Estate Planning Definitions

Will

A will is a person’s final expression of their wishes. If you have a will, you, not the State of your residence, will control the disposition of your assets upon your death. You choose the person, generally referred to as your personal representative or executor, to pay all your final debts and expenses and then distribute the remaining assets to your chosen beneficiaries. The provisions of your will guide the executor in the execution of these duties.

More specifically, a will allows you to specify the arrangements for your funeral and burial, cremation or the donation of your body for science. If you have minor children, you can name a guardian to care for them in the event of your premature death. This may be a surviving parent or, for example, a family member or close trusted friend. With regard to your property, you decide who your beneficiaries will be (spouse, family, friends, charity), what they will receive, and when and how they will receive their inheritance. For example, you may leave property to them outright or in trust. Trusts may be, but do not need to be, included under the terms of your will. If property is left in trust, you may specify how old the beneficiary must be before they receive any property from the trust. In many cases, a minor’s interest is left in trust or a guardian is appointed to receive their interest on their behalf. Every adult person should have a properly drawn and legally executed will prepared by a qualified estate planning attorney.

A helpful site to search for a qualified estate planning attorney in your area is www.actec.org, the site for The American College of Trust and Estate Counsel. This is a national organization of approximately 2,600 lawyers elected to membership by demonstrating the highest level of integrity, commitment to the profession, competence and experience as trust and estate counselors. Its members work to teach those who aspire to enter the field and to improve and reform laws, procedure and standards while working with their peers and other professional organizations. Go to the site and click the link for “Fellows”.

Nothing stated or implied in this article should be construed to be legal, tax or professional advice. For questions regarding your specific situation, please consult with a qualified estate planning attorney.

Trust

A legal document in which property is held and managed by a trustee for the benefit of another known as a beneficiary. A trust is a relationship in which property is held by one person for the benefit of another. The trust can be created verbally, but will most often be in writing.

Power of Attorney

A document established by an individual (the principal) granting another person (the agent) the right and authority to handle the financial affairs for the principal. A power of attorney becomes invalid at the death or incompetency of the principal, unless the power of attorney is a “durable power of attorney” which remains in effect after the principal becomes incompetent.

Durable Power of Attorney

A document established by an individual (the principal) granting another person (the agent) the right and authority to handle the financial and other affairs of the principal. The Durable Power of Attorney survives through the period of incompetency of the principal.

Durable Power of Attorney for Health Care

A document established by an individual (the principal) granting another person (the agent) the right and authority to handle matters related to the health care of the principal.

Living Will

A document defining your “right to die.” It usually states that you do not want to have your life artificially prolonged by modern medical technologies. You can specifically define the means which you do not want used or do want used.

Living Trust or Revocable Living Trust

A type of revocable trust used in estate planning to avoid probate, help in situations of incompetency, and allow “smooth” management of assets after the death of the grantor or person who established the trust. The trust can be effective in eliminating or reducing estate taxes for married couples. Revocable Living trusts are established during the life of the grantor, who retains the right to the income and principal and the right to amend or revoke the trust. When the grantor dies, the trust becomes irrevocable and acts as a substitute for a traditional will.

Irrevocable Trust

A trust that cannot be changed, canceled, or “revoked” once it is set up. A “living trust” is not an example of an irrevocable trust. Insurance trusts and “Children’s Trusts,” or “2503 Trusts,” are examples of irrevocable trusts. Irrevocable trusts are treated by the IRS very differently than revocable trusts.

Insurance Trust

An irrevocable trust used to hold insurance and pass it on to your heirs without any estate taxes on the death benefits of the policy.

Executor/ Executrix

The person (male/female) named in a will to manage a decedent’s estate. The more modern term is a “personal representative,” which removes any reference to the sex of the person.

Trustee

The person or institution that manages the trust property under the terms of the trust.

Beneficiary

The person(s) or organization(s) who receive(s) the benefits of trust property held under the terms of a trust.

*CancerDancer would like to thank Donald Creech, CFP®, CLU®, ChFC®, CLTC, and the fine folks in his office for compiling information for this page.

Copyright 2012 by CancerDancer