The Complexities of Estate Planning: Part Two

A few weeks ago, I wrote here that one of the biggest challenges to estate planning is simply understanding some of the terms involved. In that article, I offered some basic definitions of the following terms:



Estate Tax


Here are a few more terms that are very common in any discussion of estate planning.

Trust – A trust is a relationship that has one person, who is known as the trustor or grantor or settlor, giving another person, the trustee, the right to hold the trustor’s assets or property for the benefit of another person or people – referred to as the beneficiary. The most common reasons to create a trust are to reduce estate tax liability, to protect property in your estate from creditors, avoid probate and, perhaps most importantly provide for beneficiaries, minor children for example, who would not be capable of managing or take care of assets on their own. Another major benefit of creating a trust is to have in place a way that you can be protected and provided for if you were to become incapacitated so that you are unable to handle your own affairs

Living Trust – A living trust, which can also be referred to as an inter vivos or revocable trust is the legal document that holds your assets into a trust during your lifetime once those assets are transferred from you to your trust. Those assets can be managed by a successor trustee for you if you become unable to handle your own affairs or can later be transferred to designated beneficiaries at your death by your chosen representative – the trustee. The term revocable means you can change the terms of the living trust or just get rid of it at any time.

Health Care Surrogate Designation – Also referred to as an advance directive, this is a document that enables you to state your wishes regarding end-of-life medical care, in case you are no longer capable of communicating your desires. You name a designee whose responsibility is to see that your medical care is based on your wishes.

Living Will – A Living Will is an expression by you of your wishes regarding end of life care in the event you are unable to make those decisions for yourself.

Will – Probably the most common if not fully understood legal document related to estate planning. With a will, you express how your property should be distributed at your death. It names a person called an executor or personal representative – to manage your estate until final distribution is completed.

One major misconception I hear over and over again regarding wills is the idea that “if I have a will, I don’t have to go through probate.” That is simply not true. There are ways to avoid probate but doing a will is not one of them.

Discussing estate planning with your family is often challenging on many fronts. Probably the biggest hurdle is simply not wanting to talk about your mortality. But, as I have seen over the years, a simple understanding of these and other terms can often make that conversation much easier.

I will continue exploring other terms in future writings in order to help make that conversation easier for you. And, as always, if you need to discuss some of these concepts, I will be glad to help.  Whether you currently have a plan and wonder if it needs to be reviewed and updated or if you know you need to get a plan in place but just don’t know where to start, I am available to answer questions you may have in a brief meeting with no obligation on your part.  Please be aware I cannot have such initial consultations over the telephone or via email.

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