Commonly Used Estate Planning Terms and Definitions

Are estate planning legal fees deductible
Are Estate Planning Legal Fees Tax Deductible?
July 12, 2019
Estate Planning Terms and Definitions

As you navigate through documents and discussions about estate planning, you will come across a lot of terminologies that may be unfamiliar to you. Even when you’re trying to research a particular topic, you will find different words discussing the same concept. It’s common for many of these terms to be used interchangeably, further adding to the confusion.

Understanding the terminology will help you with document preparation and for discussions with family members, your attorney, or anyone else involved in your plans.

Below, we have put together a list of commonly mentioned estate planning terms and definitions sorted by how they apply to the following categories:

Click on the category to jump to that section

People

Documents

Property

Taxes

Click Here for Complete List of Terms and Definitions A-Z

Terms and Definitions for People in Estate Planning

terms and definitions for people

Administrator

An administrator is someone appointed by the court to represent an estate when there is no other document, like a will, that names an executor or any other individual to represent the estate. It can also occur in circumstances where an individual is unwilling to be a representative.

Attorney-In-Fact

This person is appointed through a Power of Attorney to handle another person’s property. An Attorney-In-Fact does not have to be an attorney, it can any person who is competent. Also, used interchangeably with Agent.

Beneficiary

The person (or entity) who receives assets from a living trust such as property, income, or other benefits. 

Conservator

A court-appointed individual designated to manage the property for someone who is incapacitated. It is similar to the role of a guardian to a minor. 

Decedent

A term used to refer to a deceased person. 

Executor

The person who is responsible for carrying out the instructions laid out in a will. An executor, unlike an administrator, is named in a will. 

Fiduciary 

A fiduciary can be either a person or an institution. A fiduciary is responsible for managing the assets of an estate planning instrument for the benefit of others. Executors and trustees can also act as fiduciaries. 

Grantor

A grantor is a person who creates a trust.

It is also used interchangeably with trustor, settlor, donor, and creator

Guardian 

A person (or institution) designated to handle decisions on behalf of a minor or an incapacitated person. 

Heir

An heir is a person who is entitled to inherit property or other valuable assets as defined by a state’s law. This term applies when there is no document, like a will or a trust, to designate such an individual. An heir is automatically entitled to receive a person’s property when there is no will or a trust. 

Although similar in meaning, an heir is not the same as a beneficiary. Beneficiaries can only be named in a will or a trust. 

Settlor

The person who creates the trust. Same as Grantor

Testator(male)/Testatrix (female)

The person who creates a will.

Trustee

A person or institution with the responsibility of managing trust assets and distributing them as laid out in its instructions. 

Trustor

Same as grantor and settlor

Terms and Definitions for Documents in Estate Planning

 terms and definitions for documents

A/B Trusts

A Trust: A trust created for the sole purpose of a surviving spouse

B Trust: Also referred to as a “By-Pass Trust” is designated for the benefit of the grantor’s beneficiaries, which can also include the surviving spouse. However, when the surviving spouse dies, the remaining assets are awarded to the other beneficiaries, usually the children. B-Trust is also used interchangeably with the term Credit Shelter Trust.

Advance Medical Directive

Advance healthcare directives are legal documents that allow a person to nominate another individual to make critical medical decisions on their behalf. This person named in this directive is directly responsible for carrying out the other’s wishes, including matters of life or death. 

Learn more about advance healthcare directives here.

Beneficiary Designations

Beneficiary designations are usually included as part of other forms on bank or retirement accounts where a person gets to name beneficiaries for the assets in those accounts. 

Learn more about beneficiary designations here. 

Charitable Trust

A trust established for the benefit of a grantor’s charity. Note that all charitable trusts are irrevocable.

Charitable Lead Trust

This type of trust allows an individual to have income paid out to a charity for a specified number of years. After that term, the remaining funds are paid out to the named beneficiaries.

Charitable Remainder Trust

It is similar to a charitable lead trust, expect it pays out income to the named beneficiaries first and then pays out the charity. 

Learn more about charitable trusts here. 

Deed

Not to be confused with ‘title,’ a deed is the official document that lets you change ‘title’ for a piece of property, such as real estate or a car. The term, Title, refers to ownership of the item. 

For example: “Jane Doe is on the title for the house on Maple Street.”

Dynasty Trust

A trust that’s designed for a grantor’s wealth to be passed down over multiple generations. Dynasty trusts get to enjoy many special tax privileges. Also, used interchangeably with the term Legacy Trust. 

