Understanding estate planning terminology is the first step towards having great estate planning in place. We know that what can be a little overwhelming sometimes is the foreign estate planning terminology that’s thrown about: what does it all mean? By reading through this list you’ll soon see that it needn’t be so scary.
So – what is estate planning? The umbrella phrase in estate planning terminology is estate planning. It’s a way of passing on your estate (all of your assets and valued items) to the people you want in the most financially efficient and tax effective way possible. It’s a way of formalising what you’d like to happen when you’re at the end of your life. Estate planning helps protect your family in the event that something bad happens to you in the short term, but also recognises the inevitability of death and helps you to prepare for that.
Estate Planning Terminology
A is for. . .
Advance Health Directive – Sometimes also called an ‘Advance Health Care Directive’, ‘Advance Care Directive’ or ‘Living Will’. If you lose mental capacity, need medical treatment and can’t communicate about it, an Advance Health Directive, completed and signed in the presence of your doctor, solves this problem. It is your voice about what you’d like to happen to you medically when you can’t speak due to an injury or illness. Typically, this document is important if you suffered a head injury, had a stroke or developed an illness like dementia.
Beneﬁciary – A person for whose beneﬁt an estate plan is created. Beneficiaries are the people who ‘benefit’ from your estate plan and are named in your will or receive part of your estate through intestacy laws if you don’t have a will. The law imposes a moral obligation upon the person making the will that you provide for your financial dependents from your estate, so it is wise to include them if you’d like to avoid a fight over your estate.
Bequest – This is the process of making a gift through a will.
Executor – (If female, “Executrix”) – The executor is responsible for administering your estate after your death. It is an important job that requires a variety of skills. Some of the tasks include: locating your will, finding the beneficiaries named in your will and collecting, looking after and sale of your assets as well as the paying of debts. An executor who fails to fulfill their obligations can be held personally liable for their mistakes, so make sure you choose someone who is trustworthy and will seek advice about how to fulfill those obligations.
Fiduciary – Person having the legal duty to act primarily for another’s benefit. Usually related to a trust.
Grant of Probate – A grant is a Supreme Court document that recognises someone’s authority to deal with the estate of a person who has passed away. Probate is often needed before the executor of a deceased estate can take control of the estate’s assets (administer the estate). The court will only issue the grant once it is satisfied that the will is the last will of the person who has died.
Guardian – The person who has the legal duty to care for an minor child and/or manage the child’s property. Guardians are named in your will. You can also name a guardian for any adult children who are unable to make decisions regarding their living arrangements and medical care.
Heir – A person who inherits property and assets.
Inheritance Tax – There is currently no inheritance tax in Australia, but many other countries do. Assets acquired from an estate by a beneficiary may be subject to Capital Gains Tax if the asset is sold.
Intestate – When a person dies without leaving a valid will or trust. The rules of intestacy apply when there is no valid will. These are rules set by the government and give little flexibility.
Issue – All lineal descendants of a person (e.g., children, grandchildren, great-grandchildren, etc.). You’ll most commonly come across this word when looking at the rules of intestacy in your state of writing your will.
Joint Tenancy – A co-ownership of property by two or more parties. When one party dies, his or her interest passes to the other co-owner. The property is not an asset that you can make other arrangements for in the will.
Power of Attorney – A written document in which a person (the principal) designates another person (the agent) to manage the principal’s ﬁnancial affairs while the principal is living. In different states of Australia there are different terms for the types of power of attorney. In Queensland there is a general power of attorney (for when you are of sound mind but you need someone to make decisions on your behalf for a specific period of event) and an enduring power of attorney. An enduring power of attorney appoints someone to make financial and/or personal decisions on your behalf.
Probate – Probate is the Supreme Court of Queensland’s official recognition of a will as legally valid. (See Grant of Probate)
Testator – (If female, “Testatrix”) – A person who makes a will. Also known as a will maker.
Testamentary Discretionary Trust – A testamentary discretionary trust is a type of trust created under a will, comes into existence only upon the administration of the deceased estate and can offer tax minimisation, asset protection and flexibility.
Trustee – The person or institution that is responsible for managing and distributing money and other property held by a trust.
Trustor – A person who establishes a trust.
Will – A written legal document that says what you would like to happen with your money, belongings and other assets (your estate) when you pass away.
As you can see, estate planning includes much more than just writing a will. It’s a complex area of the law and you need to seek specialist legal advice, especially if you have complex circumstances.
Understanding the estate planning terminology is just the first step. At Estate Battles we can help you to navigate your estate planning. Every person has unique circumstances – estate planning is not one-size-fits-all. Our estate lawyers can help you to figure out the best plan for you. Please contact us today. We offer a free, 10-minute phone consultation.