Estate Planning Terms

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Anything of value; property. Resource, capital, estate, money, belongings, means, chattel, possessions, holding, fund equity, valuable, goods, financial resource, inventory, reserve, wealth.
Attorney in Fact
Someone who is given authority through a Power of Attorney to conduct general (or specific) financial or legal acts. An “attorney in fact” (also known as an “agent”) need not be a member of the legal profession. 
The individual or entity who receives the benefit of a transaction (e.g., a beneficiary under a Last Will, Revocable Living Trust, under a life insurance policy).
This is just a fancy “Latin” word for an Amendment to a Last Will. The Codicil may modify, add to, subtract from, qualify, alter, revoke, spindle, fold, or mutilate provisions of a Last Will. The Codicil is a separate document signed with the same formalities as a Last Will. If you wish, you can further modify, add to, subtract from, qualify, alter, revoke, spindle, fold, or mutilate that very Codicil later. Hint: I recommend revoking the Last Will and replacing it with a new Last Will. That way, there is no “paper trail” on the changes that were made for the heirs to see unless there is a strategic reason to do so (i.e., a “disinheritance”).
Community Property
Assets owned in common by a husband and wife, with each having an undivided one-half interest in the assets because of their marital status. The following eight states are “community property states”: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, and Washington (and Wisconsin has community property in its legal effect).
Someone appointed by the Probate Court to manage the financial affairs of a minor child or an incapacitated adult.
Contingent Beneficiary:
A person who may or will receive a benefit, but only if the primary beneficiary becomes disqualified for the benefit (e.g., by death).
A conveyance of real property transferring title from the grantor(s) to the grantee(s).
Any interest in real or personal property; the extent of one’s interest in real or personal property… everything of value you own in whole or in part. Your “assets,” generally.
(Life &) Estate Planning
The process of planning for future events so you can keep control over your assets while you are alive, take care of yourself and your loved ones if you should become disabled, and leave what you have to whom you want, the way you want, and when you want, all the while saving every last tax dollar, professional fee, and court cost possible. Important stuff, yes?
Estate Taxes
The “death taxes” imposed by the state and federal governments on the transfer of assets upon the death of the owner. The amount “exempted” from estate taxes is subject to the political process and has fluctuated wildly, especially over the past several decades. Accordingly, keep a close eye on Congress and the White House. The wallet or purse of every American is at risk any time Congress is in session, and there is a resident in the White House.
The individual or corporate institution appointed in a Last Will by a maker of that Last Will to administer his or her “estate” postmortem. Also known as a “Personal Representative,” the Executor (or Executrix, if female) has fiduciary substantial fiduciary responsibilities and is supervised by the Probate Court. 
The individual or corporate institution held to the highest legal duty to act on behalf of another. A Trustee is an example of a “fiduciary.”
Gift Tax Annual Exclusion
The federal government allows you gift $18,000 (adjusted periodically for inflation) without paying gift taxes on the transfer. The gift must be a “present interest” to a specific individual donee. A present interest is one where the donee has an immediate, unrestricted right to use and enjoy the gift.
Someone appointed by the probate court to manage the personal and health care decisions of a minor child or a disabled adult. Often, the Guardian and the Conservator are one and the same.
A person who inherits the probate estate of someone who dies without a Last Will, according to applicable state intestate succession law.
Inter Vivos Trust
Just like “Codicil” above, the is just a fancy “Latin” word for a Revocable Living Trust. The “inter vivos” part simply means “between the living” since the same person usually serves as all three “living” parties to the Revocable Living Trust while alive: Trustmaker, Trustee, and Beneficiary. Compare this to a “Testamentary Trust” defined below.
Intestate Succession
The transfer of property to the relatives of a person who died with estate assets subject to probate and no Last Will. In such cases, state intestate succession laws provide the default estate plan by specifying which relatives inherit the estate after probate. The probate estate “escheats” to the state if there are no relatives. No, really. If there are no relatives within the prescribed degree of kinship, then the state inherits the probate estate.
Irrevocable Trust
A trust whose terms and provisions cannot be changed, modified, altered, amended or revoked except by a court order under certain limited circumstances.
All persons who have descended from a common ancestor (i.e., children, grandchildren, great grandchildren, etc.).
Joint Tenancy
A form of property ownership by two or more persons designated as “joint tenants with right of survivorship.” When one joint tenant dies, their interest in the asset automatically passes to the surviving joint tenant(s) outside of and beyond the control of the decedent’s will. The asset passes outside the grip of probate. However, probate is not avoided if one of the joint tenants is disabled or at the death of the surviving joint tenant. Also called “tenancy by the entirety” in some states (i.e., Missouri), when between husband and wife, joint tenancy can be “legal dynamite” for the unwary. Consult a qualified attorney before taking title to assets in this manner.
Life Tenant
A beneficiary whose interest in an asset consists solely of the use of and income flow from the asset during their lifetime.
Living Trust
See “Inter Vivos Trust” above.
Living Will
Also known as a “Health Care Treatment Directive,” when properly executed, this document allows you to specify the extent of life support/medical treatment you would want under various conditions if you could not then communicate your own desires at the time of need. Many people, even attorneys, mistake “Living Trusts” and “Living Wills.”
Marital Deduction
There is both a federal gift tax and a federal estate tax marital deduction. The deduction pertains only to assets given to one’s spouse, whether during life or at death. The federal tax laws have specific rules to determine whether the asset given to a spouse qualifies for the marital deduction.
Marital Deduction
Prior to the Economic Recovery Act of 1981 (ERTA), an (Estate Tax) amount up to the greater of one-half of the decedent’s adjusted gross estate for federal estate tax purposes, or $250,000, was permitted as a marital deduction for decedents dying after 1981. There is now an unlimited marital deduction available. However, to obtain the benefits of the new law, your trust or will, which transfers your assets to your spouse, must have been executed or amended after September 12, 1981. Property must actually pass to your spouse in a “qualified” manner under the Internal Revenue Code. Note: There is also an unlimited gift tax marital deduction identical to the estate tax marital deduction for all gifts made after 1981.
A person who is under the age of legal competence. In most states, the age of majority is either 18 or 21.
Per Capita
Divided equally among all individuals, usually in a “class” (such as “my children”)
Per Stirpes
Proportionally divided between beneficiaries according to their deceased ancestor’s shares.
Personal Property
Movable property, as contrasted with “real property,” which is fixed. It can be tangible or intangible.
Personal Representative
See “Executor” above.
Power of Attorney
A document through which the “principal” appoints one or more agents (aka attorneys in fact”) to take care of the principal’s financial business. If the Power of Attorney is “durable,” then the Agent may continue acting should the principal become incapacitated. We prepare a separate power of attorney for financial matters and another for health care matters.
Pour-Over Will
A last will and testament that provides for the transfer into a living trust, after the probate court proceeding, of the assets a person neglected to transfer to their living trust while they were alive. The pour-over will designates the living trust as its beneficiary and the assets are then managed and distributed under the private terms of the living trust.
A court proceeding in which the probate court has jurisdiction over both the personal representative and the assets of the decedent. The primary purposes of probate are to:
  1. Protect the heirs from fraud & embezzlement;
  2. Protect the government so all taxes are paid by the estate; and
  3. Protect creditors of the decedent so they are paid.

