Glossary of Estate Planning Terms and Documents

AGENT - A person or entity that is authorized by a power of attorney or other document to act for the principal pursuant to the terms provided by the document. An agent may only act during the life of the principal.

APPOINTMENT AND DESIGNATION OF GUARDIAN - A guardianship is a protective arrangement in which one individual (the guardian) is placed “in charge of the person” of another individual (the ward) in a relationship which is similar to the relationship a parent has toward his or her unemancipated child. In Colorado, either parent of an unmarried minor may nominate a guardian either in his or her will, or in another written instrument executed with the same formalities as a will.

BENEFICIARY - As used in the context of a trust, a person who is or may be entitled to receive distributions from a trust, either immediately or at some point in the future. The term also refers to a person named to receive certain assets or benefits, such as a payable-on-death (POD) beneficiary on bank accounts, retirement accounts or life insurance policies.

CODICIL - An amendment to a will. It does not replace a will.

CONSERVATOR - A person appointed by a court to administer the property of a minor child or an incapacitated adult. In some states, the conservator is referred to as a “guardian of the property.”

CONSERVATORSHIP - A court appointed protective arrangement in which one individual (the conservator) has a legal responsibility for the property of a minor child or an incapacitated adult. A conservatorship governs the management of the protected person’s property and finances.

DECLARATION OF DISPOSITION OF LAST REMAINS - In Colorado, a decedent may leave instructions concerning his or her desires for burial, cremation, or memorial services, and designate a person to carry out those wishes.

DEVISEE - A person who is named to receive assets in a will.

ESTATE - In general, and for federal estate tax purposes, the term “estate” refers to all of the real and personal property owned by a decedent and some other assets not held in the decedent’s name. However, the term “probate estate” refers only to the decedent’s probate assets (defined below).

FIDUCIARY - In the estate planning and probate context, a person who has a legal responsibility over the property or welfare of another person. Fiduciary includes a personal representative, conservator, guardian, trustee, agent under a power of attorney and other legal relationships.

GENERAL POWER OF ATTORNEY (GPOA) - The GPOA allows an individual (the “principal”) to appoint an agent with the authority to deal with the principal’s property on the principal’s behalf during the life of the principal.

GUARDIAN - A person appointed by a court to make decisions about the health and welfare of a minor child or an incapacitated adult.

GUARDIANSHIP - A protective arrangement in which one individual (the guardian) is placed “in charge of the person” of another individual (the ward) in a relationship which is similar to the relationship a parent has toward his or her unemancipated child. A guardianship can be established for a minor or an incapacitated adult and focuses on the well-being of the protected person.

HEIR - A person who receives all or part of a decedent’s property when the decedent does not leave a will or does not dispose of all of his or her property by will.

HIPAA AUTHORIZATION - The Health Insurance Portability and Accountability Act (HIPAA) and related regulations have made doctors and hospitals more cautious about releasing medical information without specific authorization to do so. The HIPAA Authorization expressly allows certain individuals (e.g., one’s agent under a valid MPOA) to have broad access to medical information.

INTESTACY - The rules governing administration of an estate when a person dies without a will.

IRREVOCABLE TRUST - An entity similar to that of a Revocable Trust, except that the settlor does not reserve any right to amend or revoke the trust agreement. Thus, an Irrevocable Trust is an entity that is separate and distinct from its settlor, and it is typically used for more advanced estate planning matters such as an Irrevocable Life Insurance Trust (ILIT).

LETTERS TESTAMENTARY OR LETTERS OF ADMINISTRATION - The document issued by the probate court to evidence the appointment of the personal representative.

LIVING WILL - In Colorado, a living will, also known as a “Declaration as to Medical or Surgical Treatment,” directs when life-sustaining procedures will be withdrawn and when artificial nourishment will be withdrawn.

MEDICAID - A joint federal and state program that provides payment for medical care for persons unable to afford to pay. Unlike Medicare, a Medicaid recipient can only have very limited assets and income. The rules to determine Medicaid eligibility are complex, and include specific rules about how gifts are factored into the determination and what assets are exempt in considering eligibility.

MEDICAL POWER OF ATTORNEY (MPOA) - The MPOA allows an individual (the “principal”) to appoint an agent with the authority to consent to or refuse medical treatment on the principal’s behalf.

MEDICARE - An insurance program providing payment for medical needs for persons 65 and over and for certain people with disabilities. Financial resources and income are not factors in determining Medicare eligibility.

PERSONAL REPRESENTATIVE (PR) - A person appointed by a court to administer a decedent’s estate. The personal representative may be nominated in the decedent’s will. A personal representative is sometimes referred to as an executor or administrator.

POWER OF APPOINTMENT (POA) - A POA can be a general power of appointment (GPOA) or a special power of appointment (SPOA), both of which allow the power holder (e.g., a trust beneficiary) to determine who will receive the assets subject to the power (e.g., the assets of a trust) if the power is exercised. Regardless of whether the POA is exercised, for federal estate tax purposes, a GPOA generally causes the assets subject to the power to be included in the power holder’s estate, whereas an SPOA does not. A POA can be drafted to be exerciseable during life (an “intervivos POA”) or at death (a “testamentary POA”).

PRINCIPAL - A person, trust, or other entity who signs a power of attorney or other instrument of agency granting powers to an agent.

PROBATE - Technically just the court process of determining whether a decedent died with a valid will and appointing a personal representative. However, the term is frequently used to encompass the entire estate administration process whereby assets are collected and valued, debts are paid, tax returns are filed and assets are distributed to the heirs or devisees.

PROBATE ASSETS - Assets that are disposed of by a decedent’s will, or by intestacy if the decedent did not leave a will. Probate assets are assets held in the decedent’s name only, or with another person in tenancy in common, without a named beneficiary or with the decedent’s estate named as beneficiary. Probate assets do not include assets held with another person in joint tenancy or assets with another person or entity named as beneficiary.

REVOCABLE (LIVING) TRUST - An entity created under an agreement between a settlor (the trust creator) and a trustee (the trust administrator) for the benefit of one or more beneficiaries, in which the settlor reserves the right to amend or revoke the agreement during his or her life. For purposes of federal and state income, gift, and estate taxes, the settlor of a revocable trust is regarded as the owner of the trust assets during the settlor’s life, and all items of trust income are reportable by the settlor. A revocable trust generally becomes irrevocable and unamendable at the settlor’s death, with the trust agreement providing the terms for the distribution of the trust assets, including any assets that may be transferred to the trust by the settlor’s will.

SETTLOR - A person who creates a trust during his or her lifetime. A settlor is sometimes also referred to as a grantor or trustor.

SPECIAL POWER OF ATTORNEY (SPOA) - A power of attorney can be limited in scope (referred to as a Special Power of Attorney or an SPOA). For example, an SPOA can be executed to give an agent the authority only to add property to the principal’s revocable trust (discussed above) during the principal’s life.

TESTAMENTARY CAPACITY - The capacity to sign a will. In order to sign a will, a person must understand the nature and extent of his or her property, understand how the will disposes of the property, be of sound mind and under no undue constraint or influence.

TESTATOR - A person who signs a will.

TRUSTEE - A person who administers a trust. The trustee is generally appointed by the person who creates the trust (the settlor or the testator).

WILL - A document that provides for the passage of all property the testator owned at death (if such property was not held in joint tenancy or with a payable on death or other beneficiary designation) and all property acquired by the testator’s estate upon death. The will also allows a testator to appoint certain fiduciaries (e.g., a Personal Representative). The terms of a will may also create one or more trusts at the testator’s death.