Definitions for Estate Planning terms.
Some of these terms have different meanings in various legal contexts. However, these definitions provide insight into their use in Estate Planning under Missouri law.
Advance Health Care Directive
A legal document stating your wishes regarding health care treatment and end-of-life decisions. Effective upon your mental incapacity.
This individual is authorized to make decisions on your behalf. You select your Attorney-in-Fact in your General or Health Care Power of Attorney document. A general Attorney-in-Fact is authorized to act in various legal and financial situations. A Health Care Attorney-in-Fact is authorized to make medical decisions on your behalf if you are incapacitated.
The individual appointed to receive a specific benefit or asset, as named in a legal document, such as a Will or Trust.
An amendment or addition to a Will after the Will is signed.
The deceased. Typically, referring to a Settlor or Testator after their death.
If you die without a Will, your estate is in a condition of “intestacy.” Under these circumstances, every state has specific laws addressing the distribution of your property (Intestate Succession Laws). In short, the state determines which of your relatives receive what portion of your assets. The drawbacks to intestate succession include not controlling who inherits your property.
Joint Tenancy with Right of Survivorship
A form of property ownership in which two or more parties share ownership during their lifetime. Upon death, the deceased owner’s property interest passes to the surviving owner(s) without being subject to Probate.
This person is responsible for wrapping up your legal affairs after your death. Their primary responsibility is to initiate Probate Administration (if needed). Your choice of Personal Representative is a role you nominate in your Will.
Payable on Death Designee (POD)
A person directly named on a specific bank account, investment account, or other asset as its Beneficiary. The individual named in the designation would become the owner of the account or asset upon your death. Essentially, synonymous with a TOD (Transfer-on-Death Designee).
Power of Attorney (see below)
Durable Power of Attorney – A legal instrument in which the Principal grants particularized authority to an agent, their Attorney-in-Fact, to act on their behalf. This authority remains effective through the Principal’s mental incapacity.
Non-Durable Power of Attorney – A legal instrument in which the Principal grants particularized authority to an agent, their Attorney-in-Fact, to act on their behalf. This authority terminates upon the Principal’s mental incapacity.
Health Care Power of Attorney – A legal instruments in which the Principal grants authority to an agent, their Attorney-in-Fact, to act on their behalf in health care decisions. This authority becomes effective upon the Principal’s mental incapacity.
Springing Power of Attorney – A legal instrument in which the Principal grants particularized authority to an agent, their Attorney-in-Fact, to act on their behalf. This authority becomes effective upon the Principal’s mental incapacity.
The individual assigning specific decision-making authority to another (their Attorney-in-Fact) in a Power of Attorney document.
A court-ordered process that itemizes the Decedent’s property and assets, orders payment of any debts or taxes, and distributes remaining property and assets as directed by the Decedent’s Will or, in the absence of a valid Will, by Missouri Intestate Succession laws. There are typically various fees associated with Probate administration.
Revocable Living Trust
A legal entity created by a Settlor(s) gives property to a Trustee(s) to hold and own for the benefit of its Beneficiary/ies. The Settlor can cancel a Revocable Living Trust at any time. Likewise, in the case of a Revocable Living Trust, the Settlor, Trustee, and Beneficiary are typically the same person (or married couple) during the Settlor(s) life. In this scenario, the roles of Trustee and Beneficiary would pass to named successors upon the death of the Settlor(s) (or last-surviving Settlor in the case of a married couple). As a distinct legal entity, the Trust would continue to own all Trust property. A successor Beneficiary would become an active Beneficiary, but no transfer in property ownership would occur except as directed in the body of the Trust document. Accordingly, an advantage of keeping the property in a Trust is that it is not subject to Probate upon the Settlor’s death.
The party that establishes a Trust.
Special Needs Trust
This form of Trust maximizes benefits for special needs Beneficiaries. The Trust would prohibit distributions from being used for any necessity that would otherwise be provided for by a governmental organization or other entity. A Special Needs Trust preserves the Beneficiary’s eligibility to receive benefits from such organizations, and thus distributions are instead directed toward additional assistance and supplemental needs.
A provision in a Trust that prevents future Beneficiaries from spending or assigning distributions outside the terms of the Trust. Under a Trustee’s management, the Beneficiary is unable to spend undistributed funds, and creditors are unable to attach an interest to the Trust. Such clauses protect future Beneficiaries from mismanaging distributions or accessing the Trust’s assets directly.
Tenancy by the Entireties
A form of property ownership that allows married couples to co-own the undivided interest of a piece of real estate. Upon the death of one spouse, the other automatically owns the property outright. The property interest of the deceased spouse would pass to the surviving spouse without being subject to Probate.
The person who has made a Will.
Transfer on Death Designee (TOD)
A person directly named on a specific bank account, investment account, or other asset as its Beneficiary. The individual named in the designation would become the owner of the account or asset upon your death. Essentially, synonymous with a POD (Payable-on-Death Designee).
A legal entity created by one party (the Settlor), which gives property to another party (the Trustee) to hold for the benefit of a third party (the Beneficiary). These parties are not always separate individuals or entities. For example, in the case of a Revocable Living Trust, the Settlor, initial Trustee, and initial Beneficiary are typically the same individual (or individuals, in the case of a married couple).
An individual or entity that holds property under a Trust agreement and manages it for the benefit of a Beneficiary. The Trustee has a fiduciary relationship with the Beneficiary, wherein they have a legal duty to act in the Beneficiary’s best interest and within any instructions provided by the Settlor in the Trust agreement.
A legal instrument designed to distribute the Testator's property upon their death. Additionally, a Will can appoint Guardians for minor children and express wishes regarding handling final remains. A Will must go through Probate Administration upon the Testator's death. A Pour-over Will can be used with a Trust to avoid Probate Administration.