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Estate Planning Terms You Need to Know

Estate planning is incredibly important and not just for the uber wealthy or those thinking about retiring.  Estate planning is something every adult should do. Estate planning can help you accomplish many goals, including appointing guardians for minor children, choosing healthcare agents to make decisions for you should you become ill, minimizing taxes so you can pass more wealth onto your family members, and stating how and to whom you would like to pass your property on to when you die. For more information about the building blocks of an estate plan, including wills, trusts and powers of attorney, click here.

While it should be at the top of everyone’s to-do list, it can be overwhelming. To help you with the basics, here are some important terms you should know.

Assets

Generally, anything you own, including a home and other real estate, bank accounts, life insurance, investments, a business, cars and boats, furniture, jewelry, art, clothing, and collectibles.

Beneficiary

A person or entity (such as a charity) that receives a beneficial interest in something, such as an estate, trust, bank account, investment account or insurance policy.

Distribution

A payment in cash or asset(s) to the beneficiary, individual, or entity who is entitled to receive it.

Estate

All assets and debts left by an individual at death.

Fiduciary

A person with a legal obligation (duty) to act primarily for another person’s benefit, e.g., a trustee, executor (in Missouri a personal representative) or agent under a power of attorney. “Fiduciary” implies great confidence and trust, and a high degree of good faith.

Funding

The process of transferring (re-titling) assets to a living trust. A living trust will only avoid probate at the trustmaker’s death if it is fully funded, meaning it contains all of the decedent’s assets.  Those who have met with me understand the concept of a treasure chest.  In a nutshell – your estate plan is like a treasure chest – it only works when your assets are “funded” into it now or transfer into it on your death.

Incapacitated/Incompetent

Unable to manage one’s own affairs, either temporarily or permanently; often involves a lack of mental capacity.

Inheritance

The assets received from someone who has died.

Marital deduction

A deduction on the federal estate tax return, it lets the first spouse to die leave an unlimited amount of assets to the surviving spouse free of estate taxes. However, if no other tax planning is used and the surviving spouse’s estate is more than the amount of the federal estate tax exemption in effect at the time of the surviving spouse’s death, estate taxes will be due at that time.

Powers of Attorney

A person you appoint to make healthcare or financial decisions for you while you are living.  This person typically acts during a period of time when you are incapacitated.  They are not necessarily an actual attorney.  Importantly, they die when you die.  Powers of attorney are only effective while you are alive.

Settle an estate

The process of winding down the final affairs (valuation of assets, payment of debts and taxes, distribution of assets to beneficiaries) after someone dies.

Trust

A fiduciary relationship in which one party, known as the trustmaker or settlor/grantor, gives another party, known as the trustee, the right to hold property or assets for the benefit of another party, the beneficiary. The trust should be memorialized by a written trust agreement also a contract, outlining how the trust assets will be distributed to the beneficiary.

Will

A written document with instructions for disposing of assets after death. A will can only be enforced through a probate court. A will can also contain the nomination of guardian for minor children.

If you have any additional questions about estate planning, or would like to consult an estate planning professional, please contact our offices. We can make sure you have a comprehensive plan that is tailored to your unique needs and goals. Planning for peace of mind – that’s what we do.

Contact The Estate Planner LLC in our St. Louis office at 314-303-3218 for assistance with estate planning needs in Missouri.

** The choice of a lawyer is an important decision and should not be based solely on advertisements. 

Written October 16, 2022

 

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