• By Alyssa K. Jerde

Estate Planning 101: An Introduction to Basic Estate Planning Terminology


Meeting with an estate planning attorney can seem overwhelming. And when your attorney starts using terms like “intestate succession,” “attorney-in-fact,” or “probate,” it can feel like they are speaking a different language. In this article, we’ll break down some of the terminology that you may hear during an initial estate planning consultation.

A health care directive is a legal document in which you designate someone to make medical decisions on your behalf when you can no longer speak for yourself or no longer have capacity to make medical decisions. A health care directive may also include your wishes regarding medical care and thoughts about quality of life, health care and finances, specific medical procedures, as well as organ and tissue donation and religious or spiritual beliefs. A health care directive may also be known as a living will or an advance care directive. The individuals you name to act on your behalf are known as your health care agents or health care proxy. It’s important to make sure that once executed, your health care directive is put into your health care provider’s file to ensure your wishes are available.

A financial power of attorney is a legal document in which you designate and empower someone to make financial decisions on your behalf while you are living. A power of attorney typically includes broad powers, including the powers to pay bills, sell or mortgage real estate, and make investment decisions. A power of attorney is a durable power of attorney when it contains language that allows the document to remain effective even if you become incapacitated or incompetent, which is when you most need the document to be effective. The individuals you name to act on your behalf are known as your attorney-in-fact. Because a power of attorney becomes effective the moment it is signed, you should only ever name someone you trust with your finances. A power of attorney remains in effect until you revoke it or until your death, whichever comes sooner.

A will is a legal document that essentially says who inherits your assets after you die. Wills govern only probate assets, or those assets that do not pass to heirs in some other way, such as through a beneficiary designation (such as those on a life insurance policy or bank account), joint ownership (such as a couple owning their home jointly or having a joint bank account), or trust ownership. Wills are subject to probate after a person dies. Probate is the official public court process of establishing that the will is valid and appointment a personal representative – sometimes called an executor – to administer the estate. Think of a will as the instructions for the probate process.

A will also allows parents to name a guardian and conservator for their minor children. In Minnesota, a guardian is a person nominated to take custody of a minor child’s person in the event of a person’s death. A conservator is a person nominated to oversee and manage a minor child’s financial affairs until they become of age. Parents can also choose to include testamentary trust provisions within their wills. A testamentary trust is a trust that does not become effective until a triggering event occurs or certain conditions are met, such as in the event of parents death while their child is a minor or where a beneficiary is disabled and certain measures need to be taken to protect the disabled person’s access to public assistance.

When a person dies having made a will, that person is considered to have died testate. On the other hand, however, if a person dies without having made a will, that person is considered to have died intestate, meaning that they have not left any instructions on how they want their estate distributed. Instead, the state has default rules on how the estate will be distributed, otherwise known as the rules of intestate succession.

For some individuals and couples, a trust is a more appropriate planning tool. Like a will, a trust governs the distribution of your assets after death. However, unlike a will, a trust avoids probate so it is not subject to public record or a delay in administration. The individuals you name to oversee the trust administration are called trustees.

Trusts offer more control over the distribution of your assets. Say, for example, you may wish to delay distributions to your children until they are older. A stand-alone trust, or testamentary trust provisions within your will, allow you to choose vesting ages, or the ages at which your children or grandchildren receive their distributions from your estate. Trusts also offer more privacy and efficiency, especially for those who have larger or more complex estates.

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