Estate Plans are powerful tools you can use to protect yourself, your estate, your loved ones, and most importantly, your legacy. But there’s a lot to know. We know it can be overwhelming to try and grasp all the concepts and terminology.
Learn everything you need to know about all-things-estate-planning here, in our comprehensive, all-inclusive Estate Planning Law Terms and Legal Definitions guide.
Browse All Legal Definitions from A to Z
Click below to get every estate planning term and definition you could ever need. We defined every legal term in the industry, so you can be prepared and in-the-know when you’re planning or updating your Estate Plan.
Administration
Administration is a reference to how an estate is handled when it’s being managed or settled.
The Administration of an estate is a relatively complicated concept with a lot of moving parts. But essentially, it just involves taking an estate through the Probate process, settling debts the estate may owe, transferring asset titles as needed, closing accounts and finally, overseeing the distribution of an estate to proper Heirs and Beneficiaries.
Administrator
An Administrator is the legal title given to someone who’s appointed by a Probate court to handle an estate after the death of the estate owner. This appointment is made if there’s no Personal Representative or Executor named in any existing Estate Plan.
In cases where a Decedent dies Intestate (without a Will), the Probate court will appoint an Administrator to manage the estate. The Administrator can be a person or a corporate Fiduciary who will be responsible for listing all of the assets that are included in the estate, ensuring debts are paid, and then distributing any remaining assets to Beneficiaries as outlined per individual state or succession laws.
AB Trust Planning
AB Trust planning can be beneficial for married couples who want to set up a strategic Estate Plan in effort to minimize or avoid some or all estate tax.
AB Trusts can be a great option for couples who live in states that don’t offer various exemptions. Also known as Bypass Trusts, Family Trusts, or Credit Shelter Trusts, AB Trusts can be used to ensure a Surviving Spouse and Beneficiaries inherit as much as possible from an estate, without taxes interfering. They’re used to ensure support for a Surviving Spouse after the first partner passes away. In essence, an AB Trust is just a Joint Trust that will split into two parts – the Survivor Trust (the A Trust) and the Decedent’s Trust (the B Trust).
Advance Healthcare Directive
An Advance Healthcare Directive is legal documentation that expresses your wishes for medical intervention and the types of decisions you’d want made on your behalf should you become incapacitated or unable to make them on your own.
Advanced Healthcare Directives (also known simply as Advanced Directives) allow you to make your wishes known about what types of medical procedures, medications, and lifesaving measures you’d want if you were ever unable to express yourself in an emergency. You can establish your Healthcare Directive through either a Living Will or through something known as a Durable Healthcare Power of Attorney (POA).
Also see related concept: Living Will
Agent
An Agent is also known as a Power of Attorney (POA) or an Attorney-in-Fact. Your Agent is the person you legally designate to be authorized to act on your behalf.
An Agent has express and legal permission to act for you in whatever capacity you appoint them to. This could include matters that are financially related, business related, or even healthcare related. How much, or how little, control your Agent has is completely up to you. You can give them as much or as little power as you’re comfortable with.
Also see related concept: Power of Attorney (POA)
Alternate Beneficiary
Alternate Beneficiary designations are valuable in case your primary Beneficiary is either unable or unwilling to receive your assets.
Alternate Beneficiaries are also known as Contingent Beneficiaries. They would receive proceeds or assets in the event a first-named designated Beneficiary either disclaims, refuses, or is otherwise incapable of receiving an inheritance left to them. Alternate Beneficiaries are most common when dealing with Personal or Real Property. They’re important to include as a safeguard in the event a Beneficiary predeceases a Grantor (estate owner).
Also see related concept: Contingent Beneficiary
Annual Exclusion
Annual Exclusion is the determined annual amount that someone may transfer without triggering any sort of gift tax. Gift exclusions can be transferred in the form of cash or other types of assets.
Annual Exclusions are important to know if you’re trying to gift money or assets to someone. The amount allowed can change over time, so it’s essential that you look up the Annual Exclusion amount for the year you’ll be giving the gift. Exceeding the allotted amount can result in a gift tax being owed, typically to be paid by the receiver.
Applicable Exemption Amount
Applicable Exemption Amount is sometimes also called “Unified Credit,” and it’s the total amount in estate transfers and gifts that can come from an estate without triggering gift or estate tax.
Note that some gifts and amounts do not count towards the Applicable Exemption Amount, including charitable donations and some education expenses. Exclusions can be used in partial transactions or wholly on one gift. This aspect of tax law is often contested, and it’s worth noting that it changes often.
Also see related concept: Unified Credit
Appraise
Appraise is the process used to deem the monetary value associated with an asset in an estate. Appraisals can be conducted both during and after a Grantor’s (estate owner’s) life.
Appraisals are important in terms of assessing the value of individual assets for Beneficiaries. They’re also used to determine the total value of an estate. Appraisers are professionals who charge either an hourly fee to review and ascertain the value of items in an estate; or they can charge based on a percentage of a liquidated estate. Items that may need to be appraised can include real and personal property such as jewelry, art, or cars, or any other asset of high value.
Ascertainable Standard
An Ascertainable Standard is the term used to identify the cost of education, health, maintenance, or support that would qualify as a reasonable need for a distribution from a Trust.
Ascertainable Standard is used to keep any qualifying distributions from being a part of value that’s used when determining estate tax. State law determines how much protection an Ascertainable Standard can offer a Beneficiary. It may not be as beneficial in certain states.
Assets
Assets are anything of value inside an estate that can be converted to cash.
Assets can be broken down into three basic categories: fixed income (IE. bonds), equities (IE. stocks), and money market instruments or cash equivalent. Personal assets can be anything from a car, to a house or other property, to investments, to homewares, to artwork or jewelry.
Attorney-in-Fact
Attorney-in-Fact is another name for a Power of Attorney (POA), or someone who you legally authorize to act on your behalf and make decisions for you.
You can appoint an Attorney-in-Fact to make decisions for you in terms of your business dealings, financial transactions, or even personal matters. They do not need to be an attorney at law, which is sometimes confusing. The three types of POAs that can be granted to your Attorney-in-Fact include general, limited, or special.
Also see related concept: Agent; Power of Attorney (POA)
Augmented Estate
Augmented Estate is the term used to define the assets and property that were owned by someone who recently passed away and their Surviving Spouse.
The value of an Augmented Estate is calculated only when a Surviving Spouse doesn’t take the assets left by the Will, instead claiming the deceased spouse’s part of the estate. It generally includes the Surviving Spouse’s separate assets, the Probate Estate, any non-Probate transfers like retirement plans, life insurance, additional Trusts, and any assets that were transferred shortly before the decedent’s passing. State law comes heavily into play when dealing with Augmented Estates.
Beneficiary
A Beneficiary – also commonly referred to as an Inheritor, Recipient, Devisee, or Heir – is any person you name who’ll receive assets or property from your estate.