Learn more about dynasty trusts here. 

Durable Power of Attorney

This document allows a grantor to name another individual to make decisions on their behalf. Whereas a healthcare directive only applies to medical decisions, a Durable Power of Attorney extends to other matters such as critical financial decisions. 

Learn more about Durable Power of Attorney here. 

Family Trust

A trust set up for the benefit of a grantor’s family, such as spouse and children. Also, referred to as a B-Trust or a By-Pass Trust.

Irrevocable Trust

A trust that cannot be changed or altered once a grantor establishes it. It’s the opposite of a revocable trust. 

Irrevocable Life Insurance Trust (ILIT)

A special type of trust that lets a grantor transfer a life insurance policy into a living trust. 

Learn more about life insurance trusts here. 

Living Trust

A trust created during the grantor’s lifetime. The term ‘trust’ simply refers to the instrument that contains the grantor’s assets and property. 

Learn more about living trusts here. 

Pour-Over Will

A type of will that names the grantor’s trust as the will’s beneficiary. A Pour-Over Will is a way to address left-over personal property that may not have been included in a trust. A Pour-Over Will assures that this property is automatically transferred into the trust.

Learn more about pour-over wills here. 

Revocable Trust

A type of living trust that can be changed and amended during a grantor’s lifetime. A grantor can change named beneficiaries and make other modifications to it. It’s the opposite of an irrevocable living trust. 

Terms and Definitions that Relate to Property in Estate Planning

estate planning terms and definitions for property

Assets

All items under your ownership, including real estate, bank accounts, insurance policies, retirement plans, investment accounts, and personal valuables like jewelry. 

Community Property

Applies to states that follow the Community Property rules. This rule applies to the state of California. Community Property refers to property that two spouses jointly acquire, such as a husband and wife purchasing a home together. Community property is divided equally among both spouses during a divorce or upon death. 

Estate

The estate includes assets and any debts that a deceased person left behind.

Joint Tenancy

Property owned by two or more people with rights of survivorship. 

Private Trust Company

A private family company established as a fiduciary to oversee trusts and estates for extended family members. Also, referred to as a Family Trust Company

Terms and Definitions for Taxes in Estate Planning

terms and definitions for taxes

Annual Exclusion

A tax exclusion that allows an individual to give a certain amount on an annual basis without having to pay a gift tax. Currently, the annual exclusion amount is $15,000.

Estate Taxes

Federal and state taxes on assets left by a deceased person. Estate taxes are also referred to as death taxes or inheritance taxes

Generation-Skipping Transfer Tax (GST)

Federal taxes applied to transfers in a trust or gifts to beneficiaries from two or more generations from the grantor. For example, this tax would apply to the grandchildren of a grantor. This tax is applicable for any amounts over the GST tax exclusion. 

Gift Tax

A tax that is applied to transfer of assets from one person to another. Gift taxes apply to any amount over the gift tax exemption and any other applicable exclusions. 

Transfer Tax

Any taxes on transferred assets, such as estate, GST, and gift taxes.

Glossary of All Terms & Definitions

A-Trust

A trust created for the sole purpose of a surviving spouse

Administrator

An administrator is someone appointed by the court to represent an estate when there is no other document, like a will, that named an executor or any other individual to represent the estate. It can also occur in circumstances where an individual is unwilling to be a representative.

Advance Medical Directive

Advance healthcare directives are legal documents that allow a person to nominate another individual to make critical medical decisions on their behalf. This person named in this directive is directly responsible for carrying out the other’s wishes, including matters of life or death. 

Annual Exclusion

A tax exclusion that allows an individual to give a certain amount on an annual basis without having to pay a gift tax. Currently, the annual exclusion amount is $15,000.

Assets

All items under your ownership, including real estate, bank accounts, insurance policies, retirement plans, investment accounts, and personal valuables like jewelry. 

Attorney-In-Fact

This person is appointed through a Power of Attorney to handle another person’s property. An Attorney-In-Fact does not have to be an attorney. Also used interchangeably with Agent.

Beneficiary

The person (or entity) who receives assets from a living trust such as property, income, or other benefits. 

Beneficiary Designations

Beneficiary designations are usually included as part of other forms for bank and retirement accounts where a person gets to name beneficiaries for the assets in those accounts. 

