The humor behind the classic comedy routine, Who’s on first?, comes from the fact that the speakers are using identical terms to mean different things. Yet they both pretend not to recognize the problem. The language of estate planning can raise problems for the uninitiated, and the problems may not be funny at all. The vocabulary of estate planning is very precise, and a seemingly innocuous slip of the tongue can make a world of difference.
A good example is the term “estate.” What does it mean? Does it mean land, as in “real estate,” or what passes by way of my Will, as in “probate estate,” or does it mean what is subjected to “estate tax” after I am gone? It can mean a wide variety of things, depending on the context and the adjectives that surround it.
Because the word “estate” is central to estate planning, here is a brief glossary of the most common uses of the term.
An “estate” can be land, or just an interest in land. An example of an interest in land is a life estate. A life estate gives the owner the right to use the land for the life tenant’s lifetime, but then the estate terminates and the land goes to the remaindermen (a person who inherits or is entitled to inherit property upon the termination of the former estate owner).
Probate estate is whatever you own at death that will pass by way of your Last Will and Testament. It might include such things as land, bank accounts, cars and jewelry.
But wait! How come an estate tax return covers not only a person’s probate estate, but also things that have nothing to do with the persaon’s probate estate — like life insurance policies, retirement accounts, jointly-owned assets and trust assets? That is because your estate for estate tax purposes includes just about everything you own or control at the moment of your death. However, with the right estate planning, you can have a lot of control over assets that are not included in your estate for estate tax purposes.
For example, assets (sometimes called a trust estate) that you own and control as the trustee of a trust may or may not be part of your taxable estate, just depending on the words in the trust agreement that say what you can do with the trust estate. Choosing the right words is critical.
You can see how proper estate planning requires careful attention to detail and precise use of language. Helpful legal information at www.hawaiilaw.tv. You also can find elder care information by clicking here.
SCOTT MAKUAKANE, Attorney at Law of Est8Planning Counsel LLLC, specializing in estate planning and trust law.
Honolulu: (808) 587-8227 | Maui: (808) 891-8881 | Email: firstname.lastname@example.org