Beneficiaries are named in various estate planning documents, such as Trusts, Wills, or any other legal documents where assets will be passed upon your death. For example, life insurance policies, retirement accounts, or Transfer-on-Death (TOD) and Payable-on-Death (POD) accounts should all have named Beneficiaries.
Also see related concepts: Devisee; Heir; Inheritor; Recipient
Bequest
A Bequest can also be known as a Devise, and it’s essentially just a gift that’s named in a Will or Trust.
Bequests can be very specific, for example a named item or a cash gift, or they can be residuary. Residuary gifts would be a percentage share of whatever amount is left after all other named gifts have been distributed. Bequests can be made to a person or people, a class of people (like all children or all grandchildren), or any organization or charity.
Also see related concepts: Gift; Devise
Buy-Sell Agreement
A Buy-Sell Agreement is a common legal contract that outlines specific terms for any remaining surviving owners who want to buy out a deceased owner’s share of an asset or property.
These legally binding contracts are used to expressly define how one partner's shares in an entity or business can be re-distributed if they pass away or decide to leave the business for any reason. They’re commonly structured to state that the available shares can be sold to other existing partners, but they can be set up any number of ways.
Bypass Trust
A Bypass Trust is sometimes referred to as a Family Trust, AB Trust, or Credit Shelter Trust. It’s used as a way to help families save on estate taxes. If you set up a Bypass Trust, when one partner dies, the assets in the Trust split into two Trusts, an “A” (the marital) Trust and a “B” (the Family Trust).
Bypass Trusts are another way to allow assets to pass to heirs after the death of both parents. They can be helpful in avoiding the financial tax burdens that can occur for children. Assets in the Family Trust are held until the Surviving Spouse passes away, although the income earned from the Trust can be used to support the Surviving Spouse for the remainder of his or her life.
Certificate of Trust
A Certificate of Trust is simply a shorter version of a Trust. It’s often used to verify a Trust's existence.
The Certificate of Trust can also explain, in detail, the powers that the Trust will give to the Trustee. It can also appoint a Successor Trustee to step in if and when needed. The Certificate of Trust does not include any detailed information about the Trust's Beneficiaries, any of the assets held inside, or how distributions will one day be made.
Charitable Lead Trust
A Charitable Lead Trust (CLT) is a type of Trust that names a charitable Beneficiary who will receive income from the Trust for a specified number of years during the Grantor’s (Trust Owner’s) life.
The Trust is structured so that the Beneficiary receives either income, a gift, or an estate tax deduction. At the end of the Trust term, any remaining assets will be distributed to a named Beneficiary or Beneficiaries (which can be the Grantor or their Heirs) at a reduced or eliminated estate or Gift Tax cost.
Charitable Remainder Trust
Charitable Remainder Trusts (CRT) will make payments to a non-charitable Beneficiary or Beneficiaries for a defined number of years.
At the end of the Trust terms, any assets remaining will be distributed to a named charity. The Trust doesn’t pay capital gains on assets that are transferred to a CRT and sold by the Trust. Non-charitable Beneficiaries will pay tax on a portion of the gains while they’re receiving annual distributions, thus deferring the gains tax.
Charitable Trust
A Charitable Trust is a Trust set up for the benefit of a charitable organization. Charitable Trusts must have a specific purpose that’s legally deemed as “charitable.”
Charitable Trusts allow you to donate tax-exempt assets to a nonprofit or charitable organization. You can use them as a tax advantage way to reduce the taxes that you may owe. When set up properly, certain types of Charitable Trusts can be used to generate income for you or your Beneficiaries for a set time period.
Closing Letter
A Closing Letter is a letter that the Internal Revenue Service (IRS) sends to the named Executor of an estate. It’s confirmation that the tax return filed for the estate is accepted and satisfactory.
Closing Letters might have to be filed with the state tax bureau, depending on which state the estate was in. At one time, Closing Letters were sent in response to virtually all estate tax returns that were filed. Since 2015, though, they’re now only sent if requested by the estate.
Codicil
Codicil is just a document that legally amends or makes an addition to an existing valid Will.
Codicils are a useful way to be able to change an existing Will without having to rewrite the entire thing, saving both time and money.
Common Trust Fund
A Common Trust Fund is essentially just a fund that’s managed by a Trust Company or Bank. The fund exclusively collects money through collected investments and reinvestments for the benefit of the fund participants.
Common Trust Funds are not taxable on the income they generate. Any income, losses, or gains go to the fund participants and would be included on their income, regardless of whether or not any income is actually distributed at that time.
Community Property
Community Property is all the jointly held assets that are acquired by two people, usually spouses, during their marriage or partnership.
Community Property laws exist in some, but not all, states to determine ownership of property and assets. It could include the total combined earnings of both spouses, Real Property, assets acquired during a marriage, and more. Should the partnership end, due to death or divorce, all Community Property would be split 50/50. Typically, gifts and inheritances can be excluded from Community Property.
Community Property State
A Community Property State is a state that acknowledges community Property laws. As of 2022, Community Property States in the US include:
Arizona
California
Idaho
Louisiana
Nevada
New Mexico
Texas
Washington
Wisconsin
Alaska is known as an opt-in state, meaning partners can decide whether or not to make property community.
Also see related concept: Separate Property State
Conservator
A Conservator can mean different things depending on the state you’re in and the context it’s used in. Generally, it means a financial guardian for either a Minor or an incapacitated adult.
In some states, the term Conservator can be related to a Guardian. Conservators can be appointed by a court and can be either a sole individual or a corporate Fiduciary. They’re charged with caring for and/or managing a Minor’s property.
Contest
Contesting a Will or Trust means you’re challenging the contents of it.
If you’re Contesting a Will or Trust, it means you are formally objecting to the document’s validity. You’re basically saying that you do not believe the document reflects the intent of the Grantor or Testator, thus making the estate planning document invalid.
Contingent Beneficiary
A Contingent Beneficiary is in essence just an alternate or backup Beneficiary of a Will, Trust, or asset.
In the event that the Primary Beneficiary is unable to or does not wish to accept an inheritance, the Contingent Beneficiary would step in and be next in line to receive benefits or assets. Reasons a Primary Beneficiary might not be able to receive an inheritance could include he or she predeceases the asset owner, they are not of age, or they simply do not wish to receive the benefits.
Also see: Alternate Beneficiary
Corporate Trustee
A Corporate Trustee is a bank, investment firm, Trust Company, or other institution that has experience managing Trusts.
Corporate Trustees can be hired by people creating a Trust who are looking for professional experience. If they don’t have a friend or family member who they trust to fill the position of Trustee, a Corporate Trustee can be a safe option. Corporate Trustees’ responsibilities can include managing a Trust’s investments, making distributions to Beneficiaries, filing taxes on behalf of the Trust, selling property as the Trust directs, keeping a detailed accounting of the Trust’s finances and reporting to Beneficiaries, and paying debts to creditors.
Corpus
Corpus is another name for Principal, or the Real Property and Personal Property held inside a Trust.
