Having at least a basic estate plan in place is one of the most valuable gifts you can give to your loved ones. Despite knowing this, a significant percentage of Americans do not have a plan. When asked to explain the apparent dichotomy, a common response is that estate planning is intimidating. One way to make estate planning less intimidating is to learn some of the basic terms and concepts. With that in mind, the Overland Park estate planning attorneys at Parman & Easterday define the following estate planning terms you should know.
- Administrator –Person named by the court to represent a probate estate when there is no Will or the Will did not name an executor. Female is administratrix. Also called a Personal Representative in some states.
- Annual Exclusion — Amount you can give someone each year without having to file a gift tax return or pay a gift tax. As of 2019, $15,000 per recipient ($30,000 if married). The amount of tax-free gifts is tied to inflation and may increase from time to time. Gifts made using the annual exclusion do not count against your lifetime exemption.
- Beneficiary – A person who will receive the benefit of property from an estate or trust through the right to receive a bequest or to receive income or trust principal over a period of time.
- Conservator – In most states, an individual or a corporate fiduciary appointed by a court to care for and manage the property of an incapacitated person. Some states use the term “Guardian of the Estate” instead of Conservator.
- Conservatorship — A court-controlled program for persons who are unable to manage their own affairs due to mental or physical incapacity. May also be called a guardianship.
- Durable Power of Attorney for Health Care — A legal document that lets you give someone else the authority to make health care decisions for you in the event you are unable to make them for yourself. Also called a health care proxy or medical power of attorney.
- Descendants – An individual’s children, grandchildren, and more remote persons who are related by blood or because of legal adoption.
- Durable Power of Attorney – A power of attorney that does not terminate upon the incapacity of the person making the power of attorney.
- Estate — Assets and debts left by an individual at death.
- Estate Taxes — Federal or state taxes on the value of assets left at death.
- Executor –Person or institution named in a Will to carry out its instructions. Female is executrix.
- Fiduciary— Person having the legal duty to act primarily for another’s benefit. Implies great confidence and trust, and a high degree of good faith.
- Grantor – A person, including a Testator, who creates, or contributes property to, a trust. May also be called a Settlor, Trustor, or Maker.
- Guardian – An individual or bank or trust company appointed by a court to act for a minor or incapacitated person (the “ward”).
- Heir — An individual entitled to a distribution of an asset or property interest under applicable state law in the absence of a Will.
- Intestate – When one dies without a valid Will, such that the decedent’s estate is distributed in accordance with a state’s intestacy law.
- Joint Tenants with Right of Survivorship — A form of joint ownership in which the deceased owner’s share automatically and immediately transfers to the surviving joint tenant(s).
- Living Trust — A written legal document that creates an entity to which you transfer ownership of your assets. Avoids probate at death and court control of assets at incapacity. A trust created during one’s lifetime.
- Living Will — A written document that states you do not wish to be kept alive by artificial means when the illness or injury is terminal.
- Marital Deduction — A deduction on the federal estate tax return that lets the first spouse to die leave an unlimited amount of assets to the surviving spouse free of estate taxes.
- Medicaid — A federally-funded health care program for low-income individuals, families, aged, and disabled.
- Medicare — A federally-funded health care program, primarily for Americans over age 65 who are covered by Social Security or Railroad Retirement benefits.
- No-Contest Clause – A provision in a Will or trust agreement that provides that someone who sues to receive more from the estate or trust or overturn the governing document will lose any inheritance rights he or she has.
- Per Capita — A way of distributing your estate so that your surviving descendants will share equally, regardless of their generation.
- Per Stirpes — A way of distributing your estate so that your surviving descendants will receive only what their immediate ancestor would have received if he/she had been living at your death.
- Pour Over Will — A short Will often used with a living trust. It states that any assets left out of your living trust will become part of (pour over into) your living trust upon your death.
- Power of Attorney — A legal document giving someone legal authority to sign your name on your behalf in your absence. Ends at incapacity (unless it is a durable power of attorney) or death.
- Probate — The legal process of validating a Will, paying debts, and distributing assets after death.
- Special Needs Trust — Allows you to provide for a disabled loved one without interfering with government benefits.
- Testamentary Trust — A trust activated by a provision in a Will. Can only go into effect at death. Does not avoid probate.
- Trustee — Person or institution who manages and distributes another’s assets according to the instructions in the trust document.
- Will – Formally referred to as a “Last Will and Testament.” A written document with instructions for disposing of assets after death. A Will can only be enforced through the probate court.
Contact Overland Park Estate Planning Attorneys
For additional information, please join us for an upcoming FREE seminar. If you have additional questions or concerns regarding estate planning terms or concepts, or you are ready to get started on your plan, contact the experienced Overland Park estate planning attorneys at Parman & Easterday by calling 405-843-6100 to schedule your appointment today.
Founder and Owner at Parman & Easterday
After helping his own family deal with a lengthy probate and the IRS following his father’s untimely death in a farm accident, Larry Parman made a decision to help families create effective estate plans designed to reduce taxes, minimize legal interference with the transfer of assets to one’s heirs, and protect his clients’ assets from predators and creditors.
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