-death deed or TOD deed, is a legal document used in real estate to specify who will inherit a piece of real property upon the owner’s death. With a beneficiary deed, the property owner (grantor) designates one or more beneficiaries who will automatically receive the property without the need for probate proceedings. The deed is recorded with the appropriate land records office, and during the owner’s lifetime, they maintain full control and ownership of the property. The transfer to the named beneficiaries occurs only upon the owner’s death, simplifying the transfer of real estate while avoiding the probate process. |
| Bequest – A bequest is a gift or provision made in a person’s will, directing the distribution of specific assets, property, or money to a particular individual, organization, charity or entity after the testator’s death. Bequests can vary in nature and size, and they are a common way for individuals to express their wishes regarding the disposition of their estate. The recipient of a bequest is known as a legatee if an individual or a devisee if an entity. Bequests are an integral part of estate planning, allowing individuals to leave a lasting impact or provide financial support to loved ones or causes they care about. |
| Beneficiary – A beneficiary is an individual, organization, or entity designated to receive benefits or assets from a trust, will, insurance policy, retirement account, or other legal arrangement. The person creating the legal arrangement, known as the grantor, settlor, or policyholder, specifies beneficiaries to inherit or receive certain benefits upon their death. Beneficiaries can include family members, friends, charities, or any other party chosen by the grantor. In the context of life insurance or retirement accounts, beneficiaries may receive death benefits or account proceeds. In trusts or wills, beneficiaries typically inherit specific assets or property according to the terms outlined in the document. |
| Blended Family – A blended family, also known as a stepfamily, is a family unit formed when one or both partners in a relationship have children from previous marriages or relationships, and they come together to create a new family structure. In a blended family, step-parents assume parenting roles for their partner’s children, and step-siblings may live together in the same household. Blended families can face unique challenges as they navigate relationships between biological and stepfamily members, address co-parenting dynamics, and integrate various family traditions and backgrounds. Successful blending often involves effective communication, understanding, and the establishment of new family bonds. |
Blind Trust – A blind trust is a financial arrangement in which the ownership and control of an individual’s assets are transferred to an independent trustee. The purpose of a blind trust is to prevent conflicts of interest between the individual and their financial holdings, particularly when the individual holds a public office, a high-profile position, or has a significant influence on public policy.Key features of a blind trust include:
Blind trusts are often used by public officials, politicians, and individuals in prominent positions to maintain transparency and avoid real or perceived conflicts of interest. While the grantor may still benefit financially from the trust’s performance, the trust structure is designed to minimize the individual’s direct control and knowledge of the assets to ensure impartial decision-making. |
| Bypass Trust – A bypass trust, also known as a credit shelter trust or family trust, is a legal arrangement that allows an individual to leave assets to their surviving spouse while minimizing estate taxes. This trust “bypasses” the taxable estate of the surviving spouse, ensuring that a portion of the assets is excluded from taxation upon their death. The remaining assets held in the trust can benefit heirs, providing a strategy to preserve wealth and reduce tax liabilities. |
| Caveat – A caveat is a legal notice or warning, often used in the context of a will or legal proceeding. It signifies that someone has an interest in a particular matter and is requesting that the court or relevant authority take certain actions or exercise caution before proceeding further. In the context of a will, for example, a caveat may be lodged to inform the court that there is a dispute or concern regarding the validity of the will. The term “caveat” is derived from Latin and means “beware” or “let him beware,” serving as a formal expression of caution or objection in legal matters. |
| Certificate of Trust – A Certificate of Trust is a legal document that summarizes the essential details of a trust without disclosing the specific details of the trust agreement itself. It is often used to provide third parties, such as financial institutions or real estate professionals, with relevant information about the trust’s existence and the authority of the trustee without revealing private or sensitive details. The Certificate of Trust typically includes key information such as the name of the trust, the date it was established, the names of the trustees, and their authority to act on behalf of the trust. By presenting a Certificate of Trust, the trustee can authenticate the trust and its terms without the need to disclose the entire trust document. This document helps maintain the privacy of the trust while still allowing for necessary transactions and interactions with external parties. |
| Charitable Giving – The act of voluntarily donating money, goods, or services to charitable organizations, nonprofits, or individuals in need. People engage in charity giving to support various causes, such as humanitarian efforts, healthcare, education, environmental conservation, and social welfare, with the aim of making a positive impact on the community or the world at large. |
| Codicil – A codicil is a legal document that serves as an amendment or supplement to an existing will. It allows the testator (the person who made the original will) to make changes, additions, or revisions to specific provisions of the will without revoking the entire document. A codicil must meet the same legal requirements as a will, such as being in writing, signed by the testator, and witnessed according to applicable laws. Codicils are used when individuals want to update their wills without creating an entirely new document |
Charitable Remainder Trust – A (CRT) is a type of irrevocable trust that allows an individual (the donor or grantor) to contribute assets to the trust while retaining an income stream for a specified period, often the donor’s lifetime. After the income period ends or upon the donor’s death, the remaining assets in the trust are distributed to one or more designated charitable beneficiaries. There are two primary types of Charitable Remainder Trusts:
Charitable Remainder Trusts offer potential benefits such as a charitable income tax deduction for the donor, the ability to convert appreciated assets into income without immediate capital gains tax, and the opportunity to support charitable causes. They are commonly used in estate planning for individuals seeking both charitable giving and income generation. |
| Common Trust Fund – A pooled investment vehicle operated by a bank or trust company that combines the assets of multiple individual trusts for the purpose of investment management. CTFs are collective investment funds that allow smaller trusts or accounts to benefit from economies of scale in investment management. In a Common Trust Fund, each participating trust holds units or shares in the fund, and its value is determined by the performance of the underlying investments. The assets within the fund are managed by professional investment managers employed by the bank or trust company. Common Trust Funds are subject to regulatory oversight, and they are often used by institutions, such as banks or trust companies, to provide professional investment management services to smaller trusts that might not have access to the same level of expertise or diversification on an individual basis. |
| Community Property – Community property refers to a legal framework for the ownership of property acquired by a married couple during their marriage. In community property states, which include community property laws, most assets and debts acquired by either spouse during the marriage are considered jointly owned by both partners, regardless of which spouse earned the income or whose name is on the title. Key features of community property include:
Community property laws impact the distribution of assets during divorce or the determination of property rights in the event of a spouse’s death. Not all U.S. states follow community property laws; some use equitable distribution principles instead. |
| Community Property Agreement – A legal document that married couples can use to characterize and manage their property as community property. This agreement is typically employed in community property states. In community property states, assets and debts acquired during the marriage are generally considered jointly owned by both spouses. The Community Property Agreement allows spouses to convert certain types of property, usually separate property, into community property. By doing so, they can ensure that the property will be treated as community property with equal ownership rights. This agreement can cover various assets, such as real estate, financial accounts, or personal property. It’s important to note that the specifics of Community Property Agreements can vary by state, and not all states recognize or allow such agreements. Couples considering this type of arrangement should seek legal advice to understand the implications and ensure compliance with applicable laws. |
