Estate Planning 101: Top 20 Terms You Need to Know
Hello Beloved,
When it comes to securing your family’s future, estate planning is one of the most important steps you can take. Yet many people hesitate to begin because the process often sounds like a maze of legal jargon.
At L.A. Mason & Associates, our mission is to deliver clear, actionable solutions that empower our clients—especially within our community. This blog post will walk you through 20 key estate planning terms so you can start building your legacy with confidence.
1. Estate
Definition
Your “estate” encompasses all the assets and property you own (like your home, car, personal possessions, and financial accounts) and any outstanding liabilities or debts at the time of your passing. Essentially, it’s everything that forms your net worth.
Why It Matters
Having a clear picture of your estate is the first step to planning. It helps you decide who gets what—and how.
2. Will
Definition
A legally binding document that outlines how you want your assets distributed after your death. It can also designate guardians for minor children.
Why It Matters
A will ensures your wishes are honored and can help prevent disputes among family members.
3. Testator
Definition
The person who creates the will. If you write your own will, you’re considered the testator.
Why It Matters
This term is often used in legal documents. Knowing who the testator is clarifies the primary decision-maker behind the will.
4. Executor (Personal Representative)
Definition
The individual you appoint in your will to carry out (or “execute”) its terms—this includes managing your estate, paying off debts, and distributing assets.
Why It Matters
Naming a trusted executor ensures your estate is handled responsibly, in line with your wishes and relevant laws.
5. Probate
Definition
The legal process through which a will is validated by a court and the estate is settled under court supervision. It also involves collecting assets, paying off liabilities, and distributing what remains to beneficiaries.
Why It Matters
Probate can be time-consuming and public. Some people create trusts or other strategies to reduce probate costs and time.
6. Trust
Definition
A legal arrangement in which you (the “grantor” or “settlor”) transfer ownership of assets to a trustee, who manages them for the benefit of your chosen beneficiaries.
Why It Matters
Trusts can help you avoid probate and may offer tax benefits, privacy, and control over how and when assets are distributed. They also let you protect minor or special-needs beneficiaries.
7. Beneficiary
Definition
A person or entity (like a charity) designated to receive assets or benefits from a will, trust, life insurance policy, or other financial accounts.
Why It Matters
Accurately naming and updating beneficiaries ensures your assets go to the right individuals or causes. Life events (marriages, divorces, births) often require updating beneficiary designations.
8. Power of Attorney (POA)
Definition
A legal document giving someone the authority to make decisions on your behalf if you become unable to do so yourself. A “Financial Power of Attorney” focuses on financial decisions; a “Healthcare Power of Attorney” covers medical choices.
Why It Matters
A POA provides a safety net if you become incapacitated. Having one in place prevents delays in managing your finances or healthcare.
9. Advance Healthcare Directive (Living Will)
Definition
A legal document outlining your healthcare preferences if you’re unable to communicate (e.g., life support, feeding tubes, organ donation). It often includes a Healthcare Power of Attorney.
Why It Matters
This ensures that medical providers and loved ones respect your healthcare preferences, even if you cannot voice them yourself.
10. Guardian
Definition
An individual legally responsible for the care of another person, especially a minor child, if parents are unable to do so (due to death or incapacity).
Why It Matters
Designating a guardian is critical if you have minor children; it offers peace of mind knowing they will be cared for by someone you trust.
11. Revocable Living Trust (Grantor Trust)
Definition
A trust you can alter or terminate during your lifetime. You retain control of the assets, but upon your death or incapacity, the trust becomes irrevocable and the trustee takes over.
Why It Matters
This type of trust helps avoid probate and keeps your personal finances private. You maintain flexibility to change beneficiaries or trustees.
12. Irrevocable Trust
Definition
A trust that generally cannot be altered or revoked once it’s set up (with very limited exceptions). The assets you place in an irrevocable trust no longer belong to you.
Why It Matters
While it’s less flexible than a revocable trust, an irrevocable trust often provides stronger asset protection and can offer tax advantages.
13. Pour-Over Will
Definition
A type of will used alongside a living trust. It “pours” any assets not already in the trust into that trust upon your death.
Why It Matters
Ensures that all assets (even those inadvertently left out) get moved into the trust, simplifying distribution.
14. Estate Tax
Definition
A federal (and sometimes state) tax on the transfer of a deceased person’s assets. The IRS provides specific thresholds (which may change yearly) before estate taxes apply.
Why It Matters
Knowing if your estate might exceed these thresholds allows you to plan for potential taxes and protect your beneficiaries’ inheritance.
15. Gift Tax
Definition
A federal tax on the transfer of money or assets to another person while you’re alive. There is an annual exclusion (indexed for inflation) and a lifetime exemption limit. Check IRS Publication 559 for details.
Why It Matters
Strategic gifting can reduce your taxable estate and help loved ones immediately—just be mindful of gift tax thresholds to avoid penalties.
16. Step-Up in Basis
Definition
A tax rule allowing a beneficiary to “step up” the value (or cost basis) of inherited property to its current fair market value at the time of the original owner’s death.
Why It Matters
This can significantly reduce capital gains taxes if the beneficiary later sells the property. For example, if a home appreciated in value over decades, the new “basis” would be its value on the date of inheritance.
17. Funding the Trust
Definition
The process of transferring ownership of assets (such as real estate or bank accounts) from your name into the name of your trust.
