The Language of Estate Planning: What You Need to Know

Estate planning can feel daunting. Not only is it a sensitive subject, but the legal and financial terminology can make it even more complex. To help simplify the conversation, here are answers to some of the most common questions about estate planning documents, trusts, and taxes.

Estate Planning Documents 

What is a Financial Power of Attorney (FPOA)? 
A legal document that authorizes an agent to manage someone’s financial affairs. This includes paying bills, writing checks, making deposits, buying or selling assets, and even signing tax returns on another person’s behalf. 

What is a Health Care Power of Attorney (HCPOA)? 
A document that allows a designated agent to make health care decisions if you become incompetent or incapacitated. 

What is a Living Will? 
A legal document that outlines the end-of-life medical treatments you want—or do not want—if you are terminally ill or permanently unconscious with no chance of survival without life support. 

What is a HIPAA Authorization? 
A document that permits health care entities to share your protected health information with a person you specify. 

What is an Organ Donor Registry? 
A form that lets you formally state your decision about organ donation. 

What is a Last Will & Testament? 
A legal document that directs how your property will be distributed after your death. It also allows you to name an executor (to manage your estate) and a guardian (for the care of your minor children). 

Trusts 

What is a Trust? 
A legal arrangement that lets you manage and distribute assets during your lifetime and after your death. 

What is a Revocable Trust? 
Created by an individual or couple, it takes effect immediately and can be changed during the grantor’s lifetime. Often used to avoid probate, plan for taxes, manage assets during incapacity, and distribute assets after death. 

What is an Irrevocable Trust? 
Once created, it cannot be altered. Commonly used to remove property from a taxable estate and reduce estate taxes. 

What is an Irrevocable Life Insurance Trust? 
A trust funded with a life insurance policy, designed to keep life insurance proceeds out of the taxable estate. 

What is a Supplemental or Special Needs Trust? 
A trust that provides financial support for a disabled beneficiary without affecting their eligibility for government benefits. 

What is a Grantor Retained Annuity Trust (GRAT)? 
An irrevocable trust where the grantor receives a fixed annuity for a set term, with the remainder passing to beneficiaries. 

What is a Spousal Lifetime Access Trust (SLAT)? 
An irrevocable trust that benefits a spouse or children while removing assets from the grantor’s taxable estate. 

Types of Estate-Related Taxes 

What is the Estate Tax? 
A tax on the transfer of property at death, imposed by the federal government and some states. The estate—not the heirs—pays the tax. Each person has an exemption of $13.99 million in 2025 (rising to $15 million in 2026). Ohio does not have an estate tax. 

What is the Generation Skipping Tax (GST)? 
A tax on transfers made to individuals two or more generations below the transferor (e.g., grandchildren). The exemption matches the estate tax exemption: $13.99 million in 2025 and $15 million in 2026. 

What is the Gift Tax?
A tax on gifts made during life. Each person can give up to $19,000 annually to any one recipient without using their lifetime exemption. The lifetime exemption matches the estate tax exemption.

What is the Inheritance Tax? 
A tax imposed on the amount received by beneficiaries. Unlike the estate tax, this is paid by the heir. Kentucky, for example, has an inheritance tax. 

Have more questions about estate planning documents, trusts, or estate taxes? We’re here to help.