Corpus is used for the benefit of the Trust's Beneficiaries. The Corpus of a Trust can either generate income that’s distributed to the Beneficiaries, or it can be the actual value of the assets held in the Trust that can be distributed outright. The original Grantor (Trust Owner) details how, when, and how much Principal (Corpus) can be distributed to the Beneficiaries by the Trustee.
Also see related concept: Principal
Credit Shelter Trust
A Credit Shelter Trust (CST) is a Revocable Trust (while both people are living) that splits into two Trusts, at which time they become irrevocable.
Another name for a CST is a Bypass Trust, or an AB Trust. They’re commonly used by very well-off couples to maximize estate tax exemptions. The Surviving Spouse can live off the income generated by the Trust after the first spouse’s death.
Creditor
A Creditor is the person, company, or institution you owe money to.
A Creditor loans money for a certain term, recouping the Principal plus interest that accrues based on the loan amount. Creditors can also be known as lenders, banks, backers, or a host of other names.
Crummey Trust
A Crummey Trust is an Irrevocable (meaning it cannot be changed) Trust that gives the Trust Beneficiary unique power to take out some or all of the Trust’s assets for a specific time period after the contribution is made.
Crummey Trusts can be used as a strategic way to transfer assets to Beneficiaries while avoiding Gift Taxes. They’re not as commonly used as they once were, now that the annual exclusion is as high as it currently is (as of 2022, the limit is $16,000).
Custodian
A Custodian is the entity that’s legally appointed and named to manage a Minor’s assets. Most states allow for a Minor to legally receive the assets at the age of adulthood.
A Custodian of an estate can be a Trust Company or a person who is legally responsible for managing the assets (including real estate, money, or any other property) that’s in a Custodial Trust for the benefit of a Minor.
Death Tax
Death Tax is the name commonly used to reference a federal estate tax, which is paid based on the value of the assets in an estate after the owner’s death.
Death Taxes only apply to very large estates – as of 2022, only estates valued at more than $12.06 million would need to pay tax. Note that estate tax is a federal tax, and some states also impose a state tax in addition, which would vary by state law. Sometimes the term is used in reference to an Inheritance Tax at the state level as well.
Deceased
Deceased is the term used to refer to someone who has passed away.
Decedent
Another term for “deceased,” decedent is a legal term that references someone who’s died.
Deed
A Deed is a legal, signed document that’s used to transfer real estate ownership from one person or entity to another.
Deeds are often used to transfer legal ownership on vehicles or properties. Their purpose is to officially and legally transfer a title proving ownership.
Devise
Another term for Bequest, Devise is a Gift left in a Will or Trust.
Devices can either be Residuary (meaning there’s a percentage share of leftover assets after all other gifts have been made), or they can be specific (which means a cash gift or specific item). Grantors can leave a Devise to organizations, a class of people (for example all children or grandchildren), or one specific person.
Devisee
A Devisee is another name for a Beneficiary.
Devisees are the legally named people who are entitled to inherit assets or property through an Estate Plan or investment like a life insurance policy or Transfer-on-Death (TOD) or Payable-on-Death (POD) account.
Also see related concepts: Beneficiary; Heir; Inheritor; Recipient
Disclaimer
A Disclaimer is the refusal to accept an asset, Bequest, or Devise. It can also be used in reference to refusal of insurance proceeds, retirement benefits, or any other named inheritance.
Disclaimers must be made within a certain amount of time (currently nine months) in order to avoid a tax trigger. State laws may differ, and some Estate Plans can include provisions about what happens to assets that are disclaimed.
Discretion
Discretion is partial or full power to make a decision about a subject or matter relating to an estate.
Disinherit
To disinherit someone means to remove them as Beneficiary of part or all of an asset or estate.
Sometimes a Probate court will review and look into the Grantor’s intent if a Beneficiary has been disinherited. This can be more common if the language used in a Will or Trust is ambiguous or unclear.
Distribution
The Distribution of an estate is the payments of assets or cash to named Beneficiaries.
Durable Financial Power of Attorney
A Durable Financial Power of Attorney is a legal document you can create to authorize another person (known as your Agent or Attorney-in-Fact) to act on your behalf regarding decisions about your financial matters.
The durable part is important if you want somebody authorized even if you were to suddenly become incapacitated and unable to make financial decisions on your own. Durable Financial POAs end upon your death.
Also see related concepts: Agent; Healthcare Proxy; Medical Power of Attorney; Power of Attorney (POA)
Durable Healthcare Power of Attorney
A Durable Healthcare Power of Attorney (POA) is a legal document that authorizes a person (known as an “Agent”) to make healthcare decisions on your behalf should you be unable to make them yourself.
Durable Healthcare POAs can be included as part of a more comprehensive document known as an Advanced Healthcare Directive. The “Durable” part refers to the fact that you’re naming an Agent who would retain his or her authority even if you were to become suddenly incapacitated. Durable Healthcare POAs end upon your death.
Also see related concepts: Agent; Healthcare Proxy; Medical Power of Attorney; Power of Attorney (POA)
Durable Power of Attorney
A Durable Power of Attorney is a legal document designed to give authorization to an Agent (also known as an Attorney-in-Fact) to act on specific matters on your behalf.
Durable Power of Attorneys differ from regular POAs in that the “Durable” portion of it means you’re authorizing your Agent to act on your behalf even if you suddenly become incapacitated. The Agent’s power ends at your death.
Also see: Attorney-in-Fact
Elective Share
Elective Shares are also known as Spousal Shares, Widow Shares, or Widower Shares. They’re the portion of any estate that a Surviving Spouse can claim instead of what they were left in their deceased partner’s Will.
Note that Community Property States don’t have Spousal Shares. It’s also important to point out that the laws outlining a Surviving Spouse’s rights will widely vary by state. Spousal Shares are typically used to help support the Surviving Spouse.
Also see related concepts: Spousal Share; Widow’s Share; Widower’s Share
Estate
An estate is made up of the total value of assets, minus the debts, someone has at the time of their death.
Estates can be handled in a number of ways after an owner passes away. State law, individual Estate Plan documents, and other factors will all contribute to how an estate is managed and settled.
Estate Planning
Estate planning is the formal, legal process you go through to put together a strategy outlining how your estate, assets, and debts should all be managed during and after your lifetime. Estate planning can involve various documents and tools, including a Will, a Trust, or other documents that offer directions on the management and distribution of your assets.
In addition to managing assets, Estate Plans often include directives regarding healthcare desires, appointing Power of Attorney, and designating Guardianship directives for any Minors.
Estate Tax
Estate Tax, also commonly known as the Death Tax, is a federal tax that can be imposed on any transfers of assets after your death.
In addition to the United States federal estate tax, several states throughout the country also collect a state estate tax as well. Your estate has the responsibility of paying any tax due.
Also see related concept: Death Tax
Executor
An Executor is also sometimes referred to as a Personal Representative. This is the person who you legally and formally appoint to be responsible for handling all the legal and financial wishes laid out in your Estate Plan.