Probate usually begins with the will being admitted to the probate court and the personal representative being granted “Letters Testamentary.” Probate ends after all taxes are paid, creditors are paid, and assets are accounted for and distributed as provided in the will. In certain instances, administering an estate through probate may be appropriate,e given the orderly nature of probate. Why? The probate process is overseen by a judge who ensures the willmaker’s wishes are carried out. Probate also can be very efficient and effective when the estate is well-organized before death, minor children are involved, and/or sensitive issues like family members with special needs or even substance abuse issues affecting one or more heirs are at stake.

Quit-Claim Deed
A deed of conveyance for real estate that simply passes any title, interest, or claim that the grantor may have without any assurance or warranty that the title is valid.
Revocable Living Trust
A trust whose terms and provisions can be changed, modified, altered, amended or revoked. The power to do all this is reserved by the person(s) who created the trust(s) during their lifetime(s). This is the most popular and accepted means of avoiding probate at incapacity and at death. Hence, it is an alternative to probate (i.e., “guardianships & conservatorships”) for disabled adults/orphaned minor children and to probate at death by serving as a substitute for wills, etc. These trusts have been around longer than last wills but have previously been only available to wealthy individuals and families.
Sprinkling Trust
Provisions within a trust allowing the trustee to “sprinkle” income and/or principal among the trust beneficiaries. The sprinkling trust provides flexibility to base distributions on actual needs.
Tenancy in Common
A form of ownership by which each tenant (i.e., “owner”) holds an undivided interest in the asset. Each tenant in common has a right to possession of the asset, albeit the shares may not be equal. There is no right of survivorship (see “Joint Tenancy” above). When one tenant dies, they may leave their share to a third party to the tenancy.
Testamentary Trust
A trust created under the terms of a last will. For example, a testamentary trust is preferred to protect an inheritance for (and even from) beneficiaries.
A person who makes a will . . . a “willmaker.”
A “testatrix” is a female “testator.”
A legal entity created either by a trust agreement signed by a person during life (i.e., “living trust”) or arising only after death from provisions in their will (i.e., “testamentary trust”).
An individual or corporation who is a party to a trust and holds “bare legal title” to assets. The trustee has the power to carry out the wishes of the person(s) (i.e., “trustmaker(s)) who created the trust. The trustee has a “fiduciary” obligation to the trust’s beneficiaries and is subject to the highest legal responsibility under the law. Although the trustee has legal title, the “beneficial” or “equitable” title is in fact held by the beneficiary(ies). When there is more than one trustee, they are called “co-trustees.”
Warranty Deed
A form of deed in which the grantor promises a good, clear title.
Will (Last Will and Testament)
A legal document that allows one to name the backup parents for minor children left orphaned, as well as give the probate court instructions on your last wishes for family and assets. Many people mistakenly believe that a valid last will help them avoid probate. In reality, a last will only has authority when properly admitted to probate at the death of the willmaker. Accordingly, your last will is the “admission ticket” to probate and has no power to control assets in joint tenancy or with beneficiary designations.

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