Conservator / Conservatorships – A conservator is an individual or entity appointed by a court to manage the financial affairs, assets, and personal well-being of someone who has been deemed unable to handle these matters independently. The person for whom the conservator is appointed is often referred to as the conservatee. Conservatorships are typically established for individuals who are incapacitated due to age, illness, disability, or other reasons that render them incapable of managing their own affairs. There are two main types of conservatorships:
The appointment of a conservator is a legal process that involves a court determining that the individual in question is unable to manage their own affairs, and the conservator is then granted the legal authority to act on their behalf. The goal is to provide protection and support for individuals who are unable to care for themselves or make sound financial decisions. |
Contest (Contesting a Will) – Contesting a will refers to the legal action taken by an individual (usually a potential beneficiary) to challenge the validity or terms of a deceased person’s will. The person contesting the will, known as the contestant or challenger, typically asserts that there are issues with the creation, execution, or content of the will that render it invalid or unfair. Common grounds for contesting a will may include:
Contesting a will is a complex legal process that typically involves litigation. The outcome depends on the specific circumstances, evidence presented, and applicable laws. Individuals considering contesting a will should seek legal advice to understand their rights and the likelihood of success in their particular case. |
| Contingent Beneficiary – A contingent beneficiary is an individual or entity named in a legal document, such as a life insurance policy, retirement account, or will, to receive benefits or assets if the primary beneficiary is unable to do so. The contingent beneficiary steps in if the primary beneficiary predeceases the account holder, disclaims the inheritance, or is otherwise unable to fulfill the role. The contingent beneficiary designation provides a secondary or backup plan for the distribution of assets in case the primary beneficiary cannot or does not accept the inheritance. This arrangement helps ensure a clear succession plan and avoids complications in the event of unforeseen circumstances affecting the primary beneficiary. |
| Corporate Trustee – A corporate trustee is a professional entity, typically a bank or trust company, that is appointed to act as a trustee for a trust. The corporate trustee assumes fiduciary responsibilities to manage and administer the trust assets according to the terms outlined in the trust document and in compliance with applicable laws and regulations. |
| Corpus – In the context of trusts and estates, “corpus” essentially represents the main body or principal sum of assets that make up the financial foundation of the entity. This can include various types of assets such as cash, investments, real estate, and other valuable holdings. The income generated or the interest earned from the corpus is typically distributed to beneficiaries as outlined in the terms of the trust or estate plan. |
| Credit Shelter Trust – Also known as a bypass or family trust, is a legal arrangement designed to minimize estate taxes by allowing an individual to leave assets to a surviving spouse while utilizing the applicable estate tax exemption amount. This trust “shelters” an amount equal to the exemption from estate taxes, ensuring it passes tax-free to beneficiaries. |
| Death Certificate – An official document issued by a relevant government authority, typically the vital statistics office or a similar agency, that records the details surrounding an individual’s death. It serves as legal proof of the person’s death and includes essential information such as the date, time, and place of death, as well as the cause of death. Additional details may include the deceased person’s name, age, gender, marital status, and occupation. Death certificates are crucial documents used for various purposes, including settling the deceased person’s estate, claiming life insurance benefits, and facilitating the legal and administrative processes associated with death. The accuracy and completeness of the information on a death certificate are vital for legal and financial transactions following an individual’s passing. |
| Death Notice –A death notice is a formal announcement or notification that communicates the death of an individual. It is typically a brief statement or written document providing essential information about the deceased person, such as their name, date of birth, date of death, and sometimes details about funeral arrangements. Death notices are often published in newspapers, online obituary platforms, or other public forums to inform the community, friends, and acquaintances about the passing of an individual. They serve as a way to share information about the deceased and provide an opportunity for others to express condolences and offer support to the grieving family. |
| Death Tax – is a colloquial term commonly used to refer to estate tax or inheritance tax. It is not a formal legal term but is often employed in public discourse to describe taxes levied on the transfer of an individual’s wealth upon their death. |
| Deceased – “Deceased” is an adjective used to describe someone who has died or passed away. It is a term commonly used in official and legal contexts to refer to an individual who is no longer living. When someone is referred to as deceased, it indicates that the person has experienced the cessation of life, and the term is often used in documents, records, and discussions related to death. |
| Decedent – refers to a person’s offspring, children, grandchildren, and any successive generations in a direct line of descent. In genealogical terms, a descendant is an individual who is directly descended from a particular ancestor. The term is commonly used in legal and estate planning contexts when referring to heirs or beneficiaries who inherit from a deceased person. |
| Decedent’s Estate – Refers to the collective assets and property owned by the descendants of a common ancestor. Descendants are individuals who are directly descended from a particular person, such as children, grandchildren, and subsequent generations. |
| Deed – A deed is a legal document that conveys or transfers a title or interest in real property (real estate) from one party, known as the grantor, to another party, known as the grantee. The deed serves as evidence of the transfer and typically includes a description of the property, details about the parties involved, and any conditions or covenants related to the transfer. There are several types of deeds, each with its own implications for the extent of the grantor’s warranties or guarantees. Common types include warranty deeds, quitclaim deeds, and special warranty deeds. Deeds are an essential component of real estate transactions, establishing and recording ownership rights in a formal and legally binding manner. |
| Descendants – The term “descendants” refers to individuals who are directly descended from a particular ancestor or group of ancestors. In genealogy and family history research, descendants are the offspring, children, grandchildren, and so forth, of a specific person or couple. The concept is often used to trace family trees and understand the relationships between different generations within a family. |
Digital Assets – Digital assets refer to any form of content or information that exists in a digital format and has value. These assets can be owned or controlled by individuals, organizations, or entities. Digital assets come in various forms, and they can include:
The value of digital assets often lies in their ability to be easily replicated, shared, and distributed across digital networks. Managing and protecting digital assets has become increasingly important as technology continues to play a central role in various aspects of business, entertainment, and personal life. |
Digital Estate – A digital estate encompasses a person’s online accounts, assets, and digital presence. It includes a wide range of digital assets and accounts that individuals create and accumulate during their lifetime. This can include:
Managing a digital estate has become an important aspect of estate planning, as it involves considerations for the access, transfer, or closure of digital accounts after an individual passes away or becomes incapacitated. It often involves providing instructions or appointing someone to manage these digital assets in accordance with the individual’s wishes or legal requirements. |
| Disclaimer – A disclaimer is a statement or notice that is intended to limit or exclude certain liabilities, responsibilities, or claims. It is often used to clarify the scope, conditions, or limitations associated with a product, service, information, or legal document. The purpose of a disclaimer is to provide information, reduce legal risks, and manage expectations. |
