Estate planning—it is an incredibly important tool, not just for the wealthy or those thinking about retirement. On the contrary, estate planning is something every adult should do. It can help you accomplish any number of 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 estate to when you die.
While it should be at the top of everyone’s to-do list, it can be an overwhelming topic to dive into. To help you get started, below are some important terms you should know as you think about your own estate plan.
Assets: Generally, anything a person owns, including a home and other real estate, bank accounts, life insurance, investments, 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, 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 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.
Incapacitated/Incompetent: A person who is unable to manage their affairs, either temporarily or permanently; often involves a lack of mental capacity.
Inheritance: The assets received from someone who has died.
Living probate: The court-supervised process of managing the assets of an incapacitated person. Conservatorship is another term used for this process.
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 grantor, trustmaker or settlor, 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, 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 guardians for minor children.
If you have questions about any type of estate plan, contact Davis & McCann, P.A., Dodge City, Kansas at 620-225-1674. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and the National Academy of Elder Law Attorneys (NAELA). We focus our practice on providing clients with the best legal advice on Estate Planning, Medicaid and Long-term Care Planning, Special Needs Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate, 1031 Exchanges, and related matters.
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