If you’re a Maui resident who will be planning your estate soon, what are some of the terms you’re likely to encounter, and generally what do they mean? In this article, we’ll take a look at some of the most commonly used terms. Please keep in mind that the information below is only a very general discussion of each concept, and is not intended (and should not be considered) as legal advice.
“Estate” In its simplest form, this means and refers to the assets or other things that you own. Like most other words, the meaning depends upon the context in which the term is used. Therefore, for example, “probate estate” generally means the assets owned by a person who died and which are subject to Hawaii’s probate laws.
“Estate planning” The process of deciding upon who will receive what one owns, and when and how that will happen. It also involves naming the person(s) who will implement instructions for the distribution of assets, attend to administrative concerns, and for those with young children, the selection of a “guardian” to oversee their upbringing until adulthood.
“Fair market value” In very general terms, the price at which an asset will be sold on an open market, where buyer and seller have full knowledge and neither is obligated to buy or sell. The meaning of this term is largely dependent upon and defined by the context in which it is used. Therefore, for example, while this term is usually encountered at the time of a person’s death, it can also be relevant at the time of a gift made during life.
“Probate” The Hawaii laws which govern the distribution of property and the appointment of “personal representatives” (and where necessary, “guardians”) if a person dies without any planning whatsoever, or with only a limited amount of planning.
“Personal representative” The person (or sometimes an entity), also known as the “executor,” who oversees and implements the Probate Proceeding if needed upon death.
“Guardian” In very general terms, the person appointed to oversee the upbringing of children of a deceased or incapacitated person who are under the age of 18 years. In Hawaii, a “guardian” is also known as a “conservator.”
“Last Will and Testament” The document used to direct the distribution of assets which are subject to probate, name a personal representative, and where necessary appoint a guardian.
“Trust” In its simplest form, an entity established when a “Grantor” (the person who creates the Trust) conveys property to a “Trustee” who is named in a “Trust Agreement” to distribute assets pursuant to the Grantor’s instructions to one or more “Beneficiaries.” A “grantor” is sometimes referred to as a “Settlor.”
“Trustee” The person (or sometimes a Trust Company) named in the Trust Agreement to oversee all administrative concerns and to implement the Grantor’s instructions regarding the distribution of property.
“Transfer on Death Deed” The document used to name a beneficiary for Hawaii real estate upon death of the owner, and where done properly in a manner which avoids probate.
“Transfer Taxes” Also known as “inheritance taxes,” this term generally refers to the federal and state taxes (or in certain cases reporting requirements) which are imposed upon gifts made during life or upon death. Perhaps the best known are the “gift tax” which generally applies to gifts made during life, and the “estate tax,” which applies to property given or otherwise passing at death. A third, known as the “generation skipping tax,” applies to gifts made to donees who are two or more generations away from the donor.
These are some, but by no means all of the terms and concepts which are typically encountered in the estate planning process. Estate planning is best undertaken with the assistance of an attorney who understands what these and other terms mean, how and when they are relevant, and how they all work together.
Note: The information in this article and throughout this website is not intended, and should not under any circumstances be interpreted, as legal advice. This article is intended only as a general discussion, and should not be read or viewed as a comprehensive analysis of all relevant aspects, of each topic discussed. The reader is encouraged to consult with legal counsel for assistance with any aspect of the estate planning process, and any other matter of a legal nature.