| Disinherit – To disinherit means to intentionally exclude someone, typically a family member or heir, from inheriting or receiving a share of one’s estate. This exclusion is often specified in a will or estate planning document, where the testator (the person creating the will) explicitly states that a certain individual is not to inherit any portion of their assets. Disinheritance can occur for various reasons, such as strained relationships, disagreements, or other personal considerations. It is a deliberate act to prevent a particular individual from benefiting from the deceased person’s estate. The laws governing disinheritance can vary by jurisdiction, and there may be legal requirements or limitations on disinheritance in some cases. |
| Distribution (of Assets) – The distribution of assets refers to the process of dividing and allocating assets among individuals, entities, or beneficiaries as part of a legal or financial procedure. This often occurs in various contexts, such as estate planning, bankruptcy proceedings, divorce settlements, or the dissolution of a business. Estate planning, for example, the distribution of assets occurs after someone passes away, and their assets need to be distributed among heirs or beneficiaries according to a will or the laws of inheritance. In the context of a business dissolution, the distribution of assets involves allocating the company’s resources and property among shareholders or partners. When referring to bankruptcy, the distribution of assets is a key aspect of the liquidation process, where the debtor’s assets are sold, and the proceeds are used to repay creditors according to a predetermined hierarchy. Overall, the distribution of assets involves the fair and legal allocation of property, funds, or other valuable items among relevant parties based on established rules, agreements, or legal procedures. |
Domicile – Domicile refers to the permanent residence or legal address of an individual. It is the place where a person has established their true, fixed, and permanent home and principal residence, with the intention to remain there indefinitely. Domicile is more than just a physical location; it involves a subjective element of intent to make a particular place one’s permanent home. Key aspects of domicile include:
Domicile is significant in various legal contexts, including taxation, jurisdiction, and estate planning, as it can determine which laws and regulations apply to an individual. It is distinct from a person’s current location or residence, which may be temporary. |
| Durable Financial Power of Attorney – A durable financial power of attorney is a legal document that grants someone the authority to manage financial matters on behalf of another person, and it remains valid even if the individual granting the power becomes incapacitated. |
| Durable Healthcare Power of Attorney – A durable healthcare power of attorney is a legal document that designates an individual to make medical decisions on behalf of another person if they become incapacitated and unable to make their own healthcare choices. |
Durable Power of Attorney – A Durable Power of Attorney (DPOA) is a legal document that grants someone the authority to make financial and legal decisions on behalf of another person, referred to as the principal. The term “durable” indicates that the authority granted remains in effect even if the principal becomes incapacitated or mentally incompetent.Key features of a Durable Power of Attorney include:
The Durable Power of Attorney is a valuable tool in estate planning, allowing individuals to appoint someone they trust to manage their financial and legal affairs if they are unable to do so themselves. It is essential to carefully consider the choice of agent and clearly outline the powers granted in the document to ensure that the principal’s wishes are carried out. |
| Elective Share – Also known as a statutory share or forced share, refers to a legal provision that grants a surviving spouse the right to claim a portion of the deceased spouse’s estate, regardless of the terms specified in the deceased spouse’s will. The purpose of the elective share is to protect the surviving spouse from being completely disinherited by the deceased spouse. |
| Estate – In estate planning, the term “estate” refers to the total assets, debts, and interests of an individual. Estate planning involves arranging the management and distribution of these assets during one’s lifetime and after death. It includes decisions on asset distribution, minimizing taxes, providing for dependents, addressing healthcare preferences, naming executors, and planning for business succession. The process aims to ensure that assets are distributed according to the individual’s wishes, minimize tax impact, and provide for the well-being of loved ones. Professional guidance is crucial in creating an effective estate plan using legal and financial instruments like wills, trusts, and powers of attorney. |
| Estate Freeze – An estate freeze is a financial and estate planning strategy used to lock in the current value of an individual’s or business owner’s assets for tax purposes while transferring future appreciation to the next generation. This strategy is often employed to minimize the tax impact on the estate and facilitate the orderly transfer of assets to heirs. |
| Estate Plan – |
| Estate Tax – Estate tax is a tax imposed on the total value of a deceased person’s assets transferred upon their death. Calculated on the taxable estate, which is the net value of assets after deductions and exemptions, estate taxes are typically progressive, with rates varying based on the estate’s value. Various jurisdictions, including some countries and states, may levy estate taxes. Estate tax planning often involves strategies to minimize the impact, such as utilizing exemptions, deductions, and estate planning tools. The specific laws and rates depend on the jurisdiction. |
| Executor – An individual appointed in a will or by a court to carry out the final wishes and instructions of a deceased person, known as the testator. The executor is responsible for managing the estate, including gathering and distributing assets, settling debts, and handling other administrative tasks, ensuring that the deceased’s wishes are fulfilled in accordance with applicable laws and regulations. |
| Exempt Property – Refers to assets or possessions that are legally protected from being used to satisfy certain debts or claims. These exemptions are established by law to ensure that individuals maintain a basic level of essential property even in the face of financial challenges, such as bankruptcy or creditor claims. The specific types and value of exempt property can vary by jurisdiction and the nature of the debt or legal proceedings. Common examples of exempt property may include a primary residence, necessary personal items, and tools of the trade. Exempt property is shielded from seizure or liquidation to help individuals maintain a reasonable standard of living despite financial difficulties. |
| Family Limited Partnership (FLP) – A legal structure blending features of a limited partnership and family estate planning. It involves general and limited partners, with general partners having control over operations. FLPs are commonly used for asset protection, estate planning, and systematic wealth transfer between generations. The structure offers potential tax benefits, including valuation discounts for estate tax purposes. It’s crucial to establish and operate FLPs in compliance with relevant laws and seek professional advice due to their complexity. |
| Family Trust Company – A private financial institution established and operated by a specific family or related families. It focuses on managing the wealth, trusts, and financial affairs exclusively for the family members. Offering personalized services, it provides control, continuity, and privacy in wealth management across generations. Family trust companies are subject to regulatory compliance, but they often afford more flexibility compared to public trust companies. |
| Federal Estate Tax Exemption Amount – The federal estate tax exemption is the maximum value of an estate that can be transferred without incurring federal estate tax. It represents a threshold below which estates are not subject to taxation, while those exceeding the limit may face taxes on the excess amount. It’s an important factor in estate planning. For the latest information, consult a tax professional due to potential changes in tax laws. |
| Fiduciary – In estate planning, a fiduciary is an individual or entity entrusted with the responsibility to act in the best interests of another person, known as the principal or the beneficiary. Fiduciaries play key roles in managing and executing various aspects of the estate plan, ensuring that the wishes and interests of the individual creating the estate plan are carried out appropriately. Common fiduciary roles in estate planning include: |
| Fiduciary Duty -Fiduciary duties in the context of a will typically refer to the responsibilities and obligations of individuals appointed to key roles, such as executors or trustees, who are entrusted with managing and distributing the assets of an estate according to the terms outlined in the will. These fiduciary duties include: Duty of:
Executors and trustees, as fiduciaries, play a crucial role in carrying out the wishes of the deceased individual and ensuring the proper distribution of assets to heirs or beneficiaries. Breach of fiduciary duties can have legal consequences, and fiduciaries are held to high standards of integrity and accountability. |
