Estate planning can be a complex undertaking. Dealing with all your assets and family affairs may seem intimidating. Creating and managing an estate plan is especially difficult when there are so many terms that are hard to understand.
Thankfully, some simple explanations can diffuse the confusion and help you understand the intricacies of an estate plan. Here is a brief glossary of important estate planning terms.
An individual who receives money or property from an estate. A beneficiary can receive benefits from an estate, trust, life insurance policy, retirement account or transfer-on-death account.
Also known as a personal representative, an executor of an estate is someone designated in the will to manage the estate after the decedent passes away.
A person who creates a trust and transfers assets into it. This individual can also be known as a settlor or donor.
An individual entitled to inherit assets from someone even if he or she dies without a will. However, the term “heir” is also commonly used to describe all beneficiaries.
Power of attorney
This is an authority given to an individual to make choices relating to finances, personal matters and health care.
The legal process of settling and distributing an estate. Probate involves proving the validity of the will, confirming the collection of assets, ensuring the payment of taxes and debts and dividing the remaining assets to beneficiaries.
A document that holds assets for the benefit of others. A trust concerns different assets than a will and may contain more detail and contingencies.
An individual designated in the trust document to manage and distribute property. The trustee must adhere to the terms of the document at all times.
Once you have a basic grasp of estate planning, it is less intimidating. You can move forward with the process and create a plan with ease when you have the right knowledge and advice.