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Estate Planning Key Terms and Concepts

Having an estate plan means making provisions for your friends, loved ones, and yourself, should you become disabled or upon your death. It is an opportunity to memorialize your wishes as they relate to your medical care and the distribution of your assets. At Siedentopf Law, we help ensure that the estate planning and probate process is as smooth and stress-free as possible. We can help you to understand the process and identify the options that will work best for you and your family. For today’s blog, we are taking a look at some of the key terms and concepts related to estate planning and probate – and explaining how they function in estate law.

Advance Directive: An Advance Directive for Health Care, also known as a Living Will, is a document that memorializes a person’s wishes concerning medical care if they are incapacitated or terminally ill. These wishes can relate to treatment, medical testing, or other care options. An Advance Directive puts family members, doctors, and hospitals on notice of the choices – and is only used if the person is unable to communicate his or her own wishes. Click here for more on Georgia’s Advance Directive for Health Care.

Charitable trusts: A charitable trust is a type of irrevocable trust (its terms cannot be revised until the purpose of the trust has been completed) by which a person leaves their estate, or a portion of their estate, to a charitable organization for philanthropic purposes and/or tax benefits. There are two types of charitable trusts: 1) a charitable lead trust pays the charity first, and when the trust expires, any remaining funds go to the beneficiaries; and 2) a charitable remainder trust pays the beneficiaries first and then the charity with any remaining funds. Click here for more information about Charitable Bequests under the new Tax Cuts and Jobs Act.

Conservator: A conservator is someone appointed by the court to manage another person’s estate or financial affairs, when that person is unable to do so for health or other reasons. A conservator can help with bank accounts, real estate, and other financial assets. He or she typically works in tandem with a guardian, who manages the person’s physical needs (ex: daily care, nutrition, medication, etc.). For more information on Conservators, you can watch Siedentopf Law’s video explaining the differences between a conservator and a guardian.

Credit Shelter Trusts: A Credit Shelter Trust is a type of trust which allows married couples to reduce or avoid estate taxes when transferring assets to their heirs (children). The trust is structured so that when the person who created the trust dies, his or her assets are transferred to the surviving spouse, who will have certain rights to those trust assets for their lifetime. Once the spouse passes away, the trust assets are then transferred to the heirs (children) without estate taxes.

Estate Tax: Estate Tax, also known as Inheritance Tax, is the tax a person pays when he or she has inherited property or assets from someone who has died. Currently, the federal estate tax exemption amount is $11.18M for individuals and $22.36M for couples; the tax rate is 40%.  This means that individuals whose estates are worth less than the current exemption amount do not have to pay any Federal Inheritance Tax.  The state of Georgia does not have estate taxes. Click here for more information about the Estate Tax under the new Tax Cuts and Jobs Act.

Executor/Administrator: An estate executor is an individual responsible for carrying out the instructions of another person’s will. The person who drafted the will typically names or nominates their own estate executor. Responsibilities of an estate executor can include offering the will for probate, distributing property or charitable bequests to the designated beneficiaries, arranging payment of any estate debts, as well as calculating and filing taxes. If there is no will, or no executor named in the will, the court may appoint an administrator to finalize the estate and distribute assets. Click here to read our blog on what is required of estate executors.

Gift Tax: Federal gift taxes are taxes levied on money, property or property income (ex: cash, stocks, real estate) gifted to another person during the gift-giver’s lifetime. It does not apply to tuition or medical expenses, gifts to a spouse, gifts to political organizations, or gifts to certain charities. The federal gift tax is in place so that taxpayers will not avoid estate taxes by giving away everything during their lifetimes. Currently (2019), the federal gift tax rate is 40%; however, the gift tax exemption is $15,000 per person.   This means that any gifts of $15,000 or less are not taxed. Click here for more on the Gift Tax and how it applies to you.

Guardian: A guardian is a court-appointed individual who is responsible for the care of another person – when that person is otherwise not able to take care of themselves due to age, health, or other issues. A guardian can also refer to the individual appointed in a will or other estate planning documents to take care of a minor child. Duties and responsibility of a guardian can include daily needs, housing, nutrition, medical care, shopping, etc. A guardian typically works in tandem with a conservator, who manages a person’s financial needs and assets. For more information on Guardians, you can watch Siedentopf Law’s video explaining the differences between a guardian and a conservator.

Insurance trusts: An Insurance Trust, sometimes also referred to as a Life Insurance Trust, is an irrevocable trust (its terms cannot be revised until the purpose of the trust has been completed) in which a life insurance policy is the trust asset. Once the policy is placed in the trust, the insured person no longer owns that policy. Instead, the insurance trust is managed by a trustee. When the insured person passes away, the trustee becomes the administrator of that trust on behalf of the insured person’s beneficiaries.  This is used to make sure assets pass to beneficiaries free of any creditor claims.

Living Trust: A Living Trust, also known as an Inter Vivos Trust, is an estate planning document through which a person’s assets are placed into a trust for their benefit during their lifetime.  Living Trusts can be revocable (the Grantor can change or get rid of it) or irrevocable (its terms cannot be revised until the purpose of the trust has been completed). When that person dies, any remaining trust assets are transferred to his or her beneficiaries. Unlike a will, a living trust does not go through probate – the court proceedings through which a person’s assets are identified, collected, and distributed by an executor or administrator. This can mean a faster, less expensive transfer of assets.  It also avoids the public records aspect of probate and keeps assets and distribution private.

If you have any questions about these estate planning terms, or if you would like to schedule an estate planning consultation, contact Siedentopf Law at (404) 736-6066 or via our online form. Stay tuned for Part Two of this blog, which will be published later this month.

© Sarah Siedentopf and Siedentopf Law, 2019. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Siedentopf Law and EstateLawAtlanta.com with appropriate and specific direction to the original content.

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