| Financial Guardian – An individual or entity appointed to oversee and manage the financial affairs of another person, often someone who is incapacitated or unable to handle their own finances. The financial guardian is entrusted with making financial decisions, managing assets, and ensuring the individual’s financial well-being in accordance with legal responsibilities and the best interests of the person under their care. |
| Formal Probate – Formal probate refers to the legal process of administering the estate of a deceased person through the court system in a structured and formal manner. This process typically involves court oversight, hearings, and adherence to specific legal procedures to ensure the orderly distribution of the deceased person’s assets and the resolution of outstanding debts and claims. |
| Funding – Funding in estate planning denotes the crucial process of transferring ownership or control of assets into a newly established trust, ensuring seamless management and distribution according to the trust’s provisions. Proper funding is crucial to the success of an estate plan. Failure to fund assets appropriately can lead to unintended consequences, delays, and increased costs during the estate administration process. Estate planning attorneys often work closely with individuals to guide them through the funding process, ensuring that their assets are structured in a way that maximizes the efficiency of the estate plan and facilitates the smooth transfer of assets to heirs or beneficiaries. |
| Generation-Skipping Transfer Tax (GSTT) – The Generation-Skipping Transfer Tax (GSTT) is a federal tax imposed on certain wealth transfers that “skip” a generation, such as gifts or bequests made directly to grandchildren or individuals at least two generations younger than the donor. This tax aims to prevent the avoidance of estate taxes across multiple generations by taxing the transfer of assets that would otherwise escape taxation at each successive level. |
Gift – In estate planning, a “gift” refers to the voluntary transfer of assets from one person, known as the donor, to another, known as the recipient or donee, without the expectation of receiving something of equal value in return. Gifts can be a significant aspect of estate planning, and they are often made for various reasons, including wealth transfer, tax planning, and providing financial support to family members or charitable causes. Key points about gifts in estate planning include:
It’s important for individuals engaging in gift-giving as part of their estate plan to be aware of the relevant tax implications and regulations, which can vary by jurisdiction. Consulting with tax and estate planning professionals is advisable to ensure that gifts are made in a manner that aligns with the donor’s overall financial goals and objectives. |
Gift Tax – Gift tax is a tax imposed on the transfer of assets, money, or property from one person (the donor) to another person (the donee) without receiving full and adequate consideration in return. The tax is typically levied on the donor rather than the recipient of the gift and is designed to prevent individuals from avoiding estate taxes by giving away their assets before death. Key features of gift tax include:
Gift tax laws and regulations vary among countries, and it’s important for individuals engaging in significant gifting to be aware of the relevant rules and exemptions. Consulting with tax professionals or estate planning advisors can provide guidance on minimizing the impact of gift taxes while efficiently transferring wealth. |
| Grantor – In the context of a trust, a grantor is the person or entity that creates the trust by transferring assets into it. The grantor is also commonly known as the “settlor” or “trustor.” By doing so, the grantor establishes the trust and defines its terms, including how the assets should be managed and distributed to the beneficiaries. The grantor may retain certain rights or control over the trust during their lifetime, depending on the type of trust created. |
| Grantor Retained Annuity Trust (GRAT) – An irrevocable trust allowing a grantor to transfer assets while retaining the right to receive an annuity payment for a specified period. The annuity is calculated at the trust’s creation and paid annually to the grantor. At the trust’s end, remaining assets pass to designated beneficiaries, often family members, with potential estate tax benefits. GRATs are used for wealth transfer, especially when assets are expected to appreciate. Gift tax implications apply, and if the grantor dies during the trust term, remaining assets may be included in their estate for tax purposes. Professional advice is crucial due to the complexity of GRATs. |
| Grantor Trust – A legal arrangement in which the person who establishes the trust (the grantor) retains certain control or benefits over the trust property. In a grantor trust, the income generated by the trust is usually attributed to the grantor for tax purposes, and the grantor may retain the right to revoke or modify the trust. This type of trust is often used for estate planning and tax efficiency, as it allows the grantor to maintain a level of influence and flexibility over the trust assets while still facilitating wealth transfer. |
| Gross Estate – Refers to the total value of a deceased person’s assets and property at the time of their death, before any deductions or liabilities are taken into account. It includes the decedent’s real estate, personal property, financial assets, and other holdings. The gross estate serves as the starting point for calculating estate taxes, and it is used to determine the overall value of the estate before applying deductions and exemptions. |
| Guardian – In estate planning, a guardian is an individual or entity appointed to make legal and personal decisions on behalf of a minor child or an incapacitated adult who is unable to make such decisions independently. The appointment of a guardian is a crucial aspect of estate planning, especially when considering the welfare and care of dependents in the event of the individual’s death or incapacity. |
| Guardian ad Litem – A Guardian Ad Litem (GAL) is a court-appointed individual, often an attorney or a specially trained advocate, appointed to represent and protect the best interests of a person who is unable to represent themselves in legal proceedings. The role of a Guardian Ad Litem is typically associated with cases involving minors, individuals with incapacities, or those who are otherwise deemed unable to advocate for their own interests in court. |
| Healthcare Proxy – A document that appoints someone to make medical decisions for you if you can’t. A healthcare proxy is like giving a close friend or family member the job of making medical decisions for you if you can’t. This happens if you get sick and can’t say what you want for your treatment. The person you choose, called the healthcare proxy, will talk to the doctors and make choices based on what they think you would want. This job starts when the doctor says you can’t decide for yourself and lasts until you can or until you pass away. Making a healthcare proxy is an important part of planning for your health and future. |
| Heir at Law – An individual who is entitled to inherit the assets and property of a deceased person based on the laws of intestacy. Laws of intestacy come into play when someone dies without a valid will or when the will does not cover the entire estate. Heirs at law are typically determined based on their familial relationship to the deceased, such as children, spouses, or other close relatives. The specific rules regarding heirs at law can vary by jurisdiction. |
| Holographic Will – A handwritten will entirely created and signed by the testator (the person making the will) without the presence of witnesses. In some jurisdictions, a holographic will may be considered valid even if it lacks formalities, as long as it reflects the testator’s intent and is entirely in their own handwriting. However, the requirements for validity can vary, and it’s essential to comply with local laws to ensure the effectiveness of a holographic will. |
| Homestead – A residential property and the surrounding land, especially a family home and its adjoining land, which is considered the primary residence of the homeowner or family. |
| Homestead Exemption – Homestead exemption in estate planning protects a portion of the value of a person’s primary residence from certain creditors’ claims or property taxes. It prevents the forced sale of the home to satisfy certain debts, providing homeowner and family security. The amount and conditions of the exemption vary by jurisdiction, and it can also offer property tax relief. Understanding the homestead exemption is crucial in estate planning for preserving the family home’s value for heirs. |
Incapacity – In the context of estate planning, incapacity refers to a person’s inability to make sound and informed decisions about their financial affairs, healthcare, and other personal matters. This lack of capacity may result from factors such as illness, mental health issues, cognitive decline, or other conditions that impair the individual’s ability to understand the consequences of their decisions. Key points about incapacity in estate planning include:
