Common Terminology in Estate Planning
Embarking on the journey of estate planning involves navigating a landscape of legal and financial considerations, often accompanied by a myriad of specialized terms. Familiarizing yourself with these terms lays the foundation for understanding the nuances of crafting a comprehensive estate plan. Whether it is contemplating the distribution of assets through beneficiaries, establishing trusts for specific purposes, or appointing executors and guardians, the terminology reflects the diverse elements that make up a well-thought-out estate strategy. Communication with legal and financial professionals becomes paramount. So, let us explore the lexicon of estate planning, ensuring that as we plan for the future, the language used becomes a guiding compass in the complex and personalized terrain of securing one’s legacy.
- Will or Last Will and Testament
A state specific legal document that outlines how your assets should be distributed after your death. It may also specify guardianship for minor children and other important matters.
- Trust:
A legal entity that holds assets for the benefit of certain individuals or entities. Trusts can be revocable or irrevocable and serve various purposes, such as avoiding probate, providing legacy planning for loved ones, or providing for specific needs, such as individuals with special needs.
- Probate:
The legal process through which a deceased person’s will is validated, and their estate is administered and distributed under court supervision under the term of the Will or by the Commissioner of Accounts.
- Executor/Executrix:
The person appointed in a will to carry out the deceased person’s wishes, manage the estate, and ensure the distribution of assets according to the will, while working with the Courts or Commissioner of Accounts.
- Beneficiary:
An individual or entity designated to receive assets or benefits from a will, trust, life insurance policy, or retirement accounts.
- Power of Attorney:
A legal document that authorizes someone to act on your behalf in financial or legal matters if you become unable to do so yourself.
- Living Will
A document specifying the end of life medical treatment you wish to receive or not receive if you become incapacitated and are unable to communicate your preferences.
- Guardianship:
A legal arrangement in which an individual is appointed to care for and make decisions on behalf of a minor child or an incapacitated adult.
- Estate Tax:
A tax on the transfer of property at death. The amount subject to taxation can vary based on the size of the estate and applicable tax laws.
- Gift Tax:
A tax on the transfer of money or property during one’s lifetime. There are limits on the amount of gifts that can be made without incurring gift tax.
- Intestate:
Dying without a valid will. In such cases, state laws dictate how the deceased person’s assets are distributed.
- Codicil:
An amendment or addition to an existing will, used to make changes without creating an entirely new document.
- Life Insurance Trust:
A trust designed to own a life insurance policy, often used as an estate planning tool to provide liquidity for estate taxes or other expenses.
- Letter of Instruction:
A non-legal document that provides guidance and information to your loved ones about your personal and financial matters. It is not a legally binding document but can be helpful in providing additional details and instructions.
Wilson Law is here to help when you are ready to tailor a plan that aligns with your unique needs and aspirations. Reach to our office at 866-603-5976 or fill out our contact form and we will be in touch to schedule a meeting.