Executors are responsible for things such as paying off debts, selling or managing assets, and making distributions to your named Beneficiaries.
Also see related concept: Personal Representative
Exempt Property
An Exempt Property is property that’s not considered part of your estate in cases where you have a Surviving Spouse, a child, or children.
With Exempt Property, the property is directly passed to a Surviving Spouse or children, avoiding the Probate process. It can be a tax beneficial option, too, as Exempt Property is shielded from property taxes and the threat of creditors. Properties that qualify as exempt can widely vary from state to state, so it’s important for you to understand your state law.
Family Trust Company
A Family Trust Company is also known as a Private Trust Company. It’s an entity that can be formed by a family to work as a Fiduciary – someone or an institution who’s legally required to act in the best interest of someone else – for Trusts and Estates that belong to extended family members.
Family Trust Companies are state chartered and regulated entities. They can’t do business with the general public.
Also see related concept: Private Trust Company
Federal Estate Tax Exemption Amount
The Federal Estate Tax Exemption Amount is the amount that will be excluded from estate tax liability when you pass away.
As of 2022, the exemption amount is $12.06 million for individuals and twice that for couples – this means that any estate valued less than $12.06 million will not need to pay federal estate tax. If the value of an estate exceeds this amount, and no other tax advantageous plans are put into place to avoid liability, the estate will be responsible for taxes only on the amount above the exclusion limit.
Also see related concept: Estate Tax
Fiduciary
A Fiduciary is an institution or a person who’s legally authorized and responsible to act on behalf of someone else. Legally, a Fiduciary must act in the best interest of the person they are representing.
Also see related concept: Professional Trustee
Financial Guardian
A Financial Guardian might also be called a Conservator or a Guardian of the Estate. This is any person who’s appointed to handle the financial affairs of a Minor should the parents pass away or be unable to act on their own. In cases where one parent passes away, a surviving parent would most often be the Financial Guardian of any children.
Financial Guardians use an estate’s assets to pay for maintenance and care of a child or children. Sometimes no Financial Guardian is appointed in a Will, in which case whomever is appointed as Guardian would typically play both roles.
Formal Probate
Probate is the court-supervised proceeding that validates a Will after your death. It’s also the process that oversees a named Executor in carrying out all the financial and legal wishes left in an Estate Plan by a Grantor (the estate owner).
Probate includes a court hearing to confirm the death and residency of the Grantor, validate the Will, and formally appoint the Executor. During the Probate process, challenges to a Will can be reviewed and decided upon. In cases where an estate owner dies intestate (without a Will or Estate Plan), the Probate process is used to appoint an Executor and guide the settling of the estate based on state succession laws.
Also see related concepts: Informal Probate; Probate
Funding
Funding is the term used in Estate Planning to explain the process of transferring assets into an established Trust.
Creating a Trust is only half of the process. Unless it’s funded (by transferring or retitling assets to be Trust-Owned), it’s just a document that holds no power or protection for an estate owner.
Generation-Skipping Transfer Tax (GSTT)
Generation-Skipping Transfer Tax (GSTT) is the term used to describe the tax placed on assets that are left to grandchildren or further generations.
GSTT was implemented to prevent loopholes that allowed an estate to avoid paying taxes by skipping one or more generations.
Gift
A Gift is when someone gifts, or transfers, an asset with no request or expectation for any financial or other type of compensation. Another term for Gift is Bequest.
Also see related concepts: Bequest; Devise
Gift Tax
A Gift Tax is the tax on all lifetime transfers someone gives to benefit another person. There are some loopholes here, including Annual Exclusion Gifts and certain payments that directly go to cover education costs or medical care.
As of 2022, the Annual Gift Tax Exclusion limit is $6,000. Any gifts exceeding this amount in one year would trigger a tax return needing to be filed.
Grantor
A Grantor is a person who creates and/or funds a Trust. They can also be referred to as a Trustor, Settlor, or Trustmaker. In cases where more than one person contributes assets, each contributor is considered a Grantor according to the portion of the Trust property they contributed.
Also see related concepts: Settlor; Testator; Trustmaker; Trustor
Grantor Trust
A Grantor Trust is any Trust in which the Grantor (the person who creates the Trust) maintains control in relation to tax liabilities. In this case, the Trust would not be regarded for any federal income tax purposes (often the same applies to state taxes, too).
A Grantor Trust means the Grantor is taxed on any income the Trust generates, and he or she pays income taxes individually rather than the Trust or Beneficiaries being responsible.
Gross Estate
Gross Estate refers to a federal estate tax concept that involves all assets and property you own at the time of your death. It also can include various property that was transferred, but still might be subject to Federal Estate Tax liability.
Also see related concept: Net Estate
Guardian
A Guardian is the legally appointed person, bank or Trust Company who would act on behalf of a Minor or somebody who’s incapacitated (known as a “Ward”).
Guardians are legally authorized and empowered to make a variety of decisions for the Ward. Guardians of Property, which also are commonly referred to as a “Committee,” would be appointed to manage any property owned by the Ward.
Guardian of the Estate
A Guardian of the Estate is also known as a Financial Guardian or a Conservator. It’s someone who’s appointed by a parent to handle and manage the financial affairs of a child should the parent become incapacitated or pass away.
A Guardian of the Estate uses funds and assets from the parent’s estate to ensure proper and appropriate care is given to the child or children. Guardians are often also named in a Will, but if one isn’t named, the same person can fill both roles. If there’s a Surviving Spouse, he or she would most often be appointed as Guardian of the Estate for any of the couple’s minor children.
Guardian of the Person
Also commonly referred to as simply Guardian or Conservator, the Guardian of the Person is someone who was formally appointed to care for minor children if one or both parents pass away.
He or she would typically make decisions regarding both living and health matters, and they could also be appointed as Financial Guardian. Or, they could play the role of Financial Guardian if a separate person wasn’t appointed.
Healthcare Proxy
A Healthcare Proxy can also be called a Durable Power of Attorney for Healthcare, Durable Medical Power of Attorney, or a Healthcare Surrogate. This document authorizes someone to act as your Agent and on your behalf to make healthcare decisions regarding your medical care should you be unable to make them yourself.
Also see related concepts: Durable Healthcare Power of Attorney; Medical Power of Attorney
Heir
An Heir is someone who’s entitled to assets or property from your estate. In the event a Grantor (the estate owner) dies intestate, that is without an Estate Plan, applicable state laws determine distribution of assets.
Note that Heir and Beneficiary are not the same thing, but they may be used in reference to the same person.
Also see related concepts: Beneficiary; Devisee; Inheritance; Recipient
Heir-at-Law
An Heir-at-Law is someone who could be eligible to receive assets from your estate if you pass away without having a Will or other Estate Plan. State intestacy laws in the state of your primary residence at the time of death are used to determine eligibility.
