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Does it matter if you do not know common estate planning terms?

| Sep 16, 2021 | Estate Planning |

When you finally start your estate planning efforts, you will most likely read and hear some terms you might not understand. You may think it does not matter if you do not know what these terms mean, but we believe everyone involved in estate planning should be well informed.

If you do not understand a term, you might unknowingly be placing your assets at risk. We cannot list and define every estate planning term or phrase, but we can introduce you to a few of the most common terms.

Financial and legal terminology

Estate planning discussions contain many financial and legal terms most people do not use and therefore do not understand. Eight of these terms include:

  1. Assets. Anything of material value the person or the estate owns.
  2. Liabilities. Anything a person or estate owes to another party.
  3. Fiduciary. A designated person responsible for holding assets in trust for one or more beneficiaries (representative, executor, trustee, etc.).
  4. Annual exclusion. A specified, tax-free amount of money given to another party each year.
  5. Testator. The party that signs a will, sometimes called a testatrix if the party is female.
  6. Settlor. Typically describes the person that settles or establishes the trust.
  7. Codicil. A document that amends or alters the terms of an existing will.
  8. Residue. The property remaining in an estate after the executor pays debts and taxes and distributes assets per the will.

When you know what the terms used in estate planning mean, your odds of creating a plan that protects you, your estate and your family improve dramatically. It is also vital to learn more about estate planning laws in Colorado.