Incapacity planning is a critical aspect of comprehensive estate planning. By addressing potential incapacity through legal documents and advance directives, individuals can ensure that their affairs are managed in accordance with their preferences, even if they are unable to communicate those preferences themselves. Seeking legal advice is advisable to navigate the complexities of incapacity planning and document preparation. |
| Independent Administration – Independent administration streamlines the probate process, granting the executor more authority and minimizing court supervision. This allows for quicker estate settlement, reduced formality, and potential cost savings. To qualify, the estate must meet specific criteria, including a valid will and consensus among heirs. Independent administration contrasts with supervised alternatives, offering efficiency in handling the deceased person’s affairs, but its availability varies by jurisdiction, necessitating compliance with local laws and court requirements. Executors often collaborate with legal professionals to determine the best approach for a particular estate. |
| Independent Executor – An independent executor is an individual appointed in a will to manage and distribute the estate of a deceased person with greater freedom and reduced court supervision. Unlike a dependent executor, they can carry out estate administration tasks, such as paying debts and distributing assets, without needing frequent court approvals. The appointment is specified in the will, subject to legal requirements, and the independent executor is accountable to the beneficiaries. This designation streamlines the estate administration process and is aimed at achieving greater efficiency. |
| Informal Probate – Informal probate is like a quicker and simpler way to settle someone’s estate after they pass away. Instead of a lot of court involvement, the person in charge (executor) can do things more independently. This is good when everyone agrees and the estate isn’t too complicated. It’s faster and costs less because there’s less paperwork and court fees. The process involves submitting necessary documents to the court, and if everything is okay, the executor can go ahead with managing the estate. But remember, how this works can vary depending on where you are. |
| Inheritance – Inheritance refers to the process by which individuals receive assets, properties, or characteristics from their ancestors or predecessors. It commonly involves the passing on of financial assets, real estate, or personal belongings from one generation to the next. In biological terms, inheritance also pertains to the transmission of genetic traits or characteristics from parents to offspring. |
| Inheritance Tax – Inheritance tax is a tax levied on the assets or estate of a deceased person before they are passed on to their heirs or beneficiaries. It is imposed on the value of the inherited assets and is separate from income tax. The tax is typically paid by the beneficiaries or heirs based on the value of the inheritance they receive. Inheritance tax laws and rates vary by jurisdiction, and some regions may have exemptions or thresholds below which no tax is owed. |
| Inter Vivos – Latin for “between the living,” refers to transactions, gifts, or transfers that occur during a person’s lifetime, as opposed to those taking effect upon their death (testamentary). |
| Intestate /Intestacy – Intestate refers to the legal condition of a person who has died without having made a valid will or left clear instructions regarding the distribution of their assets. In such cases, the estate is settled based on the intestacy laws of the relevant jurisdiction, determining how the deceased person’s property and possessions will be distributed among heirs or beneficiaries. |
| Intestate Succession – Intestate succession is the legal process that determines the distribution of a deceased person’s estate when they have not left a valid will or other instructions regarding the division of their assets. Intestate succession laws vary by jurisdiction but generally outline the order of inheritance among surviving relatives, such as spouses, children, and other close family members. These laws guide the distribution of the deceased person’s property in the absence of a will. |
| Irrevocable Life Insurance Trust (ILIT) – An Irrevocable Life Insurance Trust (ILIT) is a legal arrangement in which an individual, known as the grantor, establishes a trust to own a life insurance policy. Once the ILIT is set up, the grantor relinquishes the ability to make changes to the trust or revoke it. The trust is designed to manage the life insurance proceeds, providing potential tax benefits and ensuring that the death benefit is excluded from the grantor’s estate for estate tax purposes. The trust typically designates beneficiaries who will receive the life insurance proceeds upon the death of the insured. |
| Irrevocable Trust – An irrevocable trust is a legal arrangement in which the grantor (the person creating the trust) transfers assets into the trust and relinquishes the ability to modify or revoke the trust without the consent of the beneficiaries. Once established, the terms of an irrevocable trust generally cannot be altered by the grantor, providing a level of permanence and security. This type of trust is often utilized for estate planning purposes to achieve specific tax or asset protection objectives. |
| Joint Ownership – Refers to a legal arrangement where two or more individuals share ownership rights and responsibilities over a property or asset. The co-owners, often referred to as joint owners or co-owners, may hold equal or distinct shares in the property, depending on the type of joint ownership structure. Common forms of joint ownership include joint tenancy, where co-owners have equal and undivided interests with the right of survivorship, and tenancy in common, where co-owners may have different ownership shares and no automatic right of survivorship. Joint ownership can apply to various assets, such as real estate, bank accounts, or investments. |
| Joint Tenancy – A form of property ownership where two or more individuals, commonly referred to as joint tenants, hold equal and undivided shares in the same property. One key feature of joint tenancy is the right of survivorship, which means that if one joint tenant passes away, their share automatically transfers to the surviving joint tenants, avoiding the probate process. Joint tenants also share equal rights to use and enjoy the entire property, and their ownership interests must begin at the same time. This type of ownership is common in real estate and can be created by specific phrasing in a property deed or other legal documents. |
| Joint Tenancy with Right of Survivorship (JTWROS) – Joint Tenancy is a type of property ownership arrangement where two or more individuals hold equal shares of the property, and in the event of the death of one owner, their share automatically transfers to the surviving owner(s) without the need for probate or a will. This means that the last surviving owner ultimately becomes the sole owner of the property. |
| Joint Trust – A joint trust is a legal arrangement in which two or more individuals create and manage a single trust together, typically for the purpose of holding and managing assets, with provisions for the distribution of assets or income according to the terms outlined in the trust document. |
| Legacy – In the context of a will, a legacy refers to a specific bequest or gift that the testator (the person making the will) designates to a particular individual, entity, or charity. A legacy can take the form of money, property, personal belongings, or any other asset that the testator intends to leave to a specific beneficiary or charitable organization. Legacies are detailed in the will and are a way for the testator to express their wishes regarding the distribution of their estate among heirs, beneficiaries, and charitable causes. |
| Letter of Instruction – A non-legal document that provides guidance and information to survivors, executors, or family members after someone has passed away. This letter typically includes details such as funeral or memorial service preferences, location of important documents (will, insurance policies, financial accounts), contact information for key individuals (attorneys, financial advisors), and any specific wishes or instructions the deceased may have had regarding the distribution of personal belongings. While not a legally binding document, a letter of instruction serves as a helpful and thoughtful guide during a challenging time, aiding those responsible in carrying out the deceased person’s wishes. |
| Life Beneficiary – A life beneficiary is an individual who is designated to receive benefits, such as income or assets, from a trust, insurance policy, or other financial arrangement during their lifetime. Upon the death of the life beneficiary, the benefits may pass to another individual or entity as specified in the terms of the arrangement. |
| Living Trust – A living trust, also known as a revocable trust or inter vivos trust, is a legal arrangement in which an individual, known as the grantor, transfers their assets into a trust during their lifetime. The grantor typically retains control over the assets and can make changes to the trust or even revoke it entirely if they wish. The primary purpose of a living trust is to facilitate the seamless management and distribution of assets, avoiding probate—a court-supervised process of estate administration—upon the grantor’s death. Living trusts are commonly used in estate planning to provide for the efficient transfer of assets to beneficiaries while allowing the grantor to maintain flexibility and control during their lifetime. |
