Key Estate Planning Terminology

Key Estate Planning Terminology
What is a spendthrift trust? What does “estate in severalty” really mean? For anyone interested in estate planning, it is particularly advantageous to acquire at least a rudimentary knowledge of the most common phrases, terms and concepts.

Codicil: A legal document that is a supplement to an existing will. It can modify, revoke, subtract or add to provisions in the original will. The codicil refers to the original will, is also dated and attested.

Decedent: A deceased individual.

Executor Or Executrix: The term “executor” has more or less been replaced by the gender neutral term “personal representative.” The personal representative administers the decedent’s estate (e.g., paying the estate’s debts and distributing property to the legal beneficiaries in accordance to the will). The personal representative is approved by the probate court.

Estate In Severalty: The estate is solely owned by an individual; not shared or connected with any other person as in joint tenancy.

Fiduciary: An individual or legal entity such as a bank that manages the property and financial affairs for the beneficiary and not for the benefit of the fiduciary! The term fiduciary covers a wide range of situations. For example, a fiduciary can be a guardian for minor children, a personal representative or a trustee.

Grantor: An individual who establishes or settles a trust or makes a grant; can also be referred to as a donor, trustor or settlor.

Halographic Will: A will that is completely hand-written by the testator or testatrix. It must be signed and dated in order for it to be valid. Some states do not recognize halographic wills.

Inter Vivos Gift: A gift that is given during the lifetime of the grantor or donor.

Inter Vivos Trust: This is also often termed as a living trust. An inter vivos trust can be revocable or irrevocable and it is created during the lifetime of a grantor who can also be the beneficiary. A revocable trust is generally established with the primary objectives to avoid probate and safeguard an individual’s privacy. The pivotal advantage of an revocable inter vivos trust is the flexibility. A person can change the revocable inter vivos trust as he or she deems fit (e.g., to accommodate changing circumstances or anticipate future needs such as mental incompetence should the individual at some point become unable to care for himself or herself) or even dissolve the trust. An irrevocable trust cannot be modified or revoked. Some examples of irrevocable trusts are charitable lead trusts, charitable remainder trusts, gift trusts and life insurance trusts.

Intestate: One who dies without a valid will.

Joint Tenancy With Right Of Survivorship: Two or more individuals who own an equal and undivided share in the property with the right of survivorship.

Probate: In brief, a will must undergo the court procedure of probate (the meaning of probate is “to prove”). The legal validity of the will must be established. The court also supervises the legal transfer of the property to the beneficiaries. The personal representative named in the will must be approved by the probate court. The property of the decedent will be identified, collected and distributed by the personal representative in accordance to the will. Some assets such as the proceeds from life insurance contracts, bank accounts and brokerage accounts that the decedent owned in joint tenancy with right of survivorship, property held in tenancy by the entirety and funds in an IRA or other type of retirement plan which name beneficiaries are not subject to probate. Depending on the estate, probate can be a fairly simple matter or a rather time consuming and costly process.

Spendthrift Trust: Broadly speaking, a spendthrift trust is created with the primary objective to secure a fund for the maintenance of a beneficiary (or spendthrift). It also protects the assets of the trust from the spendthrift’s profligate spending or improvidence although in some cases, the person may lack the mental capacity to manage their money. One critical aspect of a spendthrift trust is that it can secure the assets from creditors of the beneficiary. State laws vary regarding spendthrift trusts.

Tenancy By The Entirety: It is a type of joint ownership of property limited to married couples. The property cannot be disposed of without the consent and action of both parties.

Testate Property: Refers to property in the decedent’s will.

Testator: The deceased individual (decedent) who leaves a valid will. The term testatrix applies to a female testator.

For informational purposes. Every attempt is made at completion and accuracy, however, the author makes no claim that the content is free of factual errors.

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