When hearing the word "estate," most people think about a person living in a huge mansion, with rolling hills, having lots of money and living the life of leisure. You don’t have to be wealthy to have an estate.
With regard to estate planning, the definition of an "estate" consists of an individual’s interest in all property owned at the time of death, whether real or personal, tangible or intangible.
Let’s break that definition down piece by piece on what it means.
a. Real property is land and all the things that are attached to it. For example, if you own land with a house on it, that is real property. The things that are dug into or built onto the land is also real property. Your dining room and bedroom set are not real property.
b. Personal property is anything that is moveable and not attached to your real property. If it can be removed from your real property without doing damage, for example, a storage shed, or even a mobile home, it is personal property.
c. A tangible asset is anything that can be touched or felt. An example would be money (currency), buildings, real estate, equipment, inventories, precious stones and vehicles.
d. An intangible asset is difficult to evaluate because it lacks physical substance. You can’t touch it. Intangible assets include copyrights, patents, franchises, goodwill, trade names, trademarks, etc.
Review this example using each of these items to create an estate.
John and Mary
John and Mary Smith had been married ten years. They owned a home in Austin, Texas. Their home was located on two acres with room to have a mobile home on the property. Both John and Mary loved to collect artwork and antiques. John had been employed for the first five years of their marriage, then decided to open his own franchise business. During that time the couple set up different retirement accounts and was able to save their money and invest in various things. They both had life insurance policies, should anything happen to them to protect their family.
By looking at this example, you can see that John and Mary had created an estate for their family that needed to be protected should something happen to them. They worked hard to get to this point in their lives and didn’t want to lose what they had built. They needed to protect their assets.