| Living Will – Also known as an advance healthcare directive or directive to physicians, is a legal document that outlines an individual’s preferences regarding medical treatment in the event they become unable to communicate or make decisions for themselves due to illness or incapacitation. This document typically addresses specific medical interventions, such as life support, resuscitation, and organ donation, allowing individuals to express their healthcare wishes and guide healthcare providers and family members in making decisions on their behalf. A living will is an essential component of advance care planning and is legally binding in many jurisdictions. |
| Marital Deduction – The marital deduction refers to a provision in the U.S. federal tax law that allows for the unlimited transfer of assets between spouses without incurring federal estate or gift taxes. This deduction is a key component of estate tax planning and is designed to prevent the imposition of taxes on the transfer of property between spouses during their lifetimes or upon the death of one spouse. By utilizing the marital deduction, married couples can facilitate the transfer of assets to each other without immediate tax consequences, potentially reducing or eliminating estate taxes that would otherwise apply. |
| Medical Power of Attorney – A Medical Power of Attorney (Medical POA) is a legal document that designates an individual to make healthcare decisions on behalf of another person (the principal) in the event that the principal is unable to make those decisions due to incapacitation or inability to communicate. |
| Minor – A minor is an individual who is under the legally defined age of majority, typically under 18 years old, and is not considered an adult in terms of legal rights and responsibilities. |
| Modern Per Stirpes – Modern per stirpes is a legal term used to describe an inheritance distribution method that divides an estate among the descendants of a deceased person at the closest generational level, regardless of the number of individuals in each branch. This is in contrast to the traditional per stirpes method, where each branch receives an equal share, regardless of the number of individuals in that branch. The modern per stirpes approach aims to achieve a more equitable distribution among all descendants. |
| Net Estate – Refers to the total value of an individual’s assets, including real estate, financial holdings, and personal property, minus any outstanding debts, liabilities, and expenses. It represents the amount of an individual’s wealth or estate that remains after deducting all obligations and liabilities. |
| No Contest Clause – A no contest clause, also known as an in terrorem clause, is a legal provision in a will or trust that threatens to disinherit or reduce the share of a beneficiary if they challenge the validity of the document or contest its terms in court. The clause is designed to discourage legal disputes and promote the acceptance of the estate plan as outlined by the testator or grantor. |
| Nuncupative Will – An an oral or spoken will made by an individual in the presence of witnesses. It is a type of will that is not in writing and is often subject to specific legal requirements and limitations, which can vary by jurisdiction. Nuncupative wills are generally accepted only in specific circumstances and may have limitations on the types of assets they can cover or the value of the estate they can address. |
| Payable on Death – Payable on Death (POD) is a designation used in financial accounts, such as bank accounts or certificates of deposit, where the account owner specifies a beneficiary to whom the remaining balance will be transferred upon the owner’s death. This allows for the seamless transfer of assets outside of the probate process, providing a straightforward method of passing the funds to the named beneficiary. |
| Per Capita – Per capita refers to the Latin phrase “per head,” and in a financial or demographic context, it means “per person” or “for each individual.” It is often used to express averages or rates by dividing a total quantity or value by the number of people in a population or a group. |
| Per capita with representation – Per capita with representation typically refers to a method of distributing resources or representation by dividing them equally among individuals in a group. In this context, each person receives an equal share or representation regardless of specific characteristics or circumstances. |
| Per Stirpes – Per stirpes is a Latin term used in estate planning to determine how an inheritance is distributed among descendants. In this context, it means that each branch or line of descendants receives an equal share of the inheritance, with the share of a deceased individual passing to their descendants in equal parts. |
| Personal Property – Personal property refers to movable and tangible assets that are owned by an individual or business, excluding real estate or real property. Examples of personal property include items such as furniture, clothing, vehicles, electronics, and other possessions that are not permanently attached to land or buildings. |
| Personal Representative – A personal representative, also known as an executor or administrator, is an individual appointed to manage the affairs and settle the estate of a deceased person. This may involve tasks such as distributing assets, paying debts, and fulfilling the terms of the deceased person’s will or intestacy laws. |
| Pour-over Will – A legal document that is often used in conjunction with a revocable living trust as part of an estate plan. This type of will “pours over” or transfers assets that were not specifically placed into the living trust during the individual’s lifetime into the trust upon their death. The pour-over will ensures that any assets not already in the trust are included, allowing them to be distributed according to the terms of the trust. This legal instrument helps to streamline the probate process and ensures that assets are ultimately distributed as outlined in the overall estate plan. |
| Power of Attorney – A legal document that grants someone the authority to act on behalf of another person, known as the principal, in specified matters. This individual granted this authority, is often referred to as the agent or attorney-in-fact, can make decisions and take actions as outlined in the power of attorney document. The powers granted can vary widely and may include handling financial transactions, managing legal affairs, making healthcare decisions, or other specified responsibilities. The authority granted by a power of attorney can be broad or limited, and it can be effective immediately or become active under specific circumstances, depending on the terms stipulated in the document. |
| Prenuptial Agreement – Commonly known as a prenup or premarital agreement, is a legally binding contract entered into by a couple before they get married or enter into a civil partnership. This agreement outlines the distribution of assets, debts, spousal support, and other financial matters in the event of a divorce, separation, or death. Prenuptial agreements are designed to provide clarity and protect the interests of both parties, addressing potential financial issues and avoiding disputes in the future. |
| Principal – The principal, also referred to as the corpus, is the initial sum of money or assets invested, donated, or held in a trust. It is the core amount from which interest, income, or profits may be generated or distributed, while the principal itself is generally intended to be preserved. |
| Private Trust Company – A private trust company is a specialized entity established to provide trustee services exclusively for a single family or a limited group of related individuals. It is formed to manage and administer the family’s trust assets, offering more control and customization over trust management while maintaining privacy and family involvement. |
| Probate Court – Probate court is a specialized court that deals with the legal processes related to the administration of a deceased person’s estate. The primary functions of a probate court include validating and executing wills, appointing executors or administrators to oversee the distribution of the deceased person’s assets, settling debts and taxes, and resolving any disputes that may arise among heirs or beneficiaries. The court ensures that the deceased person’s wishes, as expressed in their will or according to applicable laws, are carried out in an organized and lawful manner. Probate court plays a crucial role in the probate process, which involves the legal validation and distribution of the deceased person’s estate. |
| Probate Estate – The probate estate refers to the assets and property owned by a deceased person that are subject to the probate process. When someone passes away, their estate typically goes through probate, a legal process supervised by a probate court. During probate, the court validates the deceased person’s will (if one exists) and oversees the distribution of assets to heirs and beneficiaries. The probate estate includes assets that are solely owned by the deceased and are not automatically transferred to others through mechanisms like joint tenancy, trusts, or beneficiary designations. Common components of a probate estate may include real estate, bank accounts, personal belongings, and other assets held solely in the decedent’s name. |
