Estate Planning & Inheritance Glossary

Advance Health Care Directive
A legal document that outlines an individual’s preferences for medical care if they become unable to make decisions. This can include a living will and the appointment of a health care proxy.

Beneficiary
An individual who has been designated to receive the benefit from an estate, trust, retirement account or account upon the death of the account owner.

Cost Basis
The original value of an asset for tax purposes (usually the purchase price), adjusted for stock splits, dividends and return of capital distributions. This value is used to determine the capital gain, which is equal to the difference between the asset's cost basis and the current market value.

Note for non-retirement accounts: We will default to the date of death valuation when stepping up cost basis for any shares held by the decedent that are transferred due to death. If an alternate valuation date that meets IRS regulations is required, please contact us or inform us in writing. Any shares acquired after the date of death will retain their original cost basis when transferred, unless they were acquired prior to the alternate valuation date.

Decedent
The person who has died.

Durable Power of Attorney
A document that gives a designated individual the ability to manage the financial affairs, make healthcare decisions or conduct other business for another person who is, and the document revoked upon death.

Estate
All the assets that a person owns at the time of their death.

Executor
Individual or institution named in the will who is responsible for managing the decedent's estate (also known as personal representative or executrix). The executor ensures that the estate is settled according to the decedent’s wishes and legal requirements.

Grantor
With respect to trusts, the person who creates the trust using his or her own assets (also known as donor, trustor or settlor).

Guardianship
A legal relationship where a court appoints someone to care for an individual who is unable to do so, such as a minor child or an incapacitated adult. A legal guardian’s responsibilities may include managing the individual’s personal and financial affairs.

Health Care Proxy
A document that designates another person as a health care proxy or agent to make health care decisions on an individual’s behalf if they are unable to do so.

Heir 
Individual who is eligible to inherit the assets of a decedent.

Intestate 
Describes the death of an individual with no will; all property and assets which would otherwise be governed by a will are passed to beneficiaries according to state intestacy laws.

Irrevocable Trust
A trust that cannot be modified or terminated, except under limited circumstances with the permission of the beneficiary(ies). This designation can also provide tax benefits and protect assets from creditors, legal judgments and divorce.

Joint Tenancy With Rights of Survivorship (JTWROS) 
Type of account registration with two or more co-owners. Each owner has equal ownership with rights of survivorship. Probate proceedings are not required to transfer this account to the surviving account owner(s) upon the death of another owner.

Letter of Instruction
A document (also called a letter of intent) that provides additional guidance and information for the executor or beneficiary(ies), including details about assets, funeral arrangements and personal wishes.

Living Will
A type of advance directive that specifies any medical treatment that an individual does or does not want to receive if they become terminally ill or incapacitated.

Power of Attorney
Legal document granting one individual the authority to act for another for legal or financial purposes.

Probate
The legal process for settling an estate. Through the probate process, the court will name the authorized individual or individuals to act on behalf of the estate. The probate process can vary significantly by state.

Required Minimum Distributions (RMD)
The amount the federal government (IRS) requires an IRA owner to withdraw each year. Beneficiaries of traditional IRAs and Roth IRAs are subject to RMD requirements regardless of the age of the IRA Beneficiary owner.

Revocable Living Trust
A trust that can be altered or canceled by the grantor or originator during their lifetime. It allows for the management of assets and can help avoid probate.

Small Estate Affidavit
A legal document that allows a decedent's assets to be transferred to heirs without having to go through a formal probate process. The rules for eligibility vary from state to state.

Successor Trustee
The trustee who takes over when the initial trustee has passed away or becomes unable to continue with his or her responsibilities.

Tenants by Entirety
A form of joint ownership of an asset by spouses in which both own the asset equally. Upon the death of one spouse, ownership passes automatically to the surviving spouse, without the need for probate.

Tenants in Common
A form of joint ownership of an asset in which two or more persons hold an undivided ownership interest in the assets. One owner's interest can be transferred or sold without the consent of the remaining owner(s). There is no ability to name a beneficiary, so the ownership interest in these assets must be transferred to a beneficiary under the deceased owner's will.

Transfer on Death (TOD)
A designation that allows an account owner to transfer their assets to a designated beneficiary(ies) upon the account owner's death without the need for probate.

Trust
A legal arrangement in which one party (the trustor) gives another party (the trustee) the right to hold property or assets for a beneficiary. Trusts can be used to manage assets during an individual’s lifetime and distribute them after death.

Trustee
Person or entity owning, investing, managing and distributing the trust's assets based on the grantor's trust instructions.

Trustor
With respect to trusts, the person who creates the trust using his or her own assets (also known as donor, grantor or settlor).

Will
Legal declaration by an individual that describes how they want the assets titled in their name to be distributed after death.