Bringing Clarity to Sometimes Confusing Estate Planning Terms

At Steven M. Greenwood, P.C. estate planning, we make every effort to take the mystery and confusion out of the estate planning process.  For your convenience and to help you better understand estate planning, we have selected some of the most often used terms and briefly defined them here.  Certainly, any time we can bring more clarity to estate planning, please feel free to contact us.

Administrator—when there is no will or if a will does not name an executor, an administrator (or personal representative) will be named by the court to represent the estate during probate.  A woman who administers an estate may be called an administratrix.

Asset Protection—strategy used in financial and estate planning to protect assets during life and after death.

Assets—virtually anything owned by an individual, including a house and/or other real estate, household furnishings, artwork, automobiles, boats, RVs, bank accounts, retirement accounts (IRAs, etc.), investments, life insurance, collectibles, clothing, and the like.

Assignment—legal document that transfers an individual’s interest in assets from his or her name to another person; most often when transferring or “assigning” assets to a trust.

Beneficiaries—outlined in a living trust, these are individuals or organizations that benefit from the distribution of someone’s trust assets after their death.

Buy-Sell Agreement—also called a buyout agreement, this is a contract among co-owners of an enterprise, which outlines the terms for their purchase or disposal of a partner’s or shareholder’s interest in the business upon death, disability, retirement, etc.  The agreement can also define organizational restructuring.

Business Succession—determining who will take over leadership of the company, after the owner leaves the business.

Codicil—a change or amendment written into a previously written will.

Co-Trustees—two or more individuals, or a corporate trustees, named to act together in managing the assets in an estate.

Community Property—asset(s) acquired during a marriage, with each spouse owning one-half of the asset(s).  California is a community property state.

Conservator—an individual appointed by the court legally responsible for the care and well-being of another person, whether due to mental or physical incapacity.  The conservator (or guardian) is normally supervised by and reports to the court.

Corporate Trustee (or Corporate Fiduciary)—a bank, trust company or other institution that specializes in trust management.

Death Plan—a basic, living trust created to avoid probate, minimize estate taxes, and allow for the distribution of assets to beneficiaries totally unprotected.  This kind of plan does not provide the important family protections of a Life Plan.

Deed—a document to allow transfer of the title for real property to another person.

Designated Beneficiary—in general, this is the individual(s) named who will receive benefits from retirement accounts, insurance policies and/or other like assets after the death of the original owner.

Distribution—payment in cash or assets to an individual or organization named in a will or trust to receive it.

Durable Power of Attorney—a legal document that gives one person the authority to make decisions and/or sign for another person, relating to asset management or health care for reasons of absence or incapacity. 

Estate—at someone’s death, the assets left behind.

Estate Planning—the process of directing the administration and distribution of an individual’s assets in anticipation of incapacity or death.

Estate Taxes—sometimes called death taxes or inheritance taxes, it is the federal or state taxes levied on the value of an individual’s assets when they die.

Executor—an individual or institution, also called a personal representative, named in a will to carry out its instructions.  A woman is called an executrix.

Funding—transferring or assigning assets to a living trust.

Government Plan—this is a default, government-imposed program that takes over the handling of an estate, if a person becomes incapacitated or dies without an estate plan.  Beneficiaries must seek the assistance from the government and adhere to the rulings of a Probate Court.

Grantor—the person who sets up a trust in his or her own name.

Guardianship—a court-approved mechanism set up to manage the estate and/or the person of a minor.   If the child has income, money and/or property from an inheritance or other source, the guardian of the estate is required to manage the financial affairs of the child.  A guardian of the person essentially cares for the child himself or herself.  Guardianship ends upon the child attaining the age of majority.

Health Directives—an individual’s written instructions on how to care for him or her in the event of incapacity, including determination of whether to keep the person alive by artificial means, if illness or injury is considered terminal by physicians.

HIPAAHealth Insurance Portability and Accountability Act of 1996 (HIPAA) outlines federal privacy and security protections and disclosure rules for personal health information held by covered entities and gives patients a range of rights regarding that information.

Joint Tenancy—this is a type of co-ownership of real (land, home) or personal property by two or more people.  Upon the death of one owner, their share automatically passes to the other owner(s).

Irrevocable Trust—a trust that, once it is set up, cannot be changed or cancelled, except by court order.

Intestate—to die without having a will.

Life Plan—basic estate plan that helps avoid probate, minimizes estate taxes, and protects your loved ones, such as your spouse, children and, even, grandchildren from serious loss due to lawsuits, predators, divorce, bankruptcy or inadvertent disinheritance.

Living Trust—a legal document that creates an entity to which ownership of one’s assets can be transferred during the person’s lifetime and provides instructions for managing the assets during life or incapacity and distributing assets due to death.  Avoids court control if an individual becomes incapacitated and avoids probate after death.

Living Will—a document that states an individual does not want to be kept alive by artificial means, if physicians consider illness or injury terminal.

Personal Property—virtually any “movable” asset, other than real estate, that is owned by an individual, such as cash, bank accounts, stocks/bonds, IRAs, jewelry, clothing, vehicles, furniture, and the like.

Pour Over Will—an abbreviated will that states that any assets not noted in a living trust will become part of (pour over) that trust upon an individual’s death.

Power of Attorney—a legal document authorizing someone to sign on behalf of another individual due to the latter’s absence or incapacity.  Unless it is a durable power of attorney, the power of attorney ends when an individual becomes incapacitated.

Probate—after death, it is the legal process of validating a will, paying taxes, and distributing assets.  This is a public, complicated, expensive, and time consuming process that can be avoided with proper estate planning.

Probate Court—the government body charged with the administration and/or distribution of estate assets for incapacitated or deceased persons, when they did not create their own, personal estate plan.  Having only a will guarantees proceedings through probate.

Real Property—land and structures (buildings, houses) permanently attached to land.

Required Minimum Distribution (RMD)—the amount an individual is required to withdraw each year from tax-deferred plans, normally, after reaching age 70 ½.  Upon the death of someone who had attained age 70 ½, an heir/beneficiary of a tax deferred account will also be required to withdraw a predetermined amount annually, regardless of the heir’s/beneficiary’s actual age.

Revocable Trust—a trust wherein the individual creating the trust retains the right to change or revoke the trust during his or her lifetime.

Settle an Estate—after someone’s death, this process validates assets and liabilities, pays debts and taxes, distributes assets to beneficiaries, and closes the estate after a full accounting.

Special Gifts—also called special bequests, this is a listing of specified assets intended to be left after death to certain named individuals, organizations or institutions.

Special Needs Trust—provides care for a disabled loved one without compromising any government benefits.

Successor Trustee—an individual or  institution that legally takes over management of living trust assets, when the original trustee dies, becomes incapacitated or refuses to continue handling the affairs of the trust.

Testate—to die with a valid will.

Trust—an entity created to hold assets of an individual’s estate for the benefit of other people, organizations or institutions.

Trust Administration—entails following the written instructions and wishes of the originator of the trust to administer and manage trust assets for the benefit of named beneficiaries/heirs.

Will—legal document in which an individual details how his or her estate is to be managed and assets distributed after his or her death.

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Steven M. Greenwood, P.C.
2801 Townsgate Rd., Ste. 210
Westlake Village, CA 91361

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