Bypass Trust

Also referred to as a B-Trust or a Family Trust, it is designated for the benefit of the grantor’s beneficiaries, which can also include the surviving spouse. However, when the surviving spouse dies, the remaining assets are awarded to the other beneficiaries, usually the children. 

Charitable Trust

A trust established for the benefit of a grantor’s charity. Note that all charitable trusts are irrevocable.

Charitable Lead Trust

This type of trust allows an individual to have income paid out to a charity for a specified number of years. After that term, the remaining funds are paid out to the named beneficiaries.

Charitable Remainder Trust

It’s similar to a charitable lead trust, expect it pays out income to the named beneficiaries first and then pays out the charity. 

Community Property

Applies to states that follow the Community Property rules. This rule applies to the state of California. Community Property refers to property that two spouses jointly acquire, such as a husband and wife purchasing a home together. Community property is divided equally among both spouses during a divorce or upon death. 

Conservator

A court-appointed individual designated to manage the property for someone who is incapacitated. It is similar to the role of a guardian to a minor. 

Decedent

A term used to refer to a deceased person. 

Deed

Not to be confused with ‘title,’ a deed is the official document that lets you change ‘title’ for a piece of property, such as real estate or a car. The term, Title, refers to ownership of the item. 

For example: “Jane Doe is on the title for the house on Maple Street.”

Durable Power of Attorney

This document allows a grantor to name another individual to make decisions on their behalf. Whereas a healthcare directive only applies to medical decisions, a Durable Power of Attorney extends to other matters such as critical financial decisions. 

Dynasty Trust

A trust that’s designed for a grantor’s wealth to be passed down over multiple generations. Dynasty trusts get to enjoy many special tax privileges. Also, used interchangeably with the term Legacy Trust. 

Estate

The estate includes assets and any debts that a deceased person left behind.

Estate Taxes

Federal and state taxes on assets left by a deceased person. Estate taxes are also referred to as death taxes or inheritance taxes

Executor

The person who is responsible for carrying out the instructions laid out in a will. An executor, unlike an administrator, is named in a will. 

Family Trust

A trust set up for the benefit of a grantor’s family, such as spouse and children. Also, referred to as a B-Trust or a Bypass Trust.

Generation-Skipping Transfer Tax (GST)

Federal taxes applied to transfers in a trust or gifts to beneficiaries from two or more generations from the grantor. For example, this tax would apply to the grandchildren of a grantor. This tax is applicable for any amounts over the GST tax exclusion. 

Gift Tax

A tax that is applied to transfer of assets from one person to another. Gift taxes apply to any amount over the gift tax exemption and any other applicable exclusions. 

Grantor

A grantor is a person who creates a trust.

It is also used interchangeably with trustor, settlor, donor, and creator

Guardian 

A person (or institution) designated to handle decision on behalf of a minor or an incapacitated person. 

Heir

An heir is a person who is entitled to inherit property or other valuable assets as defined by a state’s law. This term applies when there is no document, like a will or a trust, to designate such an individual. An heir is automatically entitled to receive a person’s property when there is no will or a trust. 

Although similar in meaning, an heir is not the same as a beneficiary. Beneficiaries can only be named in a will or a trust. 

Irrevocable Trust

A trust that cannot be changed or altered once a grantor establishes it. It’s the opposite of a revocable trust. 

Irrevocable Life Insurance Trust (ILIT)

A special type of trust that lets a grantor transfer a life insurance policy into a living trust. 

Joint Tenancy

Property owned by two or more people with rights of survivorship. 

Living Trust

A trust created during the grantor’s lifetime. The term ‘trust’ simply refers to the instrument that contains the grantor’s assets and property. 

Pour-Over Will

A type of will that names the grantor’s trust as the will’s beneficiary. A Pour-Over Will is a way to address left-over personal property that may not have been included in a trust. A Pour-Over Will assures that this property is automatically transferred into the trust.

Private Trust Company

A private family company established as a fiduciary to oversee trusts and estates for extended family members. Also, referred to as a Family Trust Company

Revocable Trust

A type of living trust that can be changed and amended during a grantor’s lifetime. A grantor can change named beneficiaries and make other modifications to it. It’s the opposite of an irrevocable living trust. 

Settlor

The person who creates the trust. Same as Grantor.

Testator(male)/Testatrix (female)

The person who creates a will.

Trustee

A person or institution with the responsibility of managing trust assets and distributing them as laid out in its instructions. 

Trustor

Same as grantor and settlor

Transfer Tax

Any taxes on transferred assets, such as estate, GST, and gift taxes.


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