If some of the language in your Will or Trust seems foreign to you, you are not alone. Here’s a rundown of some commonly used terms, and a description of what they mean:
Testator (male) or Testatrix (female): This is you, if this is your Will.
Settlor or Grantor: This is you, if this is your Trust.
Personal Representative or Executor: This is the person that’s been selected by the deceased in the deceased’s Will to oversee the winding up of the deceased’s affairs. The Personal Representative pays taxes and creditor claims on behalf of the estate, clears title to real estate or other assets, inventories the estate’s assets and eventually distributes the assets according to the terms of the deceased’s Will.
Trustee: This is the person or trust company that the Settlor has selected to hold legal title to trust property and to manage the property according to the Settlor’s instructions and applicable trust law. In the case of a Living Trust, the Settlor may be the trustee of his or her own trust while the Settlor is alive and mentally competent.
Intestacy or Intestate: Intestate means that the deceased died without a Will.
Beneficiary: This is a broad term for a person who receives property from the deceased whether the property is real property or personal property.
Issue: This term refers to descendants of the deceased regardless of whether they are children, grandchildren, great-grandchildren, etc.
Bequests: These are gifts of personal property under a Will.
Tangible Personal Property: This is personal property other than money, coin collections and property used in a trade or business.
Real Property: Real estate transfers are governed by the law of the state where the property is located.
Residue: This is the property in the estate that is left over after any special gifts listed in the Will are distributed. Typically, the residue is the largest part of an estate.
Lapse: A lapse occurs when a gift in a Will fails because the intended beneficiary died before the Testator or Testatrix.
Per stirpes: The estate is divided such that each branch of the family receives an equal share.
Surviving: Under Minnesota law, a potential heir is considered a survivor of the deceased if he or she lives at least 120 hours beyond the death of the deceased. If not, the potential heir is deemed to have died prior to the death of the deceased for purposes of estate administration.
Codicil: A Codicil is an amendment to a Will.
Amendment or Restatement of Trust: An amendment to a portion of a Trust is referred to as an Amendment, whereas an amendment that rewrites the entire Trust is called a Restatement.
Testamentary Trust: A Testamentary Trust is embedded inside a Will, and does not come into existence until the Testator/Testatrix dies.
Living Trust or Intervivos Trust: This trust is created during the Settlor’s lifetime.
Probate: This is the official court process of administering the estate of the deceased.
Non-probate assets: Non-probate assets are assets that are not impacted by the language in the deceased’s Will and are not required to go through probate. Non-probate assets include assets held in a Living Trust, payable-on-death (P.O.D.) assets; transfer-on-death (T.O.D.) assets; property held in joint tenancy, and assets such as life insurance and retirement assets that have beneficiary designations (unless “estate” is listed as the beneficiary).
Probate assets: Assets that don’t qualify as non-probate assets are considered probate assets. In Minnesota, probate is triggered if the deceased owned real estate in his or her name alone, or if the deceased held probate assets of $50,000 or more in his or her name alone.
Guardian: A Guardian is the person nominated in the Will and/or appointed by the Court to be the protector of a minor child. Guardians do not have any authority over the child’s property, however.
Conservator: A conservator is the person appointed by the Court to manage the assets of a protected person of any age, including a child’s assets until he or she reaches age 18.
Custodian: When appointed under the Minnesota Uniform Transfer to Minors’ Act, the custodian may manage money for a child until he or she reaches age 21.
Fiduciary: Fiduciaries, for example, include Personal Representatives, Guardians, Conservators and Trustees.
Marital Trust (also known as Marital Deduction, Trust A, Marital Share): The Marital Trust, a sub-trust, is the portion of a Trust that is for the benefit of the surviving spouse.
Family Trust (also known as Bypass Trust, Credit Trust, Credit Shelter Trust, B Trust): The Family Trust, a sub-trust, is the portion of a Trust that is set aside for ultimate distribution to the deceased’s children even though the surviving spouse has access to the income from these assets and some access to the principal during the surviving spouse’s lifetime. The Family Trust is often used to avoid inclusion of these assets in the surviving spouse’s taxable estate.
Estate Tax: This is a tax on the Settlor’s estate.
Inheritance Tax: This is a tax paid by the beneficiary who receives property from the estate. Minnesota has an estate tax, but not an inheritance tax.
Disclaimer: This is a person’s refusal to take property that he or she was entitled to inherit under the deceased’s Will or Trust.
Power of Appointment: This power gives beneficiaries the ability to choose who next will take the beneficial interest in the property subject to the power. When given, this power provides flexibility to deal with changes in the law, changes in the family, changes in the economy and changes in the ability of children to manage property.
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Disclaimer: This Blog is for informational purposes only and is not to be construed as legal advice. If you have questions, please seek the advice of an attorney licensed to practice law in the state where you live. Wittenburg Law does not expressly or implicitly warrant the accuracy or reliability of any of the Blog’s contents. An attorney-client relationship is not formed by reading this Blog. If you are interested in Wittenburg Law’s representation of you, you must contact Wittenburg Law for a determination of whether your matter is one for which Wittenburg Law is willing and able to accept representation of you.