Why It Matters
Even if you create a trust, failing to properly “fund” it means the assets still go through probate. Funding is crucial for your trust to function as intended.
18. Codicil
Definition
A legal document used to make minor changes or additions to your existing will, without rewriting the entire document.
Why It Matters
If you have small updates—like changing a beneficiary’s name or adding a new item to bequeath—a codicil can be a cost-effective, less complicated route than drafting a new will.
19. Executor’s Bond (Surety Bond)
Definition
An insurance policy sometimes required by the court to protect the estate against losses in case the executor mismanages funds.
Why It Matters
This requirement varies by state or by the terms of the will. A bond reassures heirs that the executor will handle assets responsibly.
20. Tangible vs. Intangible Assets
Definition
• Tangible assets: Physical items like real estate, cars, jewelry, or personal belongings.
• Intangible assets: Non-physical items like stocks, bonds, life insurance policies, or cryptocurrency.
• Intangible assets: Non-physical items like stocks, bonds, life insurance policies, or cryptocurrency.
Why It Matters
Differentiating these helps when determining how each type of asset should be handled, taxed, or passed on to beneficiaries.
Bonus Terms
Below are additional estate planning concepts that further demystify this sometimes-complex process.
21. Intestate
Definition
Dying intestate means dying without a valid will. In this scenario, state laws (laws of intestacy) determine how your assets are distributed.
Why It Matters
If you don’t leave a will, you lose control over who inherits your property. This can lead to unintended outcomes, delays, or disputes among potential heirs.
22. Testate
Definition
Dying testate means dying with a valid will in place.
Why It Matters
If you pass away testate, your assets are distributed according to the wishes outlined in your will, often making the probate process smoother.
23. Succession
Definition
Succession refers to the legal process that determines who inherits the property of someone who has died. It includes both testate succession (when there’s a valid will) and intestate succession (when there isn’t).
Why It Matters
Understanding succession is essential to knowing how your state’s laws will interpret your final wishes—or lack thereof.
24. Heir
Definition
An heir is someone who is legally entitled to inherit from a decedent in the absence of a valid will (intestate) or under the terms of the will (testate). Generally, heirs are family members (children, spouses, siblings, etc.).
Why It Matters
Clarifying who is (and isn’t) an heir can prevent confusion and legal disputes during the probate process.
25. Legatees
Definition
Legatees are individuals or entities who receive property under a will. Sometimes “legatee” is used interchangeably with “beneficiary,” though “legatee” often refers specifically to those named in a will.
Why It Matters
Understanding this term helps differentiate between those who inherit by law (heirs) and those who inherit by will (legatees).
26. Forced Heirship
Definition
Forced heirship laws require that certain family members (typically spouses or children) receive a portion of an estate, regardless of the will’s terms. This concept is common in some states and countries (e.g., Louisiana in the U.S.) and many civil-law jurisdictions.
Why It Matters
If you live in a jurisdiction with forced heirship rules, your estate plan must account for these mandated shares to ensure your will remains valid.
27. Holographic (Olographic) Will
Definition
A holographic (or “olographic”) will is a handwritten will, typically signed and dated by the testator but not necessarily witnessed. Its legality varies by jurisdiction.
Why It Matters
Holographic wills may be recognized in some states, but they can also lead to disputes over authenticity or clarity. Knowing the rules in your state is crucial if you create this type of will
28. Notarial Will
Definition
A notarial will is executed in front of a notary public (and often witnesses). The notary authenticates the will’s signing, which can help prevent disputes over the document’s validity
Why It Matters
Notarial wills are often seen in civil-law jurisdictions. They add a layer of formality and legal certainty, reducing the likelihood of challenges during probate.
29. Per Stirpes vs. Per Capita
Definition
• Per Stirpes: Inheritances are divided by branch of the family. If a beneficiary predeceases you, that beneficiary’s share passes to their children.
• Per Capita: Inheritances are divided equally among surviving descendants of the same generation.
• Per Capita: Inheritances are divided equally among surviving descendants of the same generation.
Why It Matters
Specifying “per stirpes” or “per capita” in your will or trust clarifies how assets should be split if a beneficiary dies before you.
Final Thoughts
Understanding estate planning lingo is the first step toward creating a comprehensive plan that protects what you’ve worked so hard to build. Whether you’re just starting or already have a will and trust in place, staying informed empowers you to make the best decisions for yourself and your loved ones.
Ready to turn your knowledge into action?
○ Sign up for our #30DayLegacy Challenge to jumpstart your estate planning journey.
○ Purchase your Estate Plan Package on our Shopify store and get 15% off.
○ Download our free Estate Planning Ebook to learn more strategies you can put into practice today.
○ Sign up for our #30DayLegacy Challenge to jumpstart your estate planning journey.
○ Purchase your Estate Plan Package on our Shopify store and get 15% off.
○ Download our free Estate Planning Ebook to learn more strategies you can put into practice today.
We believe in clarity, collaboration, and creating lasting legacies. If you have questions or need personalized guidance, don’t hesitate to reach out. We’re here to help you and your family secure a brighter future.
Stay Woke!
L.A. Mason, Chief Strategist
#30DayLegacy #EstatePlanningIsSexy #BlackLuxury
#BlackGirlMagic #RadicalSelfCare #StayWoke
#30DayLegacy #EstatePlanningIsSexy #BlackLuxury
#BlackGirlMagic #RadicalSelfCare #StayWoke