Estate planning can be a tricky matter. If it wasn’t difficult enough to make decisions regarding the end of your life and your estate beyond your lifetime, you are also expected to learn and understand a slew of new words and phrases. What are the main phrases you must know to be able to plan and understand your estate? Here’s our breakdown:
Beneficiary: A beneficiary is someone who receives an inheritance through a will. Beneficiaries can be designated on certain financial assets, such as retirement accounts and life insurance policies. These designated beneficiaries will supercede the will.
Bequest: A bequest is a provision in a will that leaves property or assets to someone specific.
Codicil: A codicil can be added to a will if you wish to make a change or addition to the original document. This allows the original document to stay in place and remain valid with a few additions or changes to terms. Any codicils attached to a will must also go through the same formal process of execution as a will does.
Custodian: A custodian comes into play when assets are left to a minor. A custodian manages these assets until the time the minor is legally of age.
Executor: The executor is the person you select to be in charge of administering your estate and distributing the assets in your estate in accordance with your will after you pass. This person should be highly trusted and should be aware of your wishes prior to you passing. It is never a good idea to surprise someone with executor status.
Guardian: If you have minor children when you pass on, your will can specify a person that you nominate to look after your minor children. Barring exigent circumstances, this is the person who will be the court’s first choice to legally responsible for their care after your death.
Heir: Each state has laws determining how property is divided if you die without a will. Those named by this statute are your heirs. Your spouse and children are the first in line; other relatives are then listed.
Intestate: A person who dies without a will is considered intestate. It is at this point that the state will decide who your heirs are and how your estate is divided amongst them.
Probate: Probate is the legal process through which the terms of your will are approved. This process includes court examination, approval and enactment. It can take several months to years and will incur court fees and other legal costs.
Residuary Estate: Your residual estate is comprised of the assets left after your specific bequests are handled. Any items which are leftover become part of your residuary estate and the last will dictates who received this.
Testator: The testator is the person making the will and whose wishes will be recorded in the will.
Trustee: The trustee is the person in charge of administering the trust and managing its assets. In most cases, while a person is alive they name themselves as the trustee and have a successor trustee in place to step in, manage and distribute the trust after their death.
Planning for your estate is an important and complicated process. By knowing a few key terms you can better arm yourself and your estate against improper estate planning.
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