Don’t know the difference between a trustor and a testator? Not sure if you need a will, a trust, or both? You’re not alone. Most people start the estate planning process with more questions than answers.

Once you know what is involved in estate planning and you’ve completed the first steps – consider your goals, list your assets, include your partner – it is helpful to learn some key terms. Understanding some of the terms and documents that are used in estate planning will ease your conversations with estate planning professionals and help you put a solid plan in place.

9 Essential Estate Planning Terms

Learning the terminology used in estate planning will help you make sense out of what can be a confusing process. As you research more about estate planning, you will find these terms repeated often:

• Inheritance. The assets passed down to an individual after someone dies. Inheritance can include cash, stocks, bonds, cars, jewelry, art, antiques, real estate, and other tangible and intangible assets. A stipulation in your will could leave an inheritance to anyone of your choice, regardless of relationship.
• Intestate. When you die without a valid will or trust, your estate is said to be intestate. Your estate will be distributed by the state according to intestacy law, which typically recognizes spouses and children in line to inherit.
• Probate. A legal process that determines whether a will is valid and supervises the executor of the estate in distributing property under the terms of the deceased person’s will or according to the state’s intestate laws if there is no will. Probate often takes longer when there is no valid will.
• Testator. A person who makes and signs a will directing the disbursement of their estate. A female testator is sometimes referred to as a testatrix, but either term is proper.
• Beneficiary. A person or organization that you choose to receive distributions from a trust, will, insurance policy, retirement account, or your estate after you die. You may choose more than one beneficiary, and you can stipulate in your will that a specific asset go to a particular beneficiary.
• Trustor. A person who creates or contributes property and assets to a trust. For example, if you put money in a trust for your children to receive when they turn 18, you are a trustor. The trustor is sometimes referred to as a grantor, settlor, or donor.
• Trustee. The individual or organization designated to hold and administer property and assets in a trust. Also known as a fiduciary, a trustee has a legal duty to act in the best interest of the trust’s beneficiaries and in accordance with the terms of the trust. The responsibilities of a trustee might include managing investments and distributing assets according to the terms of the trust. Often, alternative and successive trustees are named to carry on these responsibilities when the original trustee is unable.
• Fiduciary. A person with a legal and ethical duty to act on someone else’s behalf in financial and other matters. Executors, trustees, agents, and guardians are all examples of estate planning fiduciaries. They are chosen to carry out certain responsibilities on your behalf and must act in your best interest and according to your wishes stipulated in various legal documents.
• Marital Deduction. This unlimited federal tax deduction protects spouses from paying estate tax on any inheritance. The marital deduction makes asset transfers between spouses, when done in the right way, tax exempt.

Understanding these terms should help you navigate the estate planning process and make it easier for you to communicate with the professionals who will guide you.

5 Types of Estate Planning Documents

Another part of estate planning that can be confusing are the documents. You need to document your wishes, but it is important to use the right document for each part of your plan. The best estate plans will hold up in court if they are challenged. Here are five types of documents you may need in your estate plan:

• Will. A will is the primary instrument for distributing your assets when you die. In your will, you can stipulate specific assets to go to particular individuals or you can have just one beneficiary for your entire estate. You can choose an executor to be sure your wishes are carried out, and you can also choose a guardian for your children in the event you die before they turn 18. A will does not control your life insurance proceeds, property owned through joint title, or assets held in a living trust.
• Power of Attorney. This document gives someone the power to make decisions about your property, finances, or medical care if you become incapacitated. You can set up a durable power of attorney to be in force all the time or a conditional power of attorney to be in force only if you are unable to take care of your own affairs. A power of attorney expires when you die.
• Advance Healthcare Directive. The two main kinds of advance care directives are living wills and powers of attorney. In your living will, you can specify in advance how much medical intervention and what type of end-of-life care you would prefer. A medical power of attorney allows you to designate someone to make medical decisions for you. These terms are often used interchangeably but are not the same kinds of document; however, you should have both in place.
• Trust. A trust is a document that creates a three-way relationship between the trustor (you), the trustee (someone you appoint), and the beneficiary. In a trust, you delegate authority to the trustee to manage assets on behalf of a beneficiary. Assets held in a trust do not go through probate, and a trust can provide some tax advantages and privacy. An irrevocable trust cannot be changed without the beneficiary’s consent. With a revocable trust, the trustor can make changes at any time.
• Last Wishes/Guidance Letter. This informal letter, which is not legally binding, is meant to accompany the legal documents in your estate plan. In a guidance letter, you may explain your end-of-life choices to your grieving family. Your letter can contain instructions for your funeral arrangements, directions to find your important documents, and some final thoughts that might comfort your loved ones.

Understanding these basic estate planning terms and documents makes you better equipped to talk with an estate planning professional for guidance. Get in touch with a member of our Wealth Team for more information on starting your estate plan.