Estate Planning Glossary.

Estate planning attorneys seem to have their own language. Here are some common terms.

• Administration. The court-supervised distribution of an estate during probate.
• Alternate Beneficiary. A person or organization named in a will to receive your assets if the primary beneficiary dies before you do.
• Annual Exclusion. The amount you can give to someone each year without having to file a gift tax return or pay a gift tax. Currently $15,000 per recipient.
• Attorney in Fact. The person named as an agent under a power of attorney to manage the financial affairs of another. The attorney in fact need not be a lawyer.
  
• Basis. Amount you paid for an asset.
  
• Beneficiary. A person or organization who will receive assets from your estate.
  
• Codicil. A written amendment to a will.
  
• Conservator. An individual or corporate fiduciary appointed by a court to care for and manage the property of an incapacitated person.
• Decedent. An individual who has died.
  
• Descendants. An individual's children, grandchildren, and more remote persons who are related by blood or legal adoption. Same as "issue."
• Durable Power of Attorney. A power of attorney that does not terminate upon the incapacity of the person making the power of attorney.
• Estate Planning. The process by which an individual designs a strategy and executes a will, trust agreement, or other documents to provide for the administration of his or her assets upon incapacity or death.
  
• Estate Tax. A tax on a decedent's transfer of property at death.
• Estate Tax Exemption Amount. The amount of an estate that is exempt from estate taxation. Currently $3 million for Minnesota, 11.58 million IRS.
• Executor. More often referred to as "personal representative," the person named in a will and appointed by the court to carry out the terms of the will and administer the decedent's estate.
• Fiduciary. An individual or corporate entity designated to manage money or property for beneficiaries and required to exercise the standard of care set forth in the governing document and by state law.
• Generation-Skipping Transfer Tax (GSTT). A steep tax on assets that "skip" a generation and are left directly to grandchildren and younger generations. 
• Grantor. The person who sets up or creates a trust. Also called settlor or donor.
• Gross Estate. A federal estate tax concept that includes all property owned by an individual at death and certain property previously transferred by him/her that is subject to federal estate tax. The value of an estate before debts are paid.
  
• Guardian. An individual or corporate entity appointed by a court to act for a minor or incapacitated person.
• Health Care Directive. A document that gives instructions regarding the health care treatment for a grantor, and appoints agents to make health care decisions for the grantor. Also called an advance directive.
  
• Health Care Power of Attorney. A document that appoints one or more agents to make health care decisions when the grantor is incapacitated. The HCPOA is often incorporated into a health care directive.
• Heir. An individual entitled to a distribution of an asset or property interest under applicable state law in the absence of a will.
• Holographic Will. A handwritten will. Although valid in some states, holographic wills are not recognized as valid by Minnesota probate courts.
• Homestead Exemption. Portion of your residence (dwelling and surrounding land) that cannot be sold to satisfy a creditor's claim while the owner is still living.
• Insolvent Estate. When a decedent's debts are greater than the total value of estate assets.
  
• Intestate. When one dies without a valid will, such that the decedent's estate is distributed in accordance to the state's intestate succession law.
• Inventory. A list of assets of a decedent that is filed with the probate court.
• Joint Tenancy. An ownership arrangement in which two or more persons own property, with rights of survivorship. When one joint tenant dies, that person's share automatically transfers to the surviving joint tenant(s).
• Life Estate. The interest in property owned by a life beneficiary (also called life tenant) with the legal right to use the property for their lifetime, after which title fully vests in the remainderman (person named in the deed or other legal document as being the ultimate owner when the life estate ends).
• Liquid Assets. Cash, and other assets such as stocks that can be easily converted into cash.
• Living Will. A written document that states one's wishes as to medical treatment. Often combined with a health care power of attorney as part of a health care directive.
  
• Marital Deduction. An unlimited federal estate and gift tax deduction for property passing to a spouse in a qualified manner.
• Net Estate. The value of an estate after all debts have been paid. Federal estate taxes are based on the net value of an estate.
• Net Value. The current market value of an asset minus any loan or debt.
• No-Contest Clause. A provision in a will that provides that someone who contests the will shall lose any inheritance rights he or she has. Also known as an in terrorem clause. These are not always enforced by the courts.
  
• Payable on Death Account. A bank account that will transfer to the beneficiary who was named when the account was established. Sometimes called a transfer on death account.
• Per Capita. A method of distributing property whereby the surviving descendants will share equally, regardless of their generation. Contrast with per stirpes.
  
• Personal Property. Movable property, such as automobiles, household goods, equipment, cash and stocks. As contrasted with real property that is permanent.
• Personal Representative. An executor or administrator of a decedent's estate.
• Per Stirpes. A method for distributing property according to the family tree whereby descendants take the share their deceased ancestor would have taken if the ancestor were living. Each branch of the named person's family is to receive an equal share of the estate. If all children are living, each child would receive a share, but if a child is not living, that child's share would be divided equally among the deceased child's children. Contrast with per capita.
  
• Pour Over Will. A will used in conjunction with a revocable trust to pass title at death to property not transferred to the trust during lifetime.
• Power of Attorney. A legal document giving an agent legal authority to sign for and make financial decisions on behalf of a principal. Ends at incapacity of the principal (unless it is durable) or death.
• Principal. A person granting power of attorney to another person.
• Probate. The legal process of validating a will, paying debts, and distributing assets after death.
• Probate Estate. The assets that are subject to probate after a person dies. Usually includes assets in the decedent's name only. Does not include assets owned jointly, or assets with payable on death designations that name beneficiaries.
• Probate Fees. Legal, personal representative, appraisal fees and court costs associated with an estate being probated. Probate fees are paid from the estate before assets are distributed to the heirs.
• Real Property. Land and property permanently attached to land (such as a house and other buildings).
• Residue. The property remaining in a descendant's estate after payment of the estate's debts, taxes, and expenses and after all specific gifts of property and money have been distributed as directed by the will.
• Settle an Estate. The process of managing the final affairs such as valuation of assets, payment of debts and taxes, and distribution of assets to beneficiaries, after someone dies. The duties associated with probating an estate.
• Small Estate. An estate with personal property having an aggregate value of under $75,000, that includes no real property in the probate estate.
• Special Gifts. A separate listing in a will of special assets that will be distributed to specific individuals or organizations. Also called special bequests.
• Stepped-Up Basis. For tax purposes, the fair-market value of an asset at the time of the testator's death. Used as a means of minimizing capital gains tax by the beneficiary.
  
• Tenancy in Common. A form of joint ownership in which each person possesses an undivided interest in the property, which may be sold or transferred by gift during lifetime or death.
• Testamentary. Relating to a will or other document effective at death.
• Testate. One who dies with a valid will.
  
• Testator. A person who signs a will. If a female, may be referred to as the testratrix, though that term is falling out of favor.
• Transfer on Death Deed (TODD). An estate planning tool that allows owners of real property to transfer the property on the death of the last remaining owner. The TODD is often used as a means to avoid probate.
• Trust. An entity that holds assets for the benefit of certain other persons or entities, and managed by a trustee.
• Uniform Transfers to Minors Act (UTMA). Law adopted by many states (including Minnesota) that allows a testator to leave assets to a minor by appointing a custodian to hold the assets until the minor reaches the age of 21.
• Warranty Deed. A deed that allows the owner to transfer title to real property. The deed guarantees that the title is free of encumbrances (clear).
• Will. A written document with instructions for disposing of assets after death. A will can only be enforced through a probate court.