The process of creating a plan for the orderly administration and distribution of a person’s property after death. Proper estate planning allows a person to minimize taxes, make necessary arrangements for dependents and beneficiaries and distribute wealth and assets according to his or her wishes.
Estate
All the assets owned by a person at the time of his or her death. An estate includes such items as funds, real estate, investments, life insurance and other valuables.
Effective tax rate
The average, or actual, amount that a taxpayer pays on income. The effective tax rate takes all forms of taxes into account. It is calculated by dividing total tax paid by taxable income.