Holographic Will
A Holographic Will is just another name for a handwritten Will. They can also be called an “Olographic Testament.” These Wills are still signed by the Grantor (the person who creates it) and are used as an alternative to a professionally created document.
Note that not all states recognize Holographic Wills – in fact, they’re only valid in about half of all states.
HIPAA
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) is a federal law that resulted in significant impacts on healthcare and health insurance.
HIPAA Authorization is a document that authorizes the release of medical records which are protected under HIPAA. HIPAA is an important piece of legislation. It was originally an attempt at healthcare reform. It passed with two main objectives:
To ensure healthcare stability between jobs (insurance portability)
To ensure both security and confidentiality in terms of patient data and healthcare records while standardizing electronic data transmission relating to patients’ personal data
Homestead
A Homestead is a property that’s owned and occupied by a person as their primary residence.
Some states allow homeowners to take advantage of what's known as a Homestead Exemption, which can offer protection from creditors and property taxes among other things.
Homestead Exemption
A Homestead Exemption is also known as a Homestead Allowance. These rules are intended to protect homeowners from property taxes and creditors after the death of a spouse.
Homestead Exemptions only exist in certain states, and qualifications and the size of the exemption will differ state-by-state.
Incapacity
In cases where a person is incapacitated, they are unable to make decisions on their own behalf. Incapacitation can be related to matters that are financial, business, or healthcare related, or surrounding decisions regarding children.
Incapacity Planning refers to a specific type of estate planning where you prepare for a time if you were ever incapacitated. By appointing an Agent to act on your behalf, you can feel confident that your financial affairs, personal life, business matters, children, and healthcare are appropriately handled in the manner you would want.
Income
Income, in estate planning, is made up of (typically) monetary assets that are earned by a Trust or estate. Income can be commonly generated by things like dividends, interest on assets, rent, and net gain from sale of assets, businesses, or Real Property.
Independent Administration
Some states allow for what’s known as an Independent Administration. This simply refers to a type of Probate that’s simplified and generally requires less overall court supervision and court required appearances.
Independent Executor
An Independent Executor is recognized in some states and allows the Executor of an estate to act without court supervision. You can either be appointed this through a Will, or in cases where someone dies Intestate (without a Will), a court can appoint you.
As an Independent Executor, you have a fiduciary responsibility to act on behalf and in the best interest of the Beneficiaries. It can be wise (and is often legally required) to consider having attorney representation.
Informal Probate
Informal Probate is a simplified Probate process that limits (or entirely eliminates) court supervision and involvement in the settling of an estate. Typically, a judge won’t need to issue any decisions regarding the estate if the Informal Probate process is used.
The Informal Probate process costs less and is quicker than more formal Probates, but there are less safeguards in place.
Also see related concepts: Formal Probate; Probate
Inheritance
An Inheritance is the collection of assets you might receive from someone when they pass away. It can include such things as:
Cash
investment assets such as stocks or bonds
Real property, including land and real estate
items such as jewelry, furniture, collectibles, and family heirlooms
Inheritance Tax
An Inheritance Tax is the tax that a Beneficiary of an estate owes after they get a distribution from the estate. Inheritance Tax differs from Estate Tax, which is a tax on the actual estate before distributions occur.
Not every state has an Inheritance Tax. In fact, as of 2022, only six states in the country have it: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. However, Iowa is scheduled to appeal Inheritance Tax in January, 2025.
Inheritor
An inheritor is someone who stands to inherit (receive) assets or property from an estate.
Also see related concepts: Beneficiary; Devisee; Heir; Recipient
Insurance Trust
An Insurance Trust is a specific type of Trust that’s irrevocable (meaning it cannot be changed). These Trusts are created to own and hold life insurance policies on either one person or a couple.
The purpose of an Insurance Trust is to exclude proceeds from a life insurance policy from being included in your gross estate at the time of your death. Instead, the Trust itself would be Beneficiary on the policy, and proceeds would be immediately inside the Trust.
Inter Vivos
Inter Vivos is Latin for between the living. An Inter Vivos Trust is essentially just a Living Trust. The Trust is established and in effect during or after the Grantor’s (Trust Maker’s) lifetime. The duration is detailed at the time of the Trust’s creation.
A good example of an Inter Vivos Trust is when parents use a Trust as an education fund that will pay for their child or children’s college expenses. The opposite of an Inter Vivos Trust is called a Testamentary Trust, which is established during lifetime, but doesn’t go into effect until the Trust Owner passes away.
Also see related concept: Living Trust
Interest of a Beneficiary
Interest of a Beneficiary gives someone the rights to either Principal or Income of an asset or assets, as provided in the terms of a Trust or Will.
Intestacy
Intestacy is a term used when someone dies without having a valid Will in place.
When someone dies Intestate, their estate and assets are distributed per state intestacy laws in the legal state they were living in at the time of their death.
Irrevocable Trust
An Irrevocable Trust is a specific type of Trust that cannot be easily revoked – that is, terminated or easily changed after it’s created. It is the opposite of a Revocable Trust, which can be changed and updated at any time.
There are instances when an Irrevocable Trust can be modified, but it typically requires all Beneficiaries agreeing to the changes and there is a court process, known as decanting, which can potentially allow for the transfer of assets from one existing Irrevocable Trust to a new Trust with different provisions.
Issue
In estate planning, the term “Issue” is a legal reference describing any descendant who may be related to an estate. This could include children, grandchildren, great grandchildren, etc.
Joint Ownership
Joint Ownership is a type of asset ownership used when two or more people are invested in the same asset.
There are several specific types of Joint Ownership, including: Tenancy in Common, Joint Tenancy with Right of Survivorship, and Tenancy by Entirety.
Joint Tenancy
Joint Tenancy is a way of titling assets in which an ownership arrangement has been agreed-upon where two or more people jointly own property.
Joint Tenancy often comes with a Right of Survivorship, which means when one owner passes away, the other owner automatically is entitled to become sole owner.
Joint Tenancy with Right of Survivorship
Joint Tenancy with Right of Survivorship is another form of ownership where two or more people are both owners of the same asset. With Right of Survivorship, the death of one owner results in automatic sole ownership for the other.
Right of Survivorship can override any Will, Trust, or other Estate Plan declaration about who should own assets titled with the Right of Survivorship. Note that ownership transfer will be automatic upon one owner’s death and does not require court action if proper paperwork is in place.
Also see related concepts: Tenancy in Common; Tenancy by the Entirety
Joint Trust
A Joint Trust is an estate planning tool in the form of a Trust that’s set up usually for married people who own joint and/or individual property.
Joint Trusts can be beneficial for a number of reasons, including they’re easy to create and manage in Community Property States; they avoid complicated community property splits; and they might be tax beneficial.
Life Beneficiary
A Life Beneficiary is someone who’s legally entitled to receive Trust distributions for the remainder (duration) of his or her life. Distributions can come from Income or Principal of the Trust.
Living Trust
A Living Trust is a type of Trust that’s created during the Grantor’s lifetime.
