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Have you ever wondered what that estate planning term means?

Posted On: JULY 2024

When it comes to estate planning, you’re likely familiar with some of its more common terms. These terms typically include a will, a trust or an executor. But estate planning has a language all its own, and many of the terms may be foreign to you. Let’s take a closer look at some of the other terms you may come across in your estate plan.

Administrator:An individual or fiduciary appointed by a court to manage an estate if no executor or personal representative has been appointed or the appointee is unable or unwilling to serve.

Ascertainable standard: The legal standard, typicallyrelating to an individual’s health, education, support andmaintenance,that’s used to determine what distributionsare permitted from a trust.

Attorney-in-fact: The individual named as the agent under a power of attorney to handle the financial and/or health affairs of another person.

Codicil: A legally binding document that makes minor modifications toan existing will without requiring a complete rewrite of the will.

Community property: A form of ownership in certain states in which property acquired during a marriage is presumed to be jointly owned regardless of who paid for it.

Credit shelter trust: A trust established to bypass the surviving spouse’s estate to take full advantage of each spouse’s federal estate tax exemption. It’s also known as a bypass trustor A-B trust.

Fiduciary:An individual or entity,such as an executor or trustee,designated to manage assets or funds for beneficiaries and is legally required to exercise an established standard of care.

Grantor trust: A trust in which the grantor retains certain control so that it’s disregarded for income tax purposes and the trust’s assets are included in the grantor’s taxable estate.

Inter vivos: Thelegal phrase used to describe various actions (such as transfers to a trust) made by an individual during his or her lifetime.

Intestacy:If a persondies without a legally valid will, the deceased’s estate is distributed in accordance with theapplicable state’s intestacy laws.

Joint tenancy:An ownership right in which two or more individuals (such as amarried couple) own assets, oftenwith rights of survivorship.

No-contest clause: A provision in a will or trust that is designed to ensure that an individual who pursues a legal challenge to assets will forfeit his or her inheritance or interest.

Pour-over will:A will used, upon death, to pass ownershipof assets that weren’t transferred to a revocable trust.

Power of appointment:The power granted to an individual under a trust that authorizes him or her to distribute assets on the termination of his or herinterest in the trust or in certain other circumstances. 

Power of attorney (POA): A legal document authorizing someone to act as attorney-in-fact for another person relating to financial and/or health matters. A “durable” POA continues if the person is incapacitated.

Qualified disclaimer: The formal refusal by a beneficiary to accept an inheritance or gift or to allow the inheritance or gift to pass to the successor beneficiary.

Probate: The legal process of settling an estate in which the validity of the will is proven, the deceased’s assets are identified and distributed, and debts and taxes are paid.

Spendthrift clause: A clause in a will or trust restricting the ability of a beneficiary (such as a childunder a specified age) to transfer or distribute assets.

Tenancy by the entirety:An ownership right exclusively for spouses in which propertyis owned by the pair. As with other joint property, ownership automatically passes to the surviving spouse on the death of the first spouse to die.

Tenancy in common:Anownership right in which each person possesses rights and ownership of an undivided interest in the property.

Bear in mind that this is just a brief overview of estate planning terms. Contact us for a more detailed explanation.

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