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What Legal Terms in Estate Planning do Non-Lawyers Need to Know?

Estate Planning Terms for Non-lawyers
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For most people, entering the realm of estate planning can feel a bit like traveling as a tourist into another culture. Because the language itself is unfamiliar, asking a question can result in an answer that is equally confusing.

Having a working knowledge of the terms used in estate planning is the first step in working successfully with an estate planning attorney, says a recent article, “Learn lingo of estate planning to help ensure best outcome” from The News-Enterprise. Some of those keywords:

Principal—the individual on whose behalf documents are prepared, and

Fiduciary—a person who signs many of the documents and is responsible for making decisions in the best interest of the principal and estate.

In estate planning and business, the fiduciary is the person or business who must act responsibly and in good faith towards the person and their property. You’ll see this term in almost every estate planning or financial document.

Within a last will and testament, there are more: beneficiary, conservator, executor, grantor, guardian, testator, and trustee are some of the more commonly used terms for the roles people take.

The testator is the principal, who signs the will and on whose behalf the will was drafted.

Beneficiaries are individuals who receive property from the estate after death. Contingent beneficiaries are “back-up” beneficiaries in case the beneficiaries are unable to receive the inheritance. The beneficiaries are listed “or to descendants, per stirpes in most wills.” This designation means if the beneficiary dies before the testator, the beneficiary’s children receive the original beneficiary’s share.

In most cases, specific distributions are made first, where a particular asset or amount of money goes to a particular person. This distribution includes charitable donations. After all specific distributions are made, the rest of the estate, referred to as the “residuary estate,” is distributed. The residuary includes everything else in the probate estate.

The administrator,  executor, or personal representative is the fiduciary charged with gathering assets, paying bills, and distributing to beneficiaries. The executor or personal representative is the term used when there is a will. If there is no will, the person in the role is referred to as the administrator and may be appointed by the court.

If a beneficiary cannot take the inheritance because they are a minor or incapacitated, the court will appoint a conservator to act as fiduciary on behalf of the beneficiary.

A guardian is a person who takes care of the beneficiary or minor children and is named in the will. If there is no guardian named in the will, or if there is no will, a court will appoint a person to be the guardian. Judges do not always select family members to serve as guardians, so there should always be a secondary guardian if the first cannot perform. If the first guardian does not wish to serve or cannot, naming a secondary guardian is better than a child being sent to foster care.

Finally, the trustee is the person in charge of a trust. The person who creates the trust is the grantor or settlor. It’s important to note the executor has no control or input over the trust. Only the trustee or successor trustee may make distributions, and they are the trust’s fiduciary.

Getting comfortable with estate planning terms will simplify the process and help you understand the different roles and responsibilities involved.

Reference: The News-Enterprise (Jan. 18, 2022) “Learn lingo of estate planning to help ensure best outcome.”