Per the Grantor's instructions and guidance, assets are transferred and held in the Living Trust. A Trustee (who may be the Trust Owner or someone else) manages, and eventually distributes, property or income for Beneficiaries as outlined in the Trust.
Also see related concepts: Inter Vivos; Revocable Living Trust; Revocable Trust
Living Will
A Living Will is a legal and formal statement you can make as long as you’re of sound mind. The statement establishes your wishes regarding medical treatment and all healthcare decisions that would need to be made in the event of incapacitation or if you’re no longer able to express consent on your own.
Living Wills (Advanced Healthcare Directives) establish authority for a person you trust to make medical decisions on your behalf. They spell out specific medical treatments you do, or do not, want if you.
Also see related concept: Advance Healthcare Directive
Marital Deduction
A Marital Deduction is a federal tax code provision that allows you to transfer unlimited assets or property to your spouse tax-free, in a qualified way.
This unlimited federal estate and gift tax deduction allows you to pass property between spouses without a huge tax consequence.
Medical Power of Attorney
A Medical Power of Attorney is also known as a Healthcare Proxy. In this legal document, you can appoint another person (an Agent or Attorney-in-Fact) to act in your best interest and on your behalf in regards to very specific, detailed healthcare decisions.
Durable Healthcare Power of Attorneys are generally included in an Advanced Healthcare Directive. The “durable” part is important, as it establishes that power and authority remains in effect even in the event that you were to become incapacitated or unable to express your wishes.
Also see: Durable Healthcare Power of Attorney; Healthcare Proxy
Minor
A Minor is simply someone who hasn’t reached legal age. In most states, adulthood is legal at 18 years of age.
Minors can be Beneficiaries, in a sense, but it’s common for parents to create a Trust to hold assets that will be managed, invested, and eventually distributed to the Minor, according to the Trust terms, typically once they reach adulthood or a specific age. In this instance, a Trustee would be named to oversee assets on the Minor’s behalf.
Modern Per Stirpes
Modern Per Stirpes is a method of asset distribution that equally divides assets among children or branches of a family if there are surviving descendants.
An example of Per Stirpes is you have three children who will be Heir to your estate, Per Stirpes. If all three are living at the time of your death, each one receives 1/3 of your estate. If two are living, but one predeceased you, a Per Stirpes direction would transfer that 1/3 to the deceased person’s descendants. If they had no descendants, child one and two would each get 1/2 of the 1/3.
Also see related concept: Per Capita with Representation
Net Estate
Net Estate refers to the value of an estate after all debts have been paid off. Federal Estate Taxes would be based on the Net Estate value.
Also see related concept: Gross Estate
No-Contest Clause
A No-Contest Clause is a stipulation put in a Trust or Will that explicitly states any Beneficiary who challenges the validity or terms of any part of an Estate Plan will forfeit all Bequests (Gifts) that were originally left to them.
No-Contest Clauses are commonly used to discourage Beneficiaries from questioning or challenging any part of an Estate Plan. Note that No-Contest Clauses are not enforced in every state.
Nuncupative Will
Nuncupative Wills are a specific type of Will that’s presented orally. They are commonly used when people are on their deathbed and don’t have a satisfactory Estate Plan in place.
Nuncupative Wills are also known as Oral Wills, Verbal Wills, or Deathbed Wills. Rarely are Nuncupative Wills legal. In the few jurisdictions that do consider them valid, there are very strict limitations in place.
Payable on Death (POD)
Payable on Death (POD) is a title you can put on a bank or credit union account where you designate a named Beneficiary to receive assets in an account.
Upon your death, an immediate transfer of assets is triggered on any POD accounts. Note that POD arrangements most often will take precedence over any specifications on distributions outlined in a Will or Trust.
Also see related concepts: Transfer on Death (TOD); Totten Trust
Per Capita
Per Capita is a method used to distribute estate assets in which every surviving Heir in one generation would receive the same proportion of your estate.
If one Heir predeceases you, their share would go back into the total estate value pool to be equally distributed among surviving Heirs.
Per Capita with Representation
Per Capita with Representation is a method of asset distribution very similar to Per Stirpes, with one distinct difference. Rather than equally dividing amongst first generational tier, Per Capita with Representation equally divides assets among all surviving children (or the nearest generation), but remaining shares of anyone predeceased would be divided among their surviving descendants.
Note that Per Capita with Representation is not used in every state.
Also see related concept: Modern Per Stirpes
Per Stirpes
Per Stirpes (Latin for “by branches”) is a method to distribute assets in your estate so that every branch receives the same percentage or proportion of your total assets.
With Per Stirpes, if a child predeceases you, the assets that would have gone to him or her would stay in their “branch.” Thus, their share would be re-distributed to their children.
Personal Property
Personal Property is simply property that can be moved. Examples of Personal Property can include furniture, cash, stocks, vehicles, etc.
Personal Property is in direct contrast to what’s known in the world of estate planning as Real Property – that is, property that’s not able to be moved (think: land).
Personal Representative
A Personal Representative (also known as an Executor) is the person you formally name and appoint to be responsible for carrying out all the legal and financial wishes you state in your Will.
Personal Representative’s responsibilities could include paying debts, selling assets, and eventually, making distributions to your named Beneficiaries.
Also see related concept: Executor
Power of Attorney (POA)
A Power of Attorney (POA) is a legal document that authorizes someone to act on behalf of someone else as their Agent. Power of Attorneys can be established for financial, legal, personal, as well as health matters.
Powers can be as general or broad as the Grantor wishes. Scope of the authority that’s granted by the document will be clearly specified in the POA. POAs automatically terminate upon the death or incapacitation of the Grantor, unless the document is a specific type known as “Durable.”
Also see related concept: Agent
Pour-Over Will
A Pour-Over Will is a type of Will that’s used with a Living Trust. Pour-Over Wills can legally establish that any assets not specifically designated for a Beneficiary should automatically become part of your Trust at the time of your death.
In essence, Pour-Over Wills simply name your Living Trust as Beneficiary to any assets that aren’t already in a Trust or set to go to someone else. After you pass away, assets that aren’t already Trust-Owned will just “pour over” into the Trust. Not all states acknowledge Pour-Over Wills.
Principal
Principal, or Corpus, is the Real and Personal Property inside a Trust that’s used for the benefit of the Trust’s named Beneficiaries. Assets can include stock, money, real estate, etc.
Principal can either be distributed, or it can generate Income. The Trust Grantor (creator) details how, and when, a Trustee should use Principal on behalf of named Beneficiaries.
Also see related concept: Corpus
Private Trust Company
A Private Trust Company is an entity that can be formed by a family to act as Fiduciary for the Trusts or estates of extended family members. A Private Trust Company can also commonly be referred to as simply a “Family Trust Company.”
Also see related concept: Family Trust Company
Professional Trustee
A Professional Trustee is a named Trustee who isn’t a Beneficiary of a Trust. He or she would oversee the management of the Trust and is also sometimes referred to as a Fiduciary.
