Estate Planning From A to Z: What Does (fill in the blank) Mean?

Do you have to pull out a dictionary when you are looking at your estate planning documents? Are there terms that you just brush aside as "legal mumbo jumbo"? Listed below, from A to Z, are the more common estate planning terms that you may encounter in your estate planning documents or in the estate planning process.

A - Amendment. A change to a Trust. A change to a Will is called a Codicil.

B - Beneficiary. An individual (or individuals) who receive(s) the benefits from a trust, an estate, or an asset (e.g. beneficiary of an IRA). 

C - Community Property. In Washington State this is property acquired by a married couple during a marriage. This includes income from work and assets purchased with that income. Assets that have been "hopelessly" co-mingled are also considered community property.

D - Disclaimer. The right to refuse to accept property left by a Will, Trust, or beneficiary designation. A disclaimer is often used to minimize estate taxes.

E - Estate.  A legal entity that holds assets that pass through probate before they can be distributed to a beneficiary(ies). For estate tax purposes, there is another definition: all property, real or personal, tangible or intangible, wherever situated. This broader definition includes assets that typically do not pass through probate (e.g. a life insurance policy with a named beneficiary).

F - Funding. The process of transferring assets (e.g. bank accounts and real property) from the name of the individual to the name of a Living Trust or by adding beneficiary designations. The funding process is an important step when a Living Trust is created. If the funding of a Living  Trust is incomplete, a probate may be necessary at a death.

G - Guardian. A court appointed individual (or entity) who has responsibility over the person and/or estate of a minor or incapacitated individual.

H - Heir. An individual who, under the laws of a state, would be entitled to share in the estate of a deceased individual.

I - Intestate Succession. The statutory directions for distributing property when a person dies without a Will or Living Trust (i.e. died intestate). 

J - Joint Tenant With Right of Survivorship ("JTWROS"). An asset held with JTWROS transfers automatically to the surviving owner(s) upon the death of the other owner. A probate is not required to transfer an asset held in JTWROS.

K - K-1. A tax form issued by an Irrevocable Trust to a beneficiary. The beneficiary will then report that information on his or her own 1040 tax return. A K-1 is also issued by estates.

L - Letters Testamentary. The document that a Court issues when a Personal Representative is appointed by the Court.  Letters Testamentary allow the Personal Representative to take control of a deceased person's estate. If a person died intestate (i.e. without a Will), the appointed Personal Representative will be given Letters of Administration.

M - Memorandum of Engagement ("MOE"). A document that the client and attorney both sign that details the fees and scope of the project that the attorney is undertaking on behalf of the client. 

N - Notice to Creditors. A public notice to known and unknown creditors of a decedent. This notice starts a four-month window (here in Washington) where a creditor or debtor must make a timely claim. A claim that is untimely or defective is forever barred.

O - Order Appointing a Personal Representative. A document issued by the Court and signed by the Judge or Court Commissioner formally designating the named Personal Representative in the Will as the Personal Representative. With this Order, the Clerk of the Court will issue Letters Testamentary.

P - Personal Representative. The individual or entity named in a Will and appointed by the Court whose job it is to carry out the terms of the Will. This term is synonymous with Executor or Executrix (if there is a Will) or Administrator or Administratrix (if there is no Will).

Q - QTIP. A Trust with property left to the surviving spouse for his or her sole benefit for his or her lifetime. No estate taxes are assessed on the Trust property until the death of the surviving spouse. QTIPs may be found in both Will and Living Trusts. See the article below for more information on QTIPs.

R - Rule Against Perpetuity. A rule that limits the length of time the creator of a Trust ("Trustor") can control his or her property after their death. Without a termination clause complying with this rule, the Trust could be ruled invalid. Washington state has done away with the Rules Against Perpetuity and instead has designated a set number of years a Trust can exist. Currently, a Trust can exist for 150 years.

S - Separate Property. Property acquired before a marriage, property acquired after marriage by gift or bequest, or property designated as separate property. 

T - Testator or Testatrix. A male or female individual who is creating a Will.

U - Unlimited Marital Deduction. At a death, no estate taxes are assessed on property that you leave to your surviving U.S. citizen spouse.

V - VA Aid & Attendance. The long-term care program available to qualifying veterans or their spouses.

W - Will. A valid witnessed instrument designating a person's intent as to the distribution of his or her assets upon their death. A Will is designed to go through a Probate.

X - Xylophone. A musical instrument is considered a Personal Effect. Personal Effects are listed in a separate document called a "Personal Effects List." To change a Personal Effects List, you will simply need to cross off the old one and sign and date your new Personal Effects List. No attorney needed.

Y - "Y" Do an Estate Plan? By doing an estate plan, you have control over how your assets are going to be distributed to your beneficiaries, and therefore, peace of mind, that at your death, your wishes will be carried out. If you do not do an estate plan, your state of residence has one for you (and it may not be what you want). See I - Intestate Succession.

Z - Zebra. A vertebrate mammal with distinctive black-and-white striped coats. You can provide for your pet zebra using a Pet Trust. A Pet Trust can only be used for animals possessing a vertebrae.