Glossary of Estate Planning Terms

Glossary of Estate Planning Terms

Administrator –  Someone named by the court to represent an estate in probate in cases where there is no will, the will did not specify an executor, or where the validity of the will has been challenged.

Alternate Beneficiary – An Individual or Organization named to benefit from the estate, if the primary beneficiaries die before the grantor(s).

Annual Exclusion – The amount someone can give to someone else each year without the recipient having to pay gift tax.  As of 2018 the amount is $15,000.00 for individuals, and $30,000.00 for married couples.

Assets – Anything owned by a party, (in a nutshell, anything you own), including homes, real estate, bank accounts, furniture, jewelry, life insurance, art, etc.

Assignment – A document that transfers an individuals assets from their name to another, often used in transferring assets from the grantor into their trust.

Basis – The amount paid for an asset

Beneficiaries – Anyone who benefits (receives assets) from a trust after the grantor dies

Certificate of Trust – A shortened version of the trust that is used to show the existence of a trust.  Often used in the creation of bank accounts and assignments.  Also known as a Memorandum of Trust.

Child’s Trust –  The part of a trust (or a trust within a trust) that explains how a the assets will be distributed to a child who is not of legal age.  Managed by a trustee appointed by the grantor in the trust.

Codicil – written amendment to a will

Conservator – Someone who is appointed to care for the well-being of another.  Usually named in a trust where there are minor children beneficiaries, or if there is someone with special needs.  May be court appointed.  Also referred to as Guardian.

Conservatorship – Occurs where the court appoints someone to manage a person’s assets usually due to mental or physical incapacity.  May also be called a guardianship

Contest – To dispute the terms of a will or trust.

Corporate trustee – A corporate entity, usually a bank or a trust company, that specializes in managing trusts.  Often an alternative to an individual trustee where the appointed trustee dies or resigns.

Custodian – Someone named to manage the assets of a beneficiary who is a minor child under the Uniform Transfer to Minors Act.  In most states once the child has achieved adulthood, they take over management of their assets.

Decedent – Someone who has died

Deed – A document that transfers title from one being to another.  Often used to transfer real estate into a trust.

Disclaim – to refuse a gift or inheritance

Disinherit – To prevent an individual from receiving an inheritance where they would normally would have by operation of law.

Distribution –  Payment of assets

Durable Power of Attorney for Property – A document that gives legal authority for someone to manage property on behalf of another.

Durable Power of Attorney for Health – A document that gives legal authority for someone to make medical and health care decisions on behalf of another, usually when they are incapacitated and unable to make decisions for themselves.

Estate – Assets (and debts) of an individual at death.

Estate Taxes – Federal or state taxes on the value of an estate left at death.  Varies from state to state. As of 2019 assets that are less than $11,400,000.00 are excluded at the federal level

Executor – Person named in a will appointed to carry out the desires of the decedent.

Fiduciary – Any person with the legal duty to act primarily for the benefit of another.  A primary example in estate planning is a Trustee, who has a fiduciary duty to both the grantor and the beneficiaries.

Funding – the process of transferring assets to the trust

Generation Skipping Transfer Tax – A tax on assets that skip generations, ie- left to the grandchildren and younger generations.  As of 2018, transfers up to 11.2 million are exempt from Generation Skipping Transfer Tax

Gift – A transfer of assets from one individual to another, where there is no compensation from the recipient

Gift Tax – a Federal tax on gifts made between two living persons.  See “Annual Exclusion”

Grantor – Someone who greats and funds a trust, also known as a maker, settlor, or creator.

GuardianshipSee Conservatorship

Heir – One who is entitled to receive a portion of an estate.

Holographic Will – A handwritten will.  Often has little legal enforceability.

Inheritance – Assets received from a decedent.

Intestate – Without a Will

Irrevocable Trust – A trust that cannot be changed once it is set up.  Often created to avoid or minimize Estate Tax.

Letter of Office – A court issued document that gives an executor or administrator the legal authority to act on behalf of an estate.  Also referred to as letters of appointment.

Living Trust – A document that greatest an entity (trust) where the grantor transfers ownership of their assets, and a trustee (often times the same person as the grantor) manages the assets until they die.  At that point, a successor trustee appointed in the document takes over management of the estate.  This type of trust is very common.  It’s primary purpose is to avoid probate or court supervision of assets.  Also known as a revocable trust or inter vivos trust.

Living Will –  Also known as an advanced directive, a documents that states that a person does not want to be kept alive by artificial means in a case if terminal injury of illness.

Memorandum of TrustSee Certificate of Trust

Minor – An individual who has not achieved the legal age of adulthood.

Per Capita – A means of distributing the assets of an estate to surviving descendants where they all receive an equal share regardless of generation (ex.  All survivors whether children or grandchildren receive the same inheritance)

Per Stirpes – A means of distributing the assts of an estate where the assets are distributed generationally (ex.  All children receive the same assets, but if one son or daughter dies, their children (ie- the grandchildren) receive the portion that their parent would have received.

Personal Property – Property that is not Real Property. See Real Property.

Pour Over Will – A will, often used with a living trust.  That puts, or pours over, any assets left out of a trust into the trust upon the grantor’s death.

Probate – The legal process of validating a will, paying debts, and distributing assets after death.  A Living Trust if often created with the purpose of avoiding probate.

Real Property – Property that is permanently affixed to land (such as a house, or land itself)

Revocable TrustSee. Living Trust

Separate Trust – A trust established by one person.  Often times married couples will create separate trusts where each spouse has control of their own assets and even share assets in common.  This form of estate planning is common among married couples.

Small Estate – An estate valued at a certain amount that is small enough that it does not need to go through probate.  (In Illinois, an estate is considered a small estate if it is valued at under $100,000.00)

Small Estate Affidavit – An affidavit or a person with knowledge and interest in an estate that swears under penalty of perjury that an decedents estate is a Small Estate.  Often used in place of court issued Letters of Office in cases of small estate.

Special Gifts – Gifts of specific items that are given to specific individuals in a will or a trust upon the death of a grantor.

Spendthrift clause – A clause in a will or a trust that limits the amount of assets the trustee gives to an individual at any given time.  Designed to protect assets from a beneficiary’s creditors

Successor Trustee – An individual or institution named in a trust document who is responsible for the administration of the trust when the first trustee dies, resigns, or is otherwise incapacitated.

Title – A document that provides proof of ownership.

Trust – An entity that holds assets for the benefit of another entity

Trustee – An individual or institution that manages the assets of another, and has a fiduciary responsibility to them.

Will – A document that provides instructions to the executor for the distribution and disposing of assets after the death of an individual.  A Will can only be enforced through probate.