10 Estate Planning Terms to Know

Estate planning comes with its own vocabulary, and most of it gets used in conversation long before anyone stops to define it. This glossary covers the ten terms that come up most often, from the documents that make up a complete plan to the default rules that apply if you never create one. For the broader picture of why estate planning belongs in your financial plan, start with Estate Planning 101.

01Will

A will is the document that directs how your assets are distributed after you die. It also names a guardian for your minor children, which is often the single most important function a will serves for young families. A court follows the terms of a valid will unless it is successfully contested. Without one, state law determines who inherits and who raises your children.

02Trust

A trust is a legal structure that holds assets on behalf of a beneficiary and is managed by a trustee according to terms you set. Trusts can avoid probate, distribute assets to beneficiaries over time instead of in a single lump sum, and in certain structures reduce estate taxes. A trust can be funded during your lifetime or created at death through your will. The right structure depends on your goals, not a single universal answer.

03Power of Attorney

A power of attorney designates someone to manage your financial affairs if you become incapacitated and unable to make decisions yourself. Without one in place, your family must petition a court to appoint a guardian or conservator, a process that takes time and costs money. A power of attorney can be broad or limited to specific transactions, and it terminates automatically at death.

04Healthcare Directive

A healthcare directive, sometimes called a living will or medical power of attorney, designates who makes medical decisions on your behalf if you cannot make them yourself, and documents your wishes regarding end-of-life care. It removes the burden from family members who would otherwise have to guess what you would have wanted during an already difficult moment.

05Beneficiary Designation

A beneficiary designation is the form you complete on a retirement account, life insurance policy, or certain bank accounts that names who receives that asset directly. These designations transfer assets outside of probate and take legal precedence over what your will says.¹ An outdated designation, naming a former spouse for example, overrides a current will every time.

06Probate

Probate is the court-supervised process of validating a will, paying a deceased person's debts, and distributing the remaining assets to heirs. It is public, and it is not fast. The American Bar Association notes probate commonly takes nine to twenty-four months to complete, and attorney fees, court costs, and executor compensation can consume three to seven percent of a gross estate's value.² Assets that pass through a trust or by beneficiary designation avoid this process entirely.

07Intestate Succession

Intestate succession is the set of default rules a state applies to distribute your assets when you die without a will. These rules follow a fixed formula based on your surviving relatives, not your relationships or your intentions. A long-term partner you never married receives nothing under intestate succession in most states, regardless of how long you were together.

08Guardianship

Guardianship is the legal authority a court grants to someone to care for a minor child, or to manage assets on behalf of someone who cannot manage them personally, whether a child or an incapacitated adult. A will allows you to name a guardian for your own children in advance. Without that designation, a court decides who raises them, and the outcome may not be who you would have chosen.

09UTMA

UTMA stands for the Uniform Transfers to Minors Act, a law adopted in some form by all fifty states that allows assets to be held in a custodial account for a minor's benefit until a stated age, typically 18 or 21.³ It is the mechanism that lets a minor receive an inheritance without a court-appointed guardian of the property, as long as the account is set up correctly in advance.

10Estate Tax Exemption

The estate tax exemption is the dollar amount an individual can pass to heirs before the federal estate tax applies. For 2024, that threshold is $13.61 million per individual, or $27.22 million for a married couple with portability elected.⁴ The elevated exemption under the Tax Cuts and Jobs Act of 2017 is scheduled to sunset after December 31, 2025, absent Congressional action, which would cut the exemption to roughly $7 million per individual. For most clients the federal estate tax is not the primary planning concern, but the exemption amount still shapes decisions around trusts and titling.