Essential Estate Planning Terms: A Guide for Every Adult

Estate planning is an indispensable tool, not solely for the affluent or those contemplating retirement. It is a critical process for every adult, enabling the appointment of guardians for minor children, the selection of healthcare agents for decision-making in the event of illness, the minimization of taxes to enhance the transfer of wealth to family members, and the delineation of the distribution of one’s estate posthumously.

Although estate planning is a priority for every individual, it can be a daunting subject to navigate. To assist in this endeavor, the following are pivotal terms to comprehend as one contemplates their estate plan:

Assets: Refers to the entirety of an individual’s possessions, including real estate, bank accounts, life insurance policies, investments, and personal items such as jewelry, art, and collectibles.
Beneficiary: Denotes a person or entity, such as a charitable organization, that receives a beneficial interest in an asset, such as an estate, trust, account, or insurance policy.
Distribution: The act of disbursing cash or assets to the beneficiary, individual, or entity entitled to receive them.
Estate: Encompasses all assets and liabilities left by an individual upon their demise.
Fiduciary: An individual with a legal duty to act primarily for the benefit of another, such as a trustee or an agent under a power of attorney. The term implies a significant level of confidence, trust, and good faith.
Funding: The procedure of transferring assets to a living trust by re-titling them. A living trust can only circumvent probate at the trustmaker’s death if it is comprehensively funded with all of the decedent’s assets.
Incapacitated/Incompetent: The state of being unable to manage one’s affairs, either temporarily or permanently, due to a lack of mental capacity or the inability to communicate.
Inheritance: The assets received from an individual who has passed away.
Living Probate: The court-supervised process of managing the assets of an incapacitated person. This process is also referred to as conservatorship.
Marital Deduction: A deduction on the federal estate tax return that allows the first spouse to pass away to leave an unlimited amount of assets to the surviving spouse free of estate taxes. However, if no additional tax planning is utilized and the surviving spouse’s estate exceeds the federal estate tax exemption at the time of their death, estate taxes will be due.
Settle an Estate: The process of concluding the final affairs of a deceased individual, including the valuation of assets, the payment of debts and taxes, and the distribution of assets to beneficiaries.
Trust: A fiduciary relationship in which one party, known as the trustmaker, grantor, or settlor, grants another party, known as the trustee, the right to hold property or assets for the benefit of a third party, the beneficiary. The trust should be formalized by a written agreement that outlines the distribution of the trust assets to the beneficiary.
Will: A legal document that outlines the disposition of an individual’s assets after death. A will can only be enforced through a probate court and may also include the nomination of a guardian for minor children.

For additional inquiries about estate planning or to consult with Jeff B. Skoubye, please contact our offices. We are committed to ensuring that you have a comprehensive plan tailored to your unique needs and objectives.