Dipping your toes into estate planning can feel like navigating a labyrinth of legal jargon. But understanding this language is crucial to ensuring that your wishes are fulfilled after your passing. Here’s a handy glossary of some common estate planning terms to guide you on your journey.
Estate Planning
Let’s start at square one. Estate planning is the process of organizing the distribution and management of a person’s estate during and after their lifetime, aiming to minimize taxes and other costs.
Will
A will, or “last will and testament” as they used to say back in the day, is a legal device that outlines how an individual wants their assets distributed after their death. It can also include provisions for the guardianship of minor children.
Probate
Probate refers to the legal process that validates a will and executes the deceased’s wishes under court supervision.
Trust
A trust is a legal arrangement where one person, the trustee, holds and manages assets for the benefit of others, known as beneficiaries.
Living Trust
A living trust is a revocable trust, and as the name would indicate, this type of trust is created during the grantor’s lifetime. The grantor retains the right to alter the trust during their lifetime. The assets in the trust bypass probate upon the grantor’s death, and this is just one of the benefits that the trust will provide.
Irrevocable Trust
This type of trust cannot be modified or terminated under most circumstances, and this is a good thing when the grantor has certain targeted objectives. These would include nursing home asset protection, estate tax efficiency, and government benefit preservation for people with special needs.
Power of Attorney
This legal document assigns authority to another person, the agent, to act on the principal’s behalf in specified matters, which may include financial decisions and health care choices. In estate planning, durable powers of attorney are used for incapacity planning purposes because this type of POA will remain in effect upon the incapacitation of the grantor.
Advance Health Care Directive
Advance health care directives state your wishes concerning medical matters in a legally binding manner to prepare for possible incapacity. A durable power of attorney for health care is a directive that everyone should have, and your plan should also include a living will
Beneficiary
A beneficiary is an individual or entity named in a will, trust, insurance policy, or financial account that will receive assets upon the death of the designator.
Estate Tax
This tax applies to the transfer of a deceased person’s estate before it’s distributed to the beneficiaries. The federal estate tax is applicable on estates that are valued in excess of the $12.92 million exclusion, and there is a Connecticut state estate tax with the same exclusion.
Federal Gift Tax
This tax applies to asset transfers made during an individual’s lifetime, and it is unified with the estate tax. As a result, large gifts that you give tax-free while you are living will reduce the exclusion amount that can be applied to your estate after your death.
Guardianship
This is a legal process in which a person is appointed to care for and manage the affairs of another. People typically think of minor children when guardianship is mentioned, but there are also guardianship proceedings for incapacitated adults.
Executor
An executor, also known as a personal representative, is named in a will to manage the deceased’s estate. This includes asset distribution and debt and tax settlement.
Schedule a Consultation Today!
We are here to help if you are ready to put an estate plan in place, and we can also be engaged to review and revise your existing plan. You can call us at 860-548-1000 to schedule a consultation at our Glastonbury or Westport, CT estate planning offices, and you can alternately send us a message through our contact page.
In May 2023, Diana M. O’Rourke joined Nirenstein, Horowitz & Associates, P.C. as an associate attorney in the trust administration department.Diana has five years of experience practicing in the areas of estate administration, estate planning and elder law.She is admitted to practice in the State of Connecticut and is a member of the Connecticut Bar Association, where she is part of the Estate & Probate section and the Elder Law section. She is also a member of the American Academy of Estate Planning Attorneys.