Professional Trustees can be one person, or they can be an institution or company that’s hired to handle and manage a Trust on behalf of its Beneficiaries.
Also see related concept: Fiduciary
Probate
Probate is a court-supervised procedure that’s used to determine validity of a Will and to establish and supervise an Executor in carrying out all the legal and financial wishes left by a Grantor.
Probate typically begins with a court hearing to verify an estate owner’s death. In the event of Intestacy (someone dies without an Estate plan), the Probate process is used to appoint an Executor and oversee the settling of the estate.
Also see related concepts: Formal Probate; Informal Probate
Probate Estate
Probate Estate is the subset of someone’s estate that must go through Probate after their death.
Probate Estate typically does not include any assets that are titled with Joint Ownership, Payable on Death (POD) accounts, insurance policies that have named Beneficiaries, Trust-owned assets, or Retirement Plans like IRAs and 401(k)s.
Probate Fees
Probate Fees are the fees that must be paid as an estate goes through the Probate process.
Typical Probate Fees can include appraisal fees, court costs, and Executor fees. Probate Fees are typically paid out of the estate before any assets are distributed to Beneficiaries or Heirs.
Qualified Domestic Trust
A Qualified Domestic Trust is a Marital Trust (QDOT) that is established to benefit a non-U.S. citizen spouse.
QDOTs will contain specific, special provisions established by the Internal Revenue Code so that they will legally qualify for the marital deduction.
Qualified Personal Residence Trust
A Qualified Personal Residence Trust (QPRT) is a type of Irrevocable Trust that is established to hold the title of a residence for a specified number of years. It ensures the original owner retains the right to remain in the home for the set term.
The title will automatically pass to the owner’s children (or another named beneficiary or beneficiaries) upon the end of the term.
Qualified Terminable Interest Property
Qualified Terminable Interest Property (QTIP) is simply property that’s held in a Marital Trust or a Life Estate arrangement while still qualifying for the marital deduction. QTIPs are valid options if the surviving spouse is the named sole beneficiary for life. He or she must be entitled to all income generated.
Real Property
Real Property is any property that cannot be moved. It can include land, buildings attached to the land, or resources that are on or under land.
Real Property can also include man-made structures that are permanently attached to land or a building. Real Property is in direct contrast to Personal Property, which is movable property such as art, vehicles, or cash.
Recipient
A Recipient is someone who’s legally entitled to part of an estate. This can be through Intestacy Laws (in the absence of a Will or other estate planning documents), or it can be as a designated Beneficiary named by a Grantor (estate owner).
Also see related concepts: Beneficiary; Devisee; Heir; Inheritor
Residual Estate, Residuary Estate, Residue
The Residual Estate, Residuary Estate, or Residue, is the remaining value of an estate after any specific gifts are taken into account.
Residue is the property that remains in an estate after all debts, taxes, expenses, or gifts are handled or made.
Revocable Living Trust
A Revocable Living Trust is a legal document that specifies how you want all of the assets in your estate handled after you pass away. Assets can be made up from valuable possessions, real estate, investments, or bank accounts.
A Living Trust is a Revocable Trust, which can also be called a Revocable Living Trust. It’s also correct to call it a Revocable Trust or a Living Trust – they all mean the same thing. Living Trusts are created during your lifetime and then assets are transferred to named Beneficiaries after you pass away.
Also see related concepts: Inter Vivos; Living Trust; Revocable Trust
Revocable Trust
A Revocable Trust is a Trust that’s created during your lifetime and can be terminated or changed while you’re still living.
Separate Property
Separate Property is a specific type of property that’s acquired before you are married, or as an Inheritance or gift while you were married.
Separate Property State
A Separate Property State is a state that does not legally recognize Community Property. Separate Property is any property that’s held in one spouse’s name only. It often includes property owned before you were married, or anything that was given as a gift or inherited after marriage.
Not all states recognize Community Property. Those that do, as of 2022, include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
Also see related concept: Community Property State
Separate Trust
A Separate Trust is a Trust that’s established by just one person. In marriages where couples have individual assets, Separate Trusts can hold each partner’s assets distinct from one another. Separate Trusts are in direct contrast to Common Trusts.
Settle an Estate
Estate Settlement is what happens to an estate after the owner passes away. It involves appraising or determining the value of assets, paying any final expenses, settling debts, paying taxes the estate owes, and making distributions to Beneficiaries or Heirs. The process can be long and confusing for those going through it for the first time.
Having an Estate Plan can greatly decrease the stress and complexities of settling an estate.
Settlor
Also known as a Grantor, Trustor, or Trustmaker, Settlor is another term used to identify a person who establishes or settles a Trust.
Also see related concepts: Grantor; Testator; Trustor; Trustmaker
Special Needs Trust
A Special Needs Trust is a specific type of Trust that’s set up to take care of any person with a disability. The Trust can supplement public benefit payments without jeopardizing eligibility for those benefits.
One of the most important aspects of this type of Trust is that it allows a mentally or physically disabled person to access the assets without the Trust’s value affecting or reducing government assistance. The Trust also adds a layer of protection from the government attempting to access funds from inheritances or other sources.
Spendthrift Provision
A Spendthrift Provision is a clause in a Trust that serves as protection for Beneficiaries. It restricts involuntary and/or voluntary transfers of any interest due to a Beneficiary.
For example, a Spendthrift Provision would prevent creditors from laying claim on assets before Beneficiaries receive distributions.
Spendthrift Trust
A Spendthrift Trust is a type of Trust that can be set up to limit a Beneficiary's access to the assets that are inside the Trust. These Trusts can be used as a protective measure against irresponsible financial habits. They can also be used to protect against creditors, too.
Spendthrift Trusts can prevent a Beneficiary from receiving their inheritance in a lump sum, instead releasing funds over time.
Spousal Share
Spousal Share is also known as Elective Share, Widow’s Share, or Widower’s Share. It’s the value left in an estate that a Surviving Spouse could claim rather than what they were left in their deceased partner’s Will.
Community Property States do not have Spousal Shares. It’s also worth noting that Surviving Spouses’ rights can greatly vary by state.
Also see related concepts: Elective Share; Widow's Share; Widower’s Share
Successor Trustee
A Successor Trustee is the person (or institution) who you name as second in line as Trustee for a Trust. In the event that the first-named Trustee either resigns, dies, or is in any way unable to act and perform their duties, the Successor Trustee would step in.
Surviving Spouse
A Surviving Spouse is the person who lives longer than their partner. Generally, to be considered a Surviving Spouse, you must outlive your partner by 120 hours or longer.
Tenancy by the Entirety
Tenancy by the Entirety is a type of ownership that some states legally allow. Under this title, two spouses can own one asset together. Upon the first spouse’s death, the Surviving Spouse becomes the sole owner automatically.
Tenancy by the Entirety is similar to Joint Tenancy with Right of Survivorship, however with Tenancy by the Entirety, neither spouse can sell their interest without the other’s consent.
