Planning Terms You Need to Know
first step in planning for what will happen to your assets when you die is mastering
some key estate planning terminology and concepts. Here is a brief explanation
of some of the most frequently used estate planning terms:
individual or institution appointed by the probate court to oversee the settlement
of the estate of a person who has died without a will.
An individual designated to receive the principal and or income of an estate or
Property given as a gift under the terms of a will.
properly signed, written addition or other change to an existing will.
Power Of Attorney
written legal document that allows an individual to designate another person to
act on his or her behalf during the creator's lifetime. Most powers of attorney
grant powers to deal with the person's property. A durable power of attorney remains
in effect even if the person who created it becomes disabled or incapacitated.
This durable power of attorney ceases to exist upon the death of the individual
granting the power.
tax imposed upon a person's death on the transfer of most types of property that
is calculated on the total value of the estate. This is sometimes called the "death
The person or entity named in a will to carry out its provisions. More than one
executor can act together. In some states, this person is called the "personal
A federal tax credit that offsets gift and estate tax liability. For 2006, the
credit is $780,800 which offsets the tax liability on a net taxable estate of
An individual or institution legally responsible for acting in the best interest
of another party. Trustees and executors are examples of fiduciaries.
tax on the transfer (during the donor's lifetime) of property worth more than
$12,000 per year to another person. The gift tax must be paid by the donor. There
is no tax liability for the donee.
Tax Annual Exclusion
The first $12,000 (indexed for inflation) in gifts that an individual can give
tax free to as many people as he/she chooses during a calendar year. A husband
and wife together can give $24,000 to each person. This is generally known as
the "annual per donee exclusion."
- An individual
legally appointed to act in "loco parentis" for a minor or to act on
behalf of a person incapable of taking care of his or her own affairs.
A person(s) entitled by law to receive assets from the estate of a person who
has died if no will existed.
state tax based on the value of property and on the status of the beneficiary
to whom it passes.
The term applied when a person dies without a will.
legal document in which an individual states his or her wishes regarding medical
treatment and life-saving interventions in the event of exigent medical circumstances
such as a terminal illness or accident and/or appoints a proxy to make health
care decisions on the individual's behalf. The more common legal term is an "advance
health care directive" or "durable power of attorney for health care."
legal document that gives one individual the authority to act for another. See
"durable power of attorney" and "living will." This authority
ceases upon the incapacity or death of the individual granting the authority.
The court process for determining the validity of a deceased person's will and
governing the distribution of the estate's assets.
The portion of the estate that remains after all administrative expenses, taxes
and specific bequests have been paid..
A legal, fiduciary relationship, usually established in a written document, in
which an individual or institution (the trustee) holds and manages property for
the benefit of another (the beneficiary).
rule permitting spouses to transfer an unlimited amount of assets to each other,
while alive or after death, without federal income or estate tax implications.
A legally executed document that directs how and to whom a person's assets will
be distributed upon death. A will may also designate a guardian to handle the
affairs of minor children.
want to emphasize that by developing an estate plan you decide who will receive
shares of your assets, who will manage your estate and who will care for your
children. Without one, you relinquish the decision-making to the default provisions
of state inheritance laws. Take the time now to familiarize yourself with the
various aspects of estate planning, and begin the process by meeting us and your