Estate Planning Glossary

Estate Planning Terms

For more guidance or specific ways to incorporate any of the following planned giving options, talk to your financial management representative or contact the Director of Planned Giving, Greg Weimer.

Charitable Gift Annuity (CGA):

Assets can be donated to a charity to provide an income stream for life, provide an income tax deduction for the year of the gift, and (in the case of appreciated assets such as land and stock) reduce capital gains taxes.

Charitable Remainder Unitrust (CRUT):

The CRUT eliminates capital gains taxes for appreciated assets, removes a portion of the assets from the estate for federal estate tax purposes, and provides an income stream for heirs. An additional benefit is the tax-free growth of the amount remaining in the trust. Actual payments are determined by a selected payout percentage and the value of the assets in the trust.

Charitable Remainder Annuity Trust (CRAT):

The CRAT operates much like the CRUT above with one exception. The payout of a CRAT is sum certain, meaning that the payments are the same each year for a certain number of years or for life.

Do Not Resuscitate Declaration:

This is a state-specific document that declares your wishes if you experience cardiac or pulmonary failure when not in a hospital or health facility.

Family Limited Partnership (FLP):

This arrangement provides estate planning advantages plus asset protection. Current income taxes are often reduced while assets are protected in the event of litigation. Entrepreneurs, professionals, farmers, and business owners often benefit from the FLP.

Irrevocable Life Insurance Trust (ILIT):

This trust can be a means of transferring large sums of wealth to heirs. Generally, if life insurance is owned by the insured, the proceeds are included in his or her estate and are subject to estate tax. The ILIT can own life insurance and thus be a means of avoiding these estate taxes.

Life Insurance:

Life insurance can perform three important functions in an estate plan – (1) provide financial protection for dependents, (2) provide estate liquidity, and (3) be a tool in the establishment of an Irrevocable Life Insurance Trust (ILIT) which can reduce estate taxes and transfer wealth to heirs.

Living Will:

This allows you to express your desires concerning life-sustaining procedures. You may specify that only those procedures which will keep you comfortable will be administered.

Power of Attorney:

This is a document that authorizes someone to act on behalf of another individual. The individual granting the authority is the principal or the grantor. The authorized person is called the agent or an attorney-in-fact. Special or limited power of attorney is for one specified act or type of acts. A general power of attorney is broader in scope, but that scope is usually defined. The two described above end when the grantor dies or becomes incapacitated. A durable power of attorney remains in effect even if the grantor becomes incapacitated. This is also commonly called a “Health Care Power of Attorney” when it empowers the agent to make health care decisions for a grantor.

Revocable Living Trust (RLT):

The RLT is a trust set up during a person’s lifetime into which selected assets are transferred. The individual continues to manage and control the assets, but the trust document also contains language concerning the distribution of assets at death (just like a will). The RLT has certain advantages over a will – (1) probate can be avoided, (2) it is not subject to public record, and (3) it is more difficult to contest than a will.

Will:

The most basic part of any estate plan, the will is a legal document declaring a person’s wishes regarding the distribution of his or her estate after death. The will can also name an executor (or personal representative), appoint legal guardians for minor children, and state a person’s final Christian testimony.

Estate planning questions?

Email Greg Weimer or call toll-free 866-448-3472 ext. 6124.