Estate Planning
Expert-defined terms from the Professional Certificate in Investments for Teens course at London School of Planning and Management. Free to read, free to share, paired with a professional course.
**Advance Health Care Directive (AHCD)** #
**Advance Health Care Directive (AHCD)**
An AHCD is a legal document that outlines a person’s medical wishes in the event… #
It often includes a living will and a health care proxy. The living will specifies the person’s wishes regarding end-of-life medical treatments, while the health care proxy designates someone to make medical decisions on their behalf.
Example #
John creates an AHCD to ensure that his wishes regarding medical treatments are followed if he becomes unable to make decisions for himself.
Practical application #
An AHCD can provide peace of mind for both the individual and their family members, knowing that their medical wishes will be respected.
Challenge #
It’s important to regularly review and update an AHCD to ensure that it accurately reflects the individual’s current medical wishes.
**Beneficiary Designation** #
**Beneficiary Designation**
A beneficiary designation is a legal document that specifies who will receive th… #
A beneficiary designation is a legal document that specifies who will receive the proceeds of a life insurance policy, retirement account, or other financial asset upon the death of the owner.
Example #
Sarah designates her three children as the beneficiaries of her 401(k) retirement account.
Practical application #
Regularly reviewing and updating beneficiary designations can help ensure that the intended recipients receive the financial assets.
Challenge #
It’s important to coordinate beneficiary designations with the overall estate plan to avoid conflicts and ensure that the assets are distributed according to the individual’s wishes.
**Capital Gains Tax** #
**Capital Gains Tax**
Capital gains tax is a tax on the increase in value of an asset, such as stocks… #
Capital gains tax is a tax on the increase in value of an asset, such as stocks or real estate, when it is sold.
Example #
When John sells his rental property for a profit, he will owe capital gains tax on the increase in value of the property.
Practical application #
Minimizing capital gains tax can be an important consideration in estate planning, as it can help maximize the value of the estate for the beneficiaries.
Challenge #
Capital gains tax laws can be complex and subject to change, making it important to regularly review and update the estate plan.
**Durable Power of Attorney** #
**Durable Power of Attorney**
A durable power of attorney is a legal document that grants someone the authorit… #
A durable power of attorney is a legal document that grants someone the authority to manage another person’s financial affairs, even if they become incapacitated.
Example #
Jane creates a durable power of attorney and grants her husband the authority to manage her financial affairs if she becomes unable to do so.
Practical application #
A durable power of attorney can help ensure that financial affairs are managed effectively, even if the individual becomes unable to manage them themselves.
Challenge #
It’s important to choose a trustworthy and responsible person to serve as the attorney-in-fact, as they will have significant control over the individual’s financial affairs.
**Estate** #
**Estate**
An estate refers to the total value of all the assets and liabilities that a per… #
An estate refers to the total value of all the assets and liabilities that a person owns or controls at the time of their death.
Example #
John’s estate includes his primary residence, investment properties, retirement accounts, and personal belongings.
Practical application #
Estate planning involves managing and distributing the estate according to the individual’s wishes.
Challenge #
Properly valuing and managing an estate can be complex and time-consuming, making it important to seek professional advice.
**Estate Planning** #
**Estate Planning**
Estate planning is the process of managing and distributing a person’s assets an… #
Estate planning is the process of managing and distributing a person’s assets and liabilities after their death.
Example #
Sarah works with an estate planning attorney to create a will, trust, and other legal documents to manage and distribute her estate according to her wishes.
Practical application #
Estate planning can help ensure that assets are distributed according to the individual’s wishes, minimize taxes, and avoid conflicts among beneficiaries.
Challenge #
Estate planning can be a complex and ongoing process, requiring regular reviews and updates to ensure that it reflects the individual’s current wishes and circumstances.
**Estate Tax** #
**Estate Tax**
Estate tax is a tax on the transfer of assets from a deceased person’s estate to… #
Estate tax is a tax on the transfer of assets from a deceased person’s estate to their beneficiaries.
