Estate Planning Terms

Yes, estate planning should be on top of everyone’s to-do-list it can be very overwhelming topic to dive into. Hear at KAL we believe in arming our clients and community with information that will help you make the process easier. To help you in this post, below are some important terms to know as you think about your own estate planning:

Advanced Directives: a legal document dictating what you want to happen to you medically in the event that you become ill, incapacitated, or otherwise unable to speak for yourself.

Assets: anything a person owns. It can be your home, other real estate, bank accounts, life insurance, investments, furniture, jewelry. art, clothing. and collectibles. It can also include other tangle and intangible items that may not be listed here.

Beneficiaries: persons or entities (example: charities) that receive beneficial interest in something such as an estate, investments, life insurance, furniture, jewelry, art, clothing, or collectibles.

Distribution: payment in cash or assets to the beneficiary, individual, or entity who is entitled to receive it,

Estate: all assets and debts left by an individual or trust at death

Fiduciary: person with legal obligation/duty to act primarily for another person’s benefit, e.g., a trustee or agent under a power of attorney. “Fiduciary” implies great confidence and trust, and a high degree of good faith.

Funding: The process of transferring (re-titling) assets to a living trust. A living trust will only avoid probate at the trustmaker’s death if it is fully funded, meaning it contains all of the decedent’s assets.

Incapacitated/Incompetent: Unable to manage one’s own affairs, either temporarily or permanently; often involves a lack of mental capacity.

Inheritance: The assets received from someone who has died.

Living Probate: The court-supervised process of managing the assets of an incapacitated person. Conservatorship is another term used for this process.

Marital Deduction: A deduction on the federal estate tax return, it lets the first spouse to die leave an unlimited amount of assets to the surviving spouse free of estate taxes. However, if no other tax planning is used and the surviving spouse’s estate is more than the amount of the federal estate tax exemption in effect at the time of the surviving spouse’s death, estate taxes will be due at that time.

Settle an Estate: The process of winding down the final affairs (valuation of assets, payment of debts and taxes, distribution of assets to beneficiaries) after someone dies.

Trust: A fiduciary relationship in which one party, known as the trustmaker or settlor, gives another party, known as the trustee, the right to hold property or assets for the benefit of another party, the beneficiary. The trust should be memorialized by a written trust agreement, outlining how the trust assets will be distributed to the beneficiary.

Will: A written document with instructions for disposing of assets after death. A will can only be enforced through a probate court. A will can also contain the nomination of guardian for minor children