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Estate Planning Terminology

Estate Planning has many unique terms and definitions.
To better help you understand this complex process, we have provided this glossary.

Appraisal

The process of evaluating the monetary worth of property that is part of an estate.
Attorney-in-Fact
A person who is named under a Power of Attorney to act on behalf of another person.
Beneficiary
A person named as the recipient of property in an estate or trust.
Bequest
Property given as a gift under the terms of a will.
Capital Gains and Losses
For tax purposes, the difference between the purchase price and selling price.
Claim Against an Estate
A charge against an estate to settle an agreement or an outstanding obligation (as in the case of bills unpaid at the time of death).
Codicil
An addition or other change to an existing will.
Conservator
An individual or institution named by a court to manage the property of a person who is adjudged incapable of handling his or her own affairs.
Contest of a Will
Legal proceedings to prevent or alter distribution of estate assets as described in a will.
Death Probate
The legal process used to marshall assets, pay bills and distribute property after someone dies.
Death Taxes
A term used to describe taxes on property upon the death of the owner. Sometimes referred to as estate taxes.
Decedent
A person who has passed away.
Deduction
For estate tax purposes, the portion of an estate that does not generate tax (such as a marital or charitable deductions).
Donee
A person or entity who receives a gifted asset from a donor.
Donor
A person or entity who gifts an asset to another person or entity.
Estate
All the assets owned by a decedent upon his or her death.
Executor
The individual named in a will charged with settling a decedent’s estate by carrying out the provisions specified in the will. (In Michigan, this person is referred to as a Personal Representative.)
Fiduciary
An individual or institution responsible for acting in the best interests of another party. A fiduciary is bound by law and duty to put aside personal interests and act in good faith when making decisions for the benefit of another.
Gift Tax Annual Exclusion
The first $11,000 in gifts that an individual can gift tax-free to another during a calendar year.
Grantor
A person who transfers an asset to another person or entity, either outright or in a trust.
Guardian of the Person
A court-appointed supervisor in charge of the care of a minor or incompetent person’s physical well-being.
Heir
One who inherits from the estate of a person who has died.
Intestate
Dying without a will.
Irrevocable Trust
A type of trust that cannot be revoked or changed in any way.
Joint Ownership
Refers to ownership of property by two or more persons.
Last Will
Literally, the will last executed by an individual, which revokes any former existing wills.
Living Trust
A trust established and operating during the grantor’s lifetime.
Living Will
A legal document in which an individual states, in advance of final illness or injury, his or her wishes regarding procedures and equipment designed to extend life.
Power of Attorney
A legal document authorizing one individual to act as the agent or “attorney” for another (the “principal”). If the attorney is authorized to act in behalf of another for all matters, he or she has general power of attorney. Authority to act solely regarding specified situations is special power of attorney. If the authority granted extends beyond the disability of the principal, the attorney has durable power of attorney.
Principal
Refers to the assets included in a trust that yield income.
Probate
The process through which a will is proved to be valid.
Prudent Investor Rule
Legal term that refers to the duty of the fiduciary to invest and manage assets in the best interests of another, and as a prudent investor would.
Revocable Trust
A type of trust that can be terminated or amended by the grantor. (the opposite of an Irrevocable Trust).
Successor Trustee or Personal Representative
An individual or institution taking the place of a trustee or executor unable to continue the responsibilities designated in the trust agreement or will.
Testamentary Trust
A type of trust that is established under the will of a deceased individual.
Testate
Making and leaving a valid will. (Opposite of Intestate.)
Testator
The creator of a Will.
Title
Legal ownership of property.
Trust
An agreement under which property is held and managed on behalf of another individual.
Trust Agreement
A legal document that establishes a trust and outlines the rules and guidelines affecting its management and disposition.
Trust Fund
Property held in trust. This term originally applied only to money held in trust, but is frequently used when referring to all property held in trust.
Trustee
A person or entity, individual or institution, responsible for managing, holding and administering the trust assets according to the terms of the trust for the benefit of another individual.
Unified Credit
A federal tax credit that offsets gift and estate tax liability.
Will
Legal document expressing the wishes of an individual regarding distribution of his or her property after death.