The world of trust and estate planning can be confusing for most Americans. Unfortunately, about 40% of Americans die without a trust or estate plan in place. We want to take the mystery out of trust and estate planning, so we have compiled some of the most common terms you may hear when planning your estate. Please know that trust and estate planning attorneys will never require you to know every one of these terms– that’s our job! However, client education is important to us, so here are trust and estate terms you may wish to look over.
Trust and Estate Terms
Advance Medical Directive: A document that names who can make medical decisions when the person who created the directive can no longer do so.
Appraisal: The activity of determining the monetary value of property included in an estate.
Attorney-in-Fact: A person given the authority to act on behalf of another individual under a power of attorney.
Beneficiary: A person designated to receive property from an estate or trust is called a beneficiary of that property.
Bequest: A piece of property (real estate), cash, or other specific item left to a beneficiary per the provisions of a will or trust.
Capital Gains and Losses: The difference between the purchase price and the selling price to calculate tax liability.
Claim Against an Estate: A charge placed against an estate to fulfill an agreement or an obligation that has not been satisfied (as in the case of unpaid bills at the time of death).
Codicil: An amendment or alteration made to an already existing will.
Conservator: A person or organization appointed by a court to manage the assets of a person who has been determined to be unable to handle his or her own financial and legal matters.
Contest of a Will: Taking legal action to challenge the validity of or change the distribution of an estate’s assets per the terms of a will.
Decedent: An individual who has passed away.
Donee: An individual or organization that is the beneficiary of an asset donated.
Donor: A person or entity that donates an asset to another person or entity.
Estate: All of the assets a deceased person had at the time of their passing are referred to as their estate.
Estate Taxes: Taxes due because the decedent owned more at death than the estate tax exemption amount. These are sometimes also referred to as “death taxes.” Virginia currently does not have estate tax.
Executor: The person named in a will and given the responsibility of settling the estate of a deceased person by following the stipulations outlined in the will.
Fiduciary: A person or organization tasked with looking out for the financial interests of another party and acting accordingly. When making choices for the benefit of another person, a fiduciary is required by the law to put their interests to the side and act in good faith.
Grantor: A person who transfers an asset to another person or entity, directly or through the establishment of a trust, is referred to as a grantor.
Guardian: A guardian is a person appointed by the court to be in charge of the physical well-being of a minor or an incompetent person.
Heir: A person entitled to inherit from the estate of a deceased person who died without a will.
Income: The amounts generated by principal.
Intestate: Passing away without leaving a will, known as “dying intestate.”
Irrevocable Trust: A form of trust that, once established, cannot be altered or canceled.
Joint Ownership: The ownership of a piece of property by two or more people simultaneously.
Last Will & Testament: A legal document that expresses an individual’s preferences about the disposition of his or her property after death and the proposed guardian for any minor children.
Living Trust: A living trust is a trust that the grantor creates during their lifetime, which can be either revocable or irrevocable.
Living Will: A living will is a legal document, often found in an advance medical directive, in which an individual expresses, in advance of fatal sickness or injury , their desire to avoid aggressive treatment and procedures meant to extend life. Living wills are becoming increasingly common as people are living longer.
Power of Attorney: A formal document that gives one person the authority to act as an agent or “attorney” on behalf of another person (the principal) in legal and financial matters. The attorney is said to have a durable power of attorney if the authority provided continues after the principal can no longer make decisions for themselves.
Principal: This refers to assets that are part of a trust or estate that produce income.
Probate: The legal procedure following a person’s death to gather assets, pay liabilities, and divide their property. It can also refer to the method through which the legality of a will is established..
Revocable Trust: A type of trust that the grantor can dissolve or modify at any time. (This type of trust is the antithesis of an irrevocable trust.)
Special Power of Attorney: A legal document giving the agent authority to act only in relation to certain circumstances.
Successor Representatives: A person or organization that steps in to fill the role of trustee or executor when the original trustee or executor is unable to fulfill their duties as outlined in the trust agreement or will.
Testamentary Trust: A specific kind of trust that is formed according to the terms of the will of a person who has passed away.
Testate: When a person who died had a will.
Testator: The person who creates a will.
Title: The legal ownership of property.
Trust: A legal agreement that stipulates the holding and management of one individual’s property on behalf of another person.
Trust Agreement: A formal written agreement that creates a trust and lays out the policies and procedures governing its administration and distribution of assets.
Trust Fund: The aggregate property that is held in trust. This phrase was formerly used to refer exclusively to the money that was kept in trust; however, it is now commonly used to refer to any property held in trust.
Trustee: A trustee is an individual or an institution responsible for managing, holding, and administering the assets of a trust per the conditions in the trust agreement for the benefit of another person.
Will: This is the same as a last will and testament.
Trust and Estate Client Education, Anytime and Anywhere
If you’re considering creating an estate plan, a good place to start is by attending a free estate planning workshop. To make this as convenient as possible, it is available on-demand and can be watched from anywhere. This workshop provides a great foundation of information that everyone needs to make sound planning decisions. Moreover, if you attend a workshop, you also get a complimentary one-on-one consultation with an experienced estate planning lawyer.
