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What Exactly is an Estate?

What is an Estate? It sounds like a relatively easy question. At least in my mind it does. But the answer is a bit more complicated. An Estate can mean a lot of different things. People often think that their Estate is all of the assets they own. And that is one appropriate use of the word “estate”.



Probate Estate

In the legal field, another meaning of the work “Estate” could be Probate Estate. When we are dealing with assets that pass under a Will, or assets that pass by Intestate Succession, where there is no will, we would call that a Probate Estate. These assets have to go through the Probate process, which is essentially just a Court process for transferring assets to the next generation.

Trust Estate

Another meaning of “Estate” could be a Trust Estate. A Trust Estate is all of the assets that are inside of a Trust and that will pass down to the Trust Beneficiaries.

The IRS applies a different meaning to the word Estate. The IRS will want to know the decedent’s “gross estate” if their Estate is subject to Estate Tax. And when the IRS talks about Estate, they want to know the value of all property owned. They don’t care whether the assets are in a Trust or a Will. They look at ALL assets to determine the amount of Estate Tax.

So the word “Estate” is a little tricky, because it can be used in several different contexts.  But, generally speaking, it refers to the group of assets that apply to the situation, whether it be Probate, a Trust, Taxes, or anything else.