Glossary of Basic Estate Planning Terms

Estate planning can feel like learning a new language. To make the process easier, this glossary of estate planning terms simplifies the most common concepts and tools. By understanding these terms, you’ll feel more confident navigating your estate planning journey.

Estate Planning

The thing itself. Estate planning is the process of getting all of your assets, both financial and non-financial, together and leaving instructions for them.

Example: A complete list that includes your home, cars, savings and more and instructions on whom they go to.

Beneficiary

A beneficiary is a person or entity (like a charity) who receives assets from a will, trust, or insurance policy. You can name multiple beneficiaries and specify what each will receive. (Notes: Heir vs. beneficiary. The role of beneficiaries in estate planning and management.)

Example: If you leave a portion of your life insurance policy to your child, they are the beneficiary.

Durable Power of Attorney

This document lets you name someone to make financial or legal decisions on your behalf if you cannot. Unlike a regular power of attorney, it stays in effect if you become incapacitated.

Example: A durable power of attorney allows your spouse to manage your finances if you are hospitalized.

Executor

An executor is the person you choose to carry out the instructions in your will. They handle tasks like distributing assets, paying debts, and closing accounts.

Example: Naming a responsible executor ensures the proper management of your estate. 

Witness

Witnesses in trusts and wills validate proper execution of the estate planning documents and the sound mind and willingness of the person creating them.

Example: A witness is an added layer of security for estate planning documents like wills or trusts.  

Guardianship

Guardianship involves appointing someone to care for your minor children if you can’t. This can include decisions about their education, healthcare, and living arrangements.

Example: Parents often name a trusted family member as a guardian in their will.

Health Care Directive

Also called a living will, a health care directive outlines your medical preferences. It can include instructions for life support or specific treatments.

Example: A healthcare directive allows doctors to follow your wishes regarding critical care.

Heir

An heir is someone entitled by law to inherit assets from an estate if no will exists. Typically, this includes spouses, children, and other close relatives.

Example: If someone passes without a will, their heirs inherit based on state law.

Intestate

When someone passes intestate, it means they did not leave a valid will. In these cases, state laws decide how to divide their assets among heirs.

Example: Intestate laws often prioritize spouses and children for inheritance.

Revocable Trust

A revocable trust (or living trust or living revocable trust) allows you to make changes or cancel it during your lifetime. It’s a flexible option for managing assets and avoiding probate.

Example: Many people choose revocable trusts to maintain control over their estate while planning for the future.

Irrevocable Trust

An irrevocable trust cannot be changed or canceled. It can offer significant tax benefits and asset protection.

Example: People often use irrevocable trusts to shield assets from creditors or reduce estate taxes.

Probate

Probate is the legal process of validating a will and ensuring payment of debts before asset distribution. It can take months or even years, depending on the estate’s complexity.

Example: A well-prepared estate plan minimizes the need for lengthy probate proceedings.

Testator

The testator is the person who creates a will. They decide how to distribute their assets and who will manage their estate.

Example: As the testator, you specify who inherits your property in your will.

Trust

A trust is a legal entity that holds assets on behalf of beneficiaries. A trustee manages it according to instructions in the trust document. Trusts come in a couple flavors: individual trusts and joint trusts.

Example: A trust can provide financial support for children or other dependents.

Trustee

A trustee is the person or institution responsible for managing a trust and ensuring its terms are followed.

Example: You can appoint a trusted family member or a professional as your trustee.

Will

A will is a legal document that outlines how you want to distribute your assets. It also allows you to name guardians for minor children. (Here’s a quick overview of wills.)

Example: A will safeguards your wishes and reduces confusion for your family.

Estate

Your estate includes everything you own—property, bank accounts, investments, and personal belongings.

Example: An estate plan organizes the distribution of your estate.

Estate Tax

An estate tax is a tax on the total value of an estate before it passes to beneficiaries. It only applies to estates above a certain value.

Example: Careful estate planning can help reduce or eliminate estate tax obligations.

Understanding these estate planning terms helps demystify the process, making it easier to create a plan that protects your assets and your loved ones.