Estate Planning Glossary

The federal tax status for charitable nonprofits. These entities are exempt from income tax, and sometimes certain state-level taxes, and are able to receive tax-deductible donations, in exchange for strict limits on their activities.

When a will leaves someone a specific item, for example, "my house on Elm Street," or "my 200 shares of Acme," and that exact item is gone from the estate by the time the person dies, the gift can simply fail, leaving the beneficiary with nothing rather than a substitute. That failure is called ademption, and it is a common reason a will's promises don't match what beneficiaries actually receive.

An umbrella term for legal documents that record health-care wishes and treatment instructions before a crisis, covering scenarios from temporary incapacity to persistent vegetative state to end of life.

The document filed with the state that legally creates a corporation or nonprofit corporation. (LLCs file articles of organization instead.)

The formation document filed with the state that legally creates an LLC. (Corporations and nonprofits file articles of incorporation instead.)

Arranging ownership of assets in advance and lawfully so they are harder for future creditors to reach, done before a claim arises rather than after.

The court order that takes effect the instant a bankruptcy is filed and immediately stops most collection efforts such as calls, lawsuits, garnishments, and foreclosures.

A for-profit entity that legally commits to pursuing a public benefit alongside profit. (Note: the legal benefit corporation differs from the private 'B Corp' certification by B Lab.)

Everything a debtor owns at filing, gathered into a single legal pool. Exemptions then pull protected property back out to the debtor.

The fiduciary who administers a debtor's bankruptcy estate under the Bankruptcy Code. A Chapter 7 trustee gathers and sells non-exempt property to pay creditors; a Chapter 13 trustee collects the debtor's plan payments and distributes them. The trustee runs the estate for creditors and debtor alike, not as either side's advocate.

An instruction on an account or policy naming who receives it at death. It passes outside probate and overrides what a will says.

A contract among co-owners setting what happens to an owner's share on death, disability, divorce, or departure: who can buy, at what price, and how it is paid.

Which descendants inherit, and how much, can hinge on whether a will or trust says “by representation,” “per stirpes,” or “per capita at each generation,” three phrases that look interchangeable but can split the same estate very differently. Under “by representation,” the estate is divided at the nearest generation with a living member, and a deceased person's share then passes down their own branch of the family to their descendants, who “represent” the relative who died.

A bankruptcy that reorganizes debt into a three-to-five-year repayment plan — used to keep a house, catch up on arrears, or when income is too high for Chapter 7.

The most common form of bankruptcy: eligible debts are wiped out in a few months, with exemptions protecting most or all of an honest debtor's property.

A creditor's remedy against an owner's interest in an LLC or partnership: the creditor can intercept distributions but generally can't seize the business or run it.

A person a court appoints to manage the finances and property of someone who can't manage their own, distinct from a guardian, who handles personal care.

The court order that legally wipes out a debtor's personal liability for covered debts, and it is the goal of most bankruptcies and the heart of the fresh start.

A document naming who controls funeral and burial or cremation decisions and stating a person's wishes, so the family is not left guessing or fighting.

A self-settled irrevocable trust allowed in certain states that can shield the person who created it from their own future creditors, something most states, including Colorado, don't permit.

A document that lets a person name an agent to handle money and property matters, and that stays in effect if the person becomes incapacitated.

The IRS's nine-digit tax ID for an entity that is not an individual, such as a business, trust, or estate. It works like a Social Security number for that entity: used to open accounts and file returns.

A person legally required to act in someone else's best interest, with duties of loyalty and care. It is the highest standard the law imposes.

The annual information return most tax-exempt organizations file with the IRS. It's public, so it doubles as a transparency and accountability document.

A transfer made to put assets out of a creditor's reach, which a court can undo. The modern statutory term is voidable transaction.

The person who creates a trust, also called the settlor, trustor, or trust maker. The grantor puts assets into the trust, names who manages it and who benefits, and sets the rules it runs by.

An IRS arrangement letting a central organization extend its tax-exempt status to subordinate chapters under one umbrella, instead of each applying separately.

A person a court appoints (or a parent nominates) to make personal and care decisions for someone who can't, such as a minor child or an incapacitated adult.

A signed permission that lets named people receive a person's protected health information. Without it, even a chosen agent can be stonewalled by privacy rules.

What happens when someone dies without a valid will: state law, not the person, decides who inherits.

A trust that generally cannot be changed or revoked after it's created. Giving up control is the price for benefits like asset protection and tax planning.

The court document that proves a personal representative has authority to act for an estate, and banks and others rely on it.

A business structure that shields its owners' personal assets from the company's debts and lawsuits, while staying simpler and more flexible to run than a corporation.

Arranging finances in advance, within the rules, to qualify for Medicaid long-term care without needlessly spending down a lifetime of savings.

The formal notice that opens a limited window for creditors to file claims against an estate; claims filed late are generally barred.

Whether grandchildren inherit equally with their cousins or in different amounts can turn on which of three look-alike phrases a will or trust uses: “per capita at each generation,” “by representation,” or “per stirpes.” Under per capita at each generation, the estate is divided into equal shares at the nearest generation with a living member, and the shares of those who died first are pooled and split equally among the next generation, so descendants equally related to the deceased receive equal amounts.

How an inheritance is split among descendants when some have died first can turn on whether a will or trust says “per stirpes,” “by representation,” or “per capita at each generation,” three phrases that look interchangeable but can divide the same estate very differently. Under strict per stirpes, the estate is always split into equal shares at the children's generation, one share per child, and a deceased child's share drops straight down that child's branch of the family, even if no child is still living.

The person appointed to settle a deceased person's estate such as gathering assets, paying debts, and distributing the rest. Older terms are executor (with a will) and administrator (without).

A short will used alongside a living trust. It catches any asset left out of the trust at death and directs it into the trust, where the trust's terms take over.

The court-supervised process of proving a will, paying a deceased person's debts, and transferring what's left to the heirs or beneficiaries.

A trust created while you are alive that you can change or cancel at any time. It holds your assets so they can pass to the people you choose without probate, and lets a person you name step in to manage things if you become unable to.

A tax election that lets a corporation or LLC pass income through to owners (avoiding double taxation) while potentially reducing self-employment tax. It is not a separate kind of entity.

A trust the creator sets up for their own benefit. In most states this offers little protection from the creator's creditors; a few states allow protective versions.

A simplified, often court-free way to collect a modest estate's personal property using a sworn affidavit instead of full probate.

A trust that holds assets for a person with disabilities without disqualifying them from need-based benefits like Medicaid and SSI.

A trust with a clause that keeps a beneficiary from giving away or borrowing against their interest and blocks the beneficiary's creditors from reaching it before distribution.

The income-tax rule that resets an inherited asset's cost basis to its value at the owner's death, often erasing the capital-gains tax on the prior appreciation.

The person or institution that takes over running a trust when the original trustee dies, resigns, or becomes unable to serve.

A trust created by a will that springs into existence only at death, useful for managing assets for young or vulnerable beneficiaries.

The ongoing work of running a trust after the settlor's death or incapacity: taking control of assets, notifying beneficiaries, paying expenses, and distributing as the trust directs.

The step of actually moving assets into a trust, retitling accounts and deeds and lining up beneficiary designations in the trust's name. A trust controls only what it owns, so an unfunded trust accomplishes nothing no matter how well it is drafted.

The person or institution that holds and manages trust property under the trust's terms, for the benefit of the beneficiaries.

A signed, witnessed document that says who gets a person's probate property after death and names an executor to carry it out. It takes effect only at death and only after probate.

Wyoming's version of a self-settled asset protection trust, allowed under state law to protect the creator's own assets from future creditors.