| Probate Fees – Probate fees, also known as estate or inheritance taxes, are charges imposed by the government on the estate of a deceased person during the probate process. These fees are typically calculated based on the value of the assets passing through probate and are meant to cover administrative costs associated with settling the estate. The rates and regulations governing probate fees can vary by jurisdiction. |
| Probate – Probate is the legal process through which a deceased person’s estate is administered and settled under the supervision of a court. The primary objectives of probate include validating the deceased person’s will (if one exists), appointing an executor or administrator to manage the estate, identifying and inventorying assets, addressing outstanding debts and taxes, and ultimately distributing the remaining assets to heirs or beneficiaries according to the terms of the will or applicable laws. The probate process provides a legal framework for ensuring the orderly transfer of assets and resolution of financial matters after someone’s death. |
| Professional Trustee – A professional trustee is an individual or entity, often a financial institution or a trust company, that is experienced and qualified to administer and manage trusts on behalf of individuals, families, or organizations. Professional trustees bring expertise in trust administration, investment management, and fiduciary responsibilities to ensure the proper handling of trust assets and adherence to legal requirements. |
| Qualified Domestic Trust (QDOT) – A Qualified Domestic Trust (QDOT) is a legal arrangement that allows a non-U.S. citizen surviving spouse to qualify for the marital deduction in the United States for estate tax purposes. In the context of estate planning, when a non-citizen spouse inherits assets from a U.S. citizen spouse, there may be potential estate tax implications. A QDOT helps address this by deferring the estate tax until distributions are made from the trust. The trust must meet specific requirements outlined in the U.S. tax code to qualify as a QDOT, and it allows for the postponement of estate taxes until the surviving spouse receives income or principal distributions from the trust. |
| Qualified Personal Residence Trust – A Qualified Personal Residence Trust (QPRT) is a legal arrangement that allows an individual to transfer their primary residence or vacation home to an irrevocable trust, retaining the right to live in the property for a specified period. After the trust term expires, the property is passed on to beneficiaries, potentially reducing estate tax implications. |
| Qualified Terminable Interest Property – Qualified Terminable Interest Property (QTIP) refers to a type of trust that allows an individual to provide income for a surviving spouse while determining how the remaining assets will be distributed among other beneficiaries after the spouse’s death. This arrangement provides the surviving spouse with financial support while maintaining control over the ultimate distribution of assets. QTIP trusts are commonly used in estate planning to address the needs of both the surviving spouse and other heirs. |
| Revocable Living Trust – A legal arrangement in which an individual (the grantor or settlor) establishes a trust during their lifetime to manage and distribute their assets. Unlike an irrevocable trust, a revocable living trust allows the grantor to retain control over the assets placed in the trust and provides the flexibility to amend or revoke the trust at any time during their lifetime. The grantor typically serves as the initial trustee, managing the trust assets, and designates successor trustees to take over in the event of their incapacity or death. One primary advantage of a revocable living trust is that it can help streamline the distribution of assets, avoiding the probate process and providing privacy for the grantor and their beneficiaries. |
| Recipient – A recipient of an estate refers to an individual or entity that receives assets or property from a deceased person’s estate through inheritance or bequest. This can include heirs named in a will, beneficiaries of a trust, or individuals entitled to assets through the laws of intestacy when there is no will. |
| Residual Estate / Residuary Estate / Residue – Refers to the remaining assets and property in an estate after all specific gifts, bequests, debts, taxes, and administrative expenses have been accounted for and distributed according to the terms of a will or applicable laws. In other words, it encompasses whatever is left in the estate once all specified distributions and obligations have been satisfied. The residual estate is typically distributed to the residuary beneficiaries as outlined in the will or, in the absence of a will, it may be distributed according to the laws of intestacy. |
| Revocable Trust – A revocable trust is a legal arrangement that the creator can change or dissolve during their lifetime, providing flexibility and control over the assets placed in the trust. It becomes irrevocable after the creator’s death, guiding the distribution of assets to beneficiaries. |
| Self Proving Affidavit – A self-proving affidavit is a document that makes it easier to prove the validity of a will after someone passes away. It includes statements from witnesses who saw the person sign the will and confirms that everyone involved knew it was the person’s will. This helps avoid the need for witnesses to testify in court later on, making the probate process smoother. Separate Property – Separate property refers to assets and possessions owned exclusively by an individual, typically acquired before marriage or acquired through gifts and inheritances during the marriage. In the context of a legal or financial arrangement, separate property is distinct from marital or community property, and it is generally not subject to division in the event of a divorce or dissolution of the marriage. |
| Separate Property State – A separate property state is a legal jurisdiction where the ownership of assets acquired during a marriage is generally considered separate, rather than communal. In such states, each spouse typically retains ownership of the property they individually acquire, and these assets are not automatically subject to equal division in the event of a divorce. The opposite of a separate property state is a community property state, where assets acquired during marriage are often considered joint property and subject to equal distribution upon divorce. |
| Separate Trust – A separate trust is a distinct legal arrangement created to hold and manage assets separately from other trusts or entities. This structure allows for specific management, control, and distribution instructions for the designated assets within that particular trust, maintaining separation from other financial or estate planning arrangements. |
| Settle an Estate – To settle an estate means to manage and distribute the assets, debts, and affairs of a deceased individual in accordance with their will or applicable laws. This process involves resolving financial matters, paying debts, and distributing remaining assets to the heirs or beneficiaries. It often includes legal and administrative tasks, such as probate proceedings, to ensure a systematic and lawful resolution of the deceased person’s estate. |
| Settlor – Also known as a grantor or trustor, is an individual or entity that creates a trust by transferring assets into the trust. The settlor establishes the trust and determines its terms, including specifying how the assets are to be managed and distributed. In the context of a trust, the settlor may retain certain powers or interests, depending on the type of trust created. Once the trust is established, the settlor’s role is to initiate the legal arrangement, define its parameters, and transfer ownership of assets to the trust for the benefit of the trust’s beneficiaries. |
| Simplified (Summary) Probate – A streamlined legal process for handling small estates, typically allowing for quicker resolution without a full probate proceeding. This simplified procedure varies by state and involves less court involvement, often using affidavits or simplified court forms to transfer assets to heirs. It is applicable when the estate’s value falls below a specified limit set by state law. |
| Special Needs Trust – A trust designed to provide for someone with disabilities without jeopardizing government benefits. |
| Spendthrift Provision – A spendthrift provision is a legal stipulation in a trust or will that restricts a beneficiary’s ability to transfer or sell their interest in the trust’s assets and protects those assets from the beneficiary’s creditors. This provision is designed to provide financial support to the beneficiary while preventing them from recklessly spending or losing the assets to creditors. |
| Spendthrift Trust – A spendthrift trust is a type of trust that includes a spendthrift provision, which restricts the ability of the beneficiaries to transfer or assign their beneficial interests in the trust. This provision protects the trust assets from being claimed by the beneficiaries’ creditors, providing a level of financial security for the beneficiaries. The trustee of a spendthrift trust has the authority to make discretionary distributions to the beneficiaries for their well-being, while shielding the trust assets from potential external claims. |
