Estate planning involves legal documents and technical terms that can be difficult to understand. Many people delay planning because they feel overwhelmed by this unfamiliar language. Understanding common estate planning terminology makes the process easier and ensures that you make informed decisions about your future.
Testamentary vs. Living Trust
A trust provides a way to hold and manage assets for designated beneficiaries. Establishing a living trust allows for control of assets during your lifetime while ensuring a smooth transition after your passing.
By contrast, a testamentary trust is created through a will and only becomes active after death, meaning probate is required.
Probate
Probate is the legal process of validating a will and distributing assets according to its terms. If no will exists, probate courts follow state laws to determine who inherits.
The process can take months or even years, depending on the complexity of the estate and whether disputes arise. Assets held in a living trust or with designated beneficiaries typically bypass probate.
Intestate
When someone dies without a will, they are considered intestate. State laws determine who inherits based on a predetermined order, often prioritizing spouses and children.
Intestate succession does not account for personal relationships or unique family circumstances. Creating a will or trust ensures that your wishes dictate asset distribution rather than default legal rules.
Power of Attorney
Powers of attorney authorize someone to act on your behalf. A financial power of attorney allows an appointed person to manage money and property. You can use a healthcare power of attorney to name someone to make medical decisions if you cannot communicate.
Durable powers of attorney remains in effect even if you become incapacitated, while a general power of attorney becomes invalid if you lose mental capacity.
Living Will
A living will states your medical preferences for life-support treatments. This document guides doctors and family members in making healthcare decisions if you are unable to express your wishes.
It differs from a healthcare power of attorney, which appoints a person to make medical decisions rather than stating specific preferences.
Beneficiary Designations
Certain assets, such as life insurance policies and retirement accounts, allow you to name beneficiaries. These designations override instructions in a will or trust.
Keeping them updated ensures that assets pass to the intended individuals. Failing to review designations can lead to unintended consequences, such as an ex-spouse receiving funds meant for children.
Per Stirpes vs. Per Capita
These terms describe how assets are distributed among beneficiaries. A per stirpes designation means that if a beneficiary dies before you, their share passes to their descendants.
Per capita designations distribute assets equally among surviving beneficiaries, with no share passing to the children of a deceased heir. Understanding the difference prevents confusion and ensures your inheritance plan follows your intentions.
Guardian
A guardian is a person legally appointed to care for a minor child or an incapacitated adult. If you have minor children, naming a guardian in your will ensures that someone you trust will raise them if you pass away.
Without a named guardian, the court decides who takes on this role, which may not align with your preferences.
Trust Protector
A trust protector is an individual or entity with limited powers to oversee a trust. This role is useful when a trust is intended to last for generations.
Trust protectors can modify provisions to address changes in tax laws, remove a trustee who is not fulfilling their duties, or adjust terms to ensure the trust continues to serve its intended purpose.
Spendthrift Clause
A spendthrift clause prevents beneficiaries from squandering their inheritance. It restricts access to funds and protects assets from creditors. This provision is commonly included in trusts to ensure that inherited wealth is managed responsibly over time.
Funding a Trust
Creating a trust is not enough; it must be funded. Funding means transferring ownership of assets into the trust’s name. If assets are not retitled, they may still go through probate, defeating one of the main benefits of trust planning. Reviewing and properly funding a trust ensures that it functions as intended.
Need a Tucson, AZ Estate Planning Lawyer?
Our doors are open if you would like to work with a Tucson inheritance planning attorney to put a plan in place. You can call us at 888-222-1328 to schedule a consultation, and you can use our contact form to send us a message.
In addition to our location in Tucson proper, we have an office in Oro Valley along with locations in every population center in the state of Arizona.
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