Estate Planning Terms and Definitions

Incapacity / Incompetent
Legally unable to manage one's own affairs due to mental disability. This may be temporary or permanent.

Federal Estate Taxes
Taxes imposed by the US Government on the value of a person's estate upon his or her death.

Probate
The process through which the legal title to property is transferred from a decedent to the beneficiaries. If a person dies with a will (testate), the probate court determines if the will is valid, hears any objections to the will, orders that creditors be paid and supervises the process to assure that property is distributed by the Personal Representative or Executor according to the terms of the will. If a person dies without a will (intestate) the probate court appoints an Administrator who receives all claims, pays creditors, and then distributes all property according to the laws of the state.

Estate
The total of all assets, all debts and other obligations of an individual. At the time of death the total amount of benefits (life insurance, annuity and retirement benefits) to be paid to beneficiaries are often also considered part of the estate for Federal Estate Tax purposes

Will
A written document that provides instructions for disposing of a person's property upon the person's death. A will generally also names an executor or personal representative to handle the estate.

Exemption Credit
The amount of tax credit, similar in nature to the personal income tax exemption, applied to the transfer tax due at a person's death.

Decedent
A person who has died.

Trust
A long recognized legal concept (first used in ancient Greece during the times of Socrates and Plato) in which some or all property of a Trust Creator is held on behalf of a beneficiary (which may include the trust creator) in the name of the Trustee.

Informed Consent
An authorization to proceed by a person who has been given and understands all of the relevant facts.

Family Limited Partnership
A legal partnership agreement between members of a family for the management and control of property for the benefit of family members. Sometimes used to minimize transfer taxes.