| Spousal Lifetime Access Trust (SLAT) – A Spousal Lifetime Access Trust (SLAT) is an irrevocable trust created by one spouse for the benefit of the other, allowing the contributing spouse to make tax-free transfers while providing the non-contributing spouse with access to income generated by the trust. SLATs are commonly used in estate planning to leverage the gift and estate tax exemptions, as well as to facilitate wealth transfer within a family while maintaining some level of access and flexibility for the contributing spouse. Assets placed in a SLAT are typically removed from the contributing spouse’s taxable estate, and any income generated can be accessed by the non-contributing spouse during their lifetime. |
| Spousal Share – Refers to the portion of a deceased person’s estate that is legally designated for the surviving spouse, often mandated by state laws or outlined in the deceased individual’s will or trust document. This share ensures that a surviving spouse receives a specified portion of the deceased spouse’s assets, providing financial support and protection. |
| Successor Trustee – An individual or entity named in a trust document to assume the role of trustee if the original trustee is unable or unwilling to fulfill their responsibilities. The successor trustee’s role comes into effect upon the death, incapacity, resignation, or other specified events that render the original trustee unable to perform their duties. The successor trustee is then responsible for managing and administering the trust, including overseeing the distribution of assets to beneficiaries according to the terms outlined in the trust document. This provision is a common feature in revocable living trusts as a way to ensure the seamless transition of trust administration. |
| Surviving Spouse – A surviving spouse is the individual who outlives their partner. Typically, to qualify as a surviving spouse, one must live for at least 120 hours after the passing of their partner. |
| Survivorship Life Insurance – Survivorship life insurance, also known as second-to-die life insurance, is a type of life insurance policy that covers the lives of two individuals, typically spouses. The death benefit is paid out only after the death of the second insured person. This type of policy is often used in estate planning, as it can provide a source of funds to cover estate taxes, debts, or other financial obligations that may arise upon the death of the second individual. Survivorship life insurance is generally more cost-effective than individual life insurance policies, making it an attractive option for couples looking to maximize the value of their estate for their heirs. |
| Tenancy by Entirety – Tenancy by entirety is a form of joint ownership of property that is exclusive to married couples. In this arrangement, both spouses jointly own the entire property, and neither can transfer their interest without the other’s consent. Additionally, if one spouse passes away, the surviving spouse automatically becomes the sole owner of the property. This form of ownership provides certain legal advantages and protections for married couples. |
| Tenants in Common – Tenants in common is a form of property ownership where two or more individuals, known as tenants in common, hold undivided interests in the same property. Each tenant in common has a distinct, separately transferable ownership share, and these shares need not be equal. In the event of the death of one tenant in common, their share passes to their heirs or beneficiaries rather than automatically transferring to the other co-owners, as is the case with joint tenancy. This form of ownership allows for greater flexibility and individual control over one’s share of the property. |
| Testamentary – “Testamentary” in the context of a will refers to matters or provisions related to the will, particularly those that come into effect upon the death of the testator (the person making the will). |
| Testamentary Trust – A trust that is established by a person’s will and comes into effect upon their death. It allows the individual (testator) to specify how their assets should be managed and distributed for the benefit of beneficiaries after their passing. |
| Testator – A testator is an individual who has created and executed a will. The term specifically refers to the person who makes a legally valid will, outlining their wishes regarding the distribution of their assets, the appointment of guardians for minor children, and other matters related to the disposition of their estate after their death. The testator’s will is a legally binding document, and upon the testator’s death, the instructions outlined in the will are carried out by an executor or personal representative according to applicable laws and regulations. |
| Title of Property – Refers to the legal ownership or right to ownership of a particular asset, usually real estate. It represents the bundle of rights and interests that a person or entity has in a property. Having clear title is essential for establishing ownership, and it is typically documented through a title deed or other legal instruments. A clean title indicates that there are no outstanding claims, liens, or encumbrances that could challenge the owner’s right to the property. Clear title is crucial in real estate transactions to ensure a smooth transfer of ownership from one party to another. |
| Transfer Tax – or (Title to Real Property or other assets). This tax is typically levied when ownership of property is conveyed from one party to another through a sale, gift, inheritance, or other means. The amount of the transfer tax is often calculated based on the value of the property or the consideration paid for the transfer. Transfer taxes are a common source of revenue for local and state governments and are intended to generate funds from real estate transactions or asset transfers. The specific rates and regulations governing transfer taxes vary by jurisdiction. |
| Transfer-on-Death (TOD) – Transfer on Death (TOD) is a designation that allows an asset owner to specify who will receive the asset upon their death without the need for probate. This arrangement is commonly used for financial accounts, securities, or real estate. By assigning a TOD beneficiary, the owner ensures that the asset transfers directly to the designated individual or individuals upon their passing, bypassing the probate process. Transfer on Death provisions provide a relatively simple way to facilitate the transfer of certain assets while maintaining flexibility for the owner during their lifetime. |
| Trust Company – A trust company is a financial institution that specializes in managing and administering trusts, serving as a trustee to hold and manage assets for the benefit of individuals, families, or organizations according to the terms of the trust agreements. |
| Trustor – A trustor is an individual who establishes a trust by transferring assets to a trustee for the benefit of one or more beneficiaries. The trustor is also commonly referred to as the grantor or settlor. |
| Trusts – A trust is a legal arrangement in which a person, known as the settlor or grantor, transfers assets to a trustee to hold and manage for the benefit of one or more beneficiaries. The trustee is tasked with administering the trust according to the terms specified in the trust agreement, ensuring that the assets are used for the beneficiaries’ well-being or other designated purposes. Trusts are established for various reasons, including estate planning, asset protection, and charitable giving. |
| Uniform Transfer to Minors Act – The Uniform Transfer to Minors Act (UTMA) is a legal framework in the United States that allows the transfer of assets to a minor without the need for a formal trust. Under UTMA, a custodian manages and safeguards the assets until the minor reaches the age of majority, at which point they gain control over the assets. |
| Ward – A ward refers to an individual, typically a minor or someone with legal incapacity, who is placed under the guardianship or protection of another person or entity, known as the guardian or custodian. |
| Widow / Widower – A widow is a woman whose spouse has died, and a widower is a man whose spouse has died. Both terms specifically refer to individuals who have lost their husband or wife through death. |
| Widow / Widower’s Share – The term “widow’s share” or “widower’s share” is not a standard legal or financial term. However, in the context of estate law or inheritance, it might refer to the portion of a deceased person’s assets that is legally designated for their surviving spouse. |
| Widows Share – The term “widow’s share” or “widower’s share” is not a standard legal or financial term. However, in the context of estate law or inheritance, it might refer to the portion of a deceased person’s assets that is legally designated for their surviving spouse. Laws regarding spousal shares vary, and some jurisdictions have specific rules outlining the distribution of assets to the surviving spouse upon the other spouse’s death. If you encounter the term in a legal context, it’s recommended to refer to specific local laws or consult with legal professionals for precise information. |
| Will – A will is a legal document that outlines an individual’s wishes regarding the distribution of their assets, care for their dependents, and the appointment of an executor to carry out these instructions upon their death. A will is a crucial component of estate planning and allows individuals to express their preferences for the management and distribution of their property after their passing. |
