Essential Estate Planning Terms
Jargon & When to Use It
Whenever you’re learning something new, it’s a good idea to learn the jargon used in that area or field of study. For those unfamiliar with the term “jargon,” here is a definition. According to Merriam-Webster, as a noun, jargon means: 1. the technical terminology or characteristic idiom of a special activity or group and 2. obscure and often pretentious language marked by circumlocutions and long words. For those of us in the legal industry, we’re lucky enough to have both apply simultaneously!
There isn’t necessarily anything wrong with jargon. For example, if there’s a common event that’s difficult to explain succinctly, industry insiders can save time and promote efficiency by using jargon to describe that common event instead of having to explain it every time. If you aren’t an industry insider however, jargon and your professional’s use of jargon can be confusing and off-putting. So, as part of our mission to demystify estate planning, we’ve proved a list of commonly used terms related to trusts, wills, & estate planning in general and some definitions to go along with them.
General Estate Planning Terms
Decedent: An individual that died.
Descendants: An individual’s offspring, including children, grandchildren, and other people who by blood or because of legal adoption share the Decedent as an ancestor.
Disclaimer: The refusal of a Beneficiary to accept a gift from a Trust or Will.
Estate: All property, both real and personal, owned or controlled by someone.
Income: The earnings of (e.g. rent, interest, and cash dividends) of the Principal.
Intangible Personal Property: Property that has no physical substance but represents a store of value, like cash, stock certificates, bonds, and insurance policies.
Interest: The right to receive Principal or its Income as provided in the Trust Instrument or Will.
Issue: See “Descendants.”
Life Estate: An Interest in property owned by a Life Tenant to use the property for his or her lifetime, after which title passes to the Remainderman.
Life Tenant: An individual who receives Income or Principal from a Trust or similar arrangement for the duration of his or her lifetime.
Principal: The property (such as money, stock, and real estate) acquired by a Trust to be used for the benefit of Beneficiaries as described in the Trust Instrument.
Real Property: Physical property that can touched but cannot be moved, like land and items permanently attached to land, like buildings.
Remainder Interest: The interest in property owned by the Remainderman, which does not allow for possession of the property until the Life Tenant’s Life Estate ends.
Remainderman: An individual named in a deed, trust instrument, will, or other legal document as being the owner of the property at the end of the Life Tenant’s life.
Tangible Personal Property: Physical property that can be touched and moved, like, furniture, jewelry, and automobiles.
Will & Guardianship Terms
Administration: The process during which the Personal Representative collects the decedent’s assets and makes an Inventory, pays all debts and claims, and distributes the Residue according to the Will or the Intestacy Statute.
Codicil: A document that changes a Will without rewriting it.
Guardian: An individual or entity appointed by a court to act on behalf of a Ward regarding their person or property.
Heir: An individual entitled to all or part of an asset or property Interest if there is no valid will.
In Terrorem Clause: An unenforceable provision in a Will that threatens to disinherit anyone who sues to receive more from the Estate or invalidate the Will.
Incapacity: the inability of a person to manage at least some of their property or to meet their basic health and safety needs.
Intestacy Statute: the state’s laws for the distribution of an Intestate Decedent’s Estate.
Intestate: An adjective describing a Decedent without a valid Will.
Inventory: A list of a Decedent’s assets that is filed with the court.
Letters of Administration: The court-granted authority allowing the Personal Representative to act on behalf of the Decedent’s Estate.
Personal Representative: The court-appointed Administrator of a Decedent’s Estate.
Petition:A request to the court to be appointed the Guardian of a Ward.
Probate: The court-supervised process of validating a Will and distributing property under the terms of the Will. Or, if there is no valid Will, then as required by the state’s Intestacy Statute.
Residuary Estate: See “Residue.”
Residue: The property remaining in a Decedent’s Estate after Administration.
Testamentary: Relating to a Will or other document effective at death.
Testator: A man who signs a Will.
Testatrix: A woman who signs a Will.
Ward: A minor or incapacitated person for whom a Guardian has been appointed to act on their behalf.
Will: A written document specifying who should inherit the Testator’s assets and naming a Personal Representative to Administer the Estate and distribute those assets.
Trust Terms
Trust Roles & Documents
These are roles and documents commonly used in Trusts.
Beneficiary: An individual or entity that will receive an Interest in the Income or Property of an Estate or Trust.
Corpus: See “Principal.”
Declaration of Trust: See “Trust Instrument.”
Grantor: A person or Testator, who creates, or contributes Principal to, a Trust.
Pour-Over Will: A Will used by a Grantor to transfer assets to their Revocable Living Trust that were not transferred to the Revocable Living Trust during the Grantor’s lifetime.
Res: See “Principal.”
Settlor: See “Grantor.”
Trust Agreement: See “Trust Instrument.”
Trust Instrument: The document the Grantor executes, which details how the Trustee must manage and distribute the Principal and Income to the Beneficiary.
Trust: An arrangement whereby Grantor contributes the Principal, which is legally owned and managed by a Trustee for the benefit of a Beneficiary, who is the equitable owner of the property.
Trustee: The individual or entity designated to hold and administer the Principal. The term usually includes Initial and Successor Trustees. A Trustee has the duty to act in the best interests of the Trust and its Beneficiaries and in accordance with the terms of the Trust Instrument.
Trustmaker: See “Grantor.”
Trustor: See “Grantor.”
Trust Descriptors
When people talk about Trusts, they frequently use adjectives before the word 'trust' to describe a certain aspect of it. Here’s a list of common ones:
Complex: A Non-Grantor Trust that does not meet the requirements of a Simple Trust.
Discretionary: A Trust in which the Trustee has full discretion as to when, how, and amount of the distributions to the Beneficiary.
Grantor: A Trust in which the Grantor retains control over the Trust or Principal. As a result, tax authorities disregard the Trust and instead the Grantor is taxed and pays taxes at their individual rate on the Trust’s Income.
Intervivos: See “Living.”
Irrevocable A Trust that cannot be revoked, terminated, or amended by the Grantor.
Living: A trust created during the Grantor’s lifetime.
Mandatory: A Trust in which the Trustee must pay Income or Principal to the Beneficiary at certain times.
Non-Grantor: A Trust in which the Grantor does not retain control over the Trust or Principal. As a result, tax authorities consider it separate from the Grantor and tax it as a separate entity and at the trust tax rate.
Revocable: A Trust the Grantor can revoke, terminate, or amend during their lifetime.
Simple: A Non-Grantor Trust that does not distribute it Principal, distributes all its Income yearly, and does not make charitable contributions.
Spendthrift: A Trust in which there are restrictions or prohibitions on the transfer Beneficiary’s Interest, whether the transfers be voluntarily or involuntarily.
Testamentary: A Trust created in a Decedent’s Will to come into effect after Administration of the Decedent’s Estate.
Let TealAcre Lead the Way
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