Also see related concepts: Joint Tenancy with Right of Survivorship; Tenancy in Common
Tenancy in Common
Tenancy in Common is a type of asset ownership where two or more people can legally own one asset together. Upon the first co-owner’s death, their interest transfers to their own heirs, rather than to the surviving partner.
Also see related concepts: Joint Tenancy with Right of Survivorship; Tenancy by the Entirety
Testamentary
Testamentary refers to a Will or another document that’s effective at death.
Testamentary Trust
A Testamentary Trust is a type of Trust that goes into effect and is established at death. Typically, terms of a Will are instrumental in establishing this type of Trust.
Testamentary Trusts are different from Living Trusts, in that they go through Probate before the Trust is actually created. While Testamentary Trusts don’t work to avoid Probate, they can be useful for some of the other benefits Trusts offer, such as providing a way to leave assets to Minors.
Testator
A Testator is a person who signs a Will. Women may be referred to as a testatrix.
Title
A Title is a legal right to something you own. For example, in real estate, having a “Title” would give you legal ownership of a property. Title gives you rights to use a property or asset.
Totten Trust
A Totten Trust is just another name for a Payable on Death (POD) bank account. Totten Trusts are basically just bank accounts that you open and name a Beneficiary on. After you pass away, the account is directly transferred to the Beneficiary you named.
Totten Trusts act just like normal bank accounts. You can add or withdraw funds or close out the account whenever you want. You can also change the Beneficiary anytime you want.
Also see related concepts: Payable on Death (POD); Transfer on Death (TOD)
Transfer on Death (TOD)
Just like a Payable on Death (POD) account, Transfer on Death (TOD) accounts simply allow for a designation that will automatically transfer the title of an asset to your named Beneficiary upon your death.
Transfer on Death accounts can be distributed without the Probate process.
Also see related concepts: Payable on Death (POD); Totten Trust
Transfer Tax
Transfer Tax is a tax on assets that can be triggered when something is transferred to another person.
Commonly, Transfer Tax results from Estate Taxes, Gift Taxes, and Generation Skipping Transfer Taxes.
Trust
A Trust is a legal document used in estate planning that’s made up of three parties. A Grantor (the Trust creator), a Trustee (the person or entity appointed to manage the Trust), and one or more Beneficiaries.
The Grantor can also be the Trustee and the Beneficiary in some types of Trusts. There are multiple types of Trusts out there, and which one is right for you will depend on your specific goals, needs, and situation.
Trust Company
A Trust Company is a professional organization or institution that can be named as Trustee to oversee the management of a Trust.
Trust Companies are legal, separate corporate entities that act in the best interest of the Trust they’re named to manage. Trust Companies are generally charged with administering, managing, and one day transferring assets and property inside a Trust to named Beneficiaries.
Trustee
A Trustee is the person, bank, or Trust Company that’s named in a Trust to manage the assets and property held in the Trust. Trustees have a Fiduciary responsibility to act on behalf of the Trust, Beneficiaries, and the estate.
Trustees can initially be the Grantor (Trustmaker), but in that case, a Successor Trustee should be named to step in at some point.
Trustmaker
A Trustmaker is the person who makes and funds a Trust. This is also commonly referred to as a Grantor or Trustor. A Trustmaker can also be the Trustee, at least initially.
If the Trustmaker is also the Trustee, they would name a Successor Trustee to take over should they pass away or become incapacitated.
Also see related concepts: Grantor; Settlor; Testator; Trustor
Trustor
A Trustor is just another name for Grantor, or a person who creates and opens the Estate Planning document known as a Trust.
Trustors can be one person, a group of people, a married couple, or an organization. The Trustor will appoint and often work with a Trustee (and in some cases, may also be the Trustee) in order to ensure that assets, money, and/or property are safe and distributed per the terms of the Trust. If the Trustor is initially also the Trustee, they would name a Successor Trustee to eventually step into the role in the case of incapacitation or death.
Also see related concepts: Grantor; Settlor; Testator; Trustmaker
Unfunded
Unfunded refers to a Trust that’s been created, but that hasn’t had any assets transferred into it yet. Note that to be effective as part of an Estate Plan, a Trust must be funded. Without holding any assets, a Trust is not beneficial in any manner.
Unified Credit
Unified Credit is a credit against an Estate Tax or Federal Gift Tax that would normally be paid by either an individual or an estate. It’s also known as the Estate Tax Exemption amount, Applicable Exclusion amount, or the Exemption Equivalent.
As of 2022, the Unified Credit exemption amount is $12,060,000, up from $11.7m in 2021.
Also see related concept: Applicable Exemption Amount
Uniform Transfer to Minors Act
The Uniform Transfer to Minors Act (UTMA) is a law in most states that allows you to legally leave assets in your Estate Plan specifically for the benefit of a Minor or under-age Beneficiary through the appointment of a Custodian. It was formerly known as the Uniform Gifts to Minors Act.
This easy way to transfer assets to a Minor lets you name a Custodian who will manage the asset or property on behalf of the Minor until they are of legal age – typically 18 or 21 – at which point, the Beneficiary will be given the asset(s) outright.
Ward
A Ward is the title given to a minor child or an incapacitated adult who is legally under another person’s care.
Wards are cared for by court-appointed Guardians, who may have the authority to take care of their financial, medical, education, housing, and other basic needs. Most often, Ward’s are financially supported with funds from an estate.
Widow
A Widow is a woman whose spouse has passed away, but she hasn’t remarried.
Widower
A Widower is a man whose spouse has passed away, but he hasn’t remarried.
Widower’s Share
A Widower’s Share is commonly referred to as a Spousal Share, Elective Share, or Widow’s Share. Simply put, it’s the part of the estate any Surviving Spouse can claim rather than what they were left in the Decedent’s (the person who passed away) Will.
Note that Community Property States don’t have Widower’s Shares. There are specific, varying laws regarding what, if any, rights a Surviving Spouse will have after the death of their partner. These laws will vary greatly by state, so you must check the state laws where the estate is located.
Also see related concepts: Elective Share; Spousal Share; Widow's Share
Widow’s Share
A Widow’s Share is also called a Spousal Share, Elective Share, or Widower’s Share. It’s the part of the estate that a Surviving Spouse can claim instead of what they were left in the Decedent’s (the person who passed away) Will.
Note that Community Property States don’t have Widows Shares. Laws in regard to the rights a Surviving Spouse has will vary largely by state, so it’s important to check in the state you’re in.
Also see related concepts: Elective Share; Spousal Share; Widower’s Share
Will
A Will (or a Last Will and Testament) is a legal estate planning document that details all the important financial decisions and wishes you have about what should happen to your estate after you pass away.
In your Will, you can identify your assets and name Beneficiaries (the people or entities who should inherit specific parts of your estate). It’s also the place for you to legally appoint a Representative (also known as an Executor). Your Executor will be responsible for settling any debts and distributing assets to Beneficiaries.
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