What do you need to know about estate planning? Let us help you with the basics.
Demystifying Estate Planning: Key Definitions You Need to Know
When diving into the estate planning process, it’s easy to feel overwhelmed by legal jargon and complex terminology. However, understanding these essential terms can transform the way you approach your legacy and financial future. Let’s simplify estate planning by breaking down its most crucial definitions.
1. Estate Planning
Definition: Estate planning is the process of arranging the distribution of an individual’s assets to ensure that their wishes are honored after their death.
2. Will
Definition: A legal document detailing how an individual’s assets should be distributed upon death.
3. Executor
Definition: A person or institution designated in a will to manage the deceased’s estate, ensuring all assets are distributed according to the will’s specifications.
4. Beneficiary
Definition: A person or entity designated to receive assets or benefits from a will, trust, insurance policy, or any other contract.
5. Trust
Definition: A fiduciary arrangement allowing a third party (trustee) to hold assets on behalf of beneficiaries.
6. Probate
Definition: The judicial process wherein a will is proven in court and accepted as a valid legal document.
7. Power of Attorney
Definition: A legal document giving an individual the authority to act for another person, particularly in financial or medical matters.
8. Estate Tax
Definition: A tax levied on the net value of an individual’s estate at the time of their death.
9. Guardian
Definition: An individual designated to care for a minor child or incompetent adult if the need arises.
10. Intestate
Definition: Dying without a valid will, leading to assets being distributed based on state or provincial laws.
11. Codicil
.Definition: An addition or supplement to a will, allowing changes without writing an entirely new Will.
12. Revocable Trust
Definition: A trust where provisions can be altered or canceled by the grantor. Upon the grantor’s death, it becomes irrevocable.
13. Living Will
Definition: A document outlining a person’s desires regarding their medical treatment if they’re unable to express informed consent.
14. Joint Tenancy
Definition: A form of legal co-ownership of property where survivors inherit the property without probate.
15. Estate Freeze
Definition: A strategy used in estate planning to transfer any increase in the value of an estate to heirs without tax consequences.
16. Testamentary Trust
Definition: A trust created as per the specifications of a deceased person’s Will.
17. Gift
Definition: A voluntary transfer of assets from one individual to another without receiving anything in return.
18. Grantor
Definition: An individual who creates and funds a trust.
19. Digital Assets
Definition: Digital property including emails, blogs, social media accounts, and online bank accounts.
20. Estate Liquidation
Definition: The process of converting estate assets into cash to pay debts, taxes, and expenses before distribution to beneficiaries.
While the realm of estate planning can seem intricate, a deep understanding of its key terms and definitions can simplify the process immensely. As you take the journey of crafting your legacy, let these definitions be your guide. If you need advice on further legal terminology, be sure to checkout our FAQ page here.
