Knowing estate planning terms is a helpful start to preparing for your future.
You are many things.
You are talented.
You are kind.
You are a hard worker.
Even so, you are not an estate planning attorney.
Although you have heard you need an estate plan, you are not exactly sure what this means.
According to a recent Emmett Messenger Index article titled “13 Estate Planning Terms You Need to Know,” becoming familiar with common estate planning terms will provide you a better foundation.
What estate planning terms are important to know?
Assets is the term used to describe what a person owns.
These can be tangible and intangible property.
Your house, bank accounts, investments, life insurance policies, jewelry, furniture, art, collectible, clothing, and other real estate all count as assets.
You pretty much get that, right?
The beneficiary is the recipient of an asset.
A beneficiary can receive an asset in its entirety or in part.
When people name beneficiaries to their trusts, estates, accounts, or insurance polices, they may choose a person or a charity.
A distribution occurs when the cash or asset is paid to the designated beneficiary.
The estate includes all debts and assets left by individuals when they die.
Fiduciary is an estate planning term used to describe the duty of an individual who is legally obligated to act for the benefit of another.
Examples of fiduciaries are agents named in a power of attorney or trustees who manage a trust.
A revocable living trust does not fulfill its purpose if it does not hold any assets.
For assets to be governed and managed by the trust, they must be titled to the trust or designate the trust as a postmortem beneficiary.
Think life insurance.
The Trustmaker (also known as a Grantor, Settlor, or Trustor) will need to fund the trust before dying so the assets will pass outside of probate.
Incapacitated or Incompetent.
These terms describe an individual who is no longer capable of managing financial or health care decisions.
This can be permanent or temporary, but it often means the individual lacks mental capacity.
This is one of the most well known estate planning terms.
An inheritance is what is left to heirs after the asset owner dies.
Probate is a process overseen by the court through which assets are ultimately distributed to heirs.
A trust is a tool used to hold assets for the benefit of the Trustmaker and other beneficiaries.
The trust agreement provides instructions for how the property should be managed and distributed.
A last will and testament directs the probate court and the executor regarding who receives what from the estate.
The guardian for minor children can also be nominated in the last will and testament.
Although these estate planning terms provide a basic understanding of estate planning, you should work with an experienced estate planning attorney to create the best plan to meet you goals.
Reference: Emmett Messenger Index (Oct. 28, 2020) “13 Estate Planning Terms You Need to Know”