Example #
John’s estate is subject to estate tax, which will be paid by his beneficiaries before they receive their inheritance.
Practical application #
Minimizing estate tax can be an important consideration in estate planning, as it can help maximize the value of the estate for the beneficiaries.
Challenge #
Estate tax laws can be complex and subject to change, making it important to regularly review and update the estate plan.
**Executor** #
**Executor**
An executor is a person appointed in a will to manage and distribute the assets… #
An executor is a person appointed in a will to manage and distribute the assets of a deceased person’s estate.
Example #
Jane appoints her brother as the executor of her estate in her will.
Practical application #
The executor has a fiduciary duty to manage the estate according to the instructions in the will and in the best interests of the beneficiaries.
Challenge #
Serving as an executor can be a complex and time-consuming process, requiring attention to detail and organizational skills.
**Gift Tax** #
**Gift Tax**
Gift tax is a tax on the transfer of assets from one person to another during th… #
Gift tax is a tax on the transfer of assets from one person to another during their lifetime.
Example #
Sarah gives her daughter a gift of $15,000 to help her purchase a car.
Practical application #
Minimizing gift tax can be an important consideration in estate planning, as it can help maximize the value of the estate for the beneficiaries.
Challenge #
Gift tax laws can be complex and subject to change, making it important to regularly review and update the estate plan.
**Guardianship** #
**Guardianship**
Guardianship is a legal relationship in which a person is appointed to manage th… #
Guardianship is a legal relationship in which a person is appointed to manage the affairs and make decisions on behalf of another person who is unable to manage their own affairs.
Example #
Jane appoints her sister as the guardian of her minor children in her will.
Practical application #
Guardianship can help ensure that minor children are cared for and their affairs are managed effectively if their parents become unable to do so.
Challenge #
Choosing a guardian can be a difficult decision, requiring careful consideration of the individual’s values, lifestyle, and ability to care for the children.
**Health Care Proxy** #
**Health Care Proxy**
A health care proxy is a legal document that designates someone to make medical… #
A health care proxy is a legal document that designates someone to make medical decisions for another person if they become unable to make decisions for themselves.
Example #
John designates his wife as his health care proxy in his advance health care directive.
Practical application #
A health care proxy can help ensure that medical decisions are made in the individual’s best interests and according to their wishes.
Challenge #
It’s important to choose a trustworthy and responsible person to serve as the health care proxy, as they will have significant control over the individual’s medical care.
**Inheritance Tax** #
**Inheritance Tax**
Inheritance tax is a tax on the transfer of assets from a deceased person’s esta… #
Inheritance tax is a tax on the transfer of assets from a deceased person’s estate to their beneficiaries.
Example #
John’s beneficiaries are subject to inheritance tax on the assets they receive from his estate.
Practical application #
Minimizing inheritance tax can be an important consideration in estate planning, as it can help maximize the value of the estate for the beneficiaries.
Challenge #
Inheritance tax laws can be complex and subject to change, making it important to regularly review and update the estate plan.
**Irrevocable Trust** #
**Irrevocable Trust**
An irrevocable trust is a trust that cannot be modified or terminated once it ha… #
An irrevocable trust is a trust that cannot be modified or terminated once it has been established.
Example #
John establishes an irrevocable trust to hold his life insurance policy, ensuring that the proceeds will be managed and distributed according to his wishes.
Practical application #
An irrevocable trust can help minimize estate taxes, protect assets from creditors, and ensure that assets are managed and distributed according to the individual’s wishes.
Challenge #
Once an irrevocable trust has been established, it cannot be modified or terminated, making it important to carefully consider the terms and conditions before creating the trust.
**Joint Tenancy** #
**Joint Tenancy**
Joint tenancy is a legal arrangement in which two or more #
Joint tenancy is a legal arrangement in which two or more