Wills Key Terms*:
Â
The following is an explanation of commonly used words and phrases
related to estate planning and probate.
Attorney-in-Fact - An individual designated in a power of
attorney to act as the agent of the person who executed the document.
Basic Will - A will that distributes everything to your
spouse, if living, otherwise to your children when they reach the age
of majority.
Beneficiary - A person who receives funds, property, or other
benefits from a will, trust, contract, or insurance policy.
Bond - A special insurance policy that insures against the
Executor stealing or losing money from the estate.
Codicil - An amendment to a will.
Contingent Beneficiary - A beneficiary of estate property who
only has the right to receive estate property upon the occurrence of
an event.
Decedent - A person who has died.
Durable Power of Attorney for Health Care - A written document
in which an individual designates another person to make health care
and health-related decisions in the event that the individual becomes
incapacitated.
Durable Power of Attorney for Property (Financial) - A written
document in which an individual designates another person to make his
or her financial/property and property-related decisions in the event
that the individual becomes incapacitated and is unable to do so.
Estate - An individual's property and assets including real
estate, bank accounts, life insurance policies, stocks, retirement
accounts, and personal property such as automobiles and jewelry.
Estate Tax - A tax that is imposed at a person's death, or
on the transfers of property from their estate to heirs and
beneficiaries. Colorado does not have an estate tax. The federal government imposes taxes on estates over $5+ million.
Executor - A person named in a will who is authorized to
manage the estate of the deceased person. The executor will collect
the property, pay off any debts, and distribute property and assets
according to the terms of the will. (aka "Personal Representative")
Fee Simple
- The entire or whole ownership of property unburdened by
any future interest or any possibility of losing total ownership.
This is the highest form of property ownership. Other forms of
property ownership are life estate, leasehold interest, or tenancy in
common, for example.
Fiduciary - A person or institution that is legally
responsible for the management, investment, and distribution of funds
primarily for the benefit of another (i.e. the trustee identified in
a trust).
Grantor - A person who transfers assets to another, usually
into a trust. Also may be called a trustor or settlor.
Guardian - An individual with the legal authority and
responsibility to care for another, usually a minor child.
Heir - A person who would inherit property under state
intestacy law, where a person dies without a will.
Incapacity - A person's inability to act on his or her own
behalf. A court makes a finding of incapacity.
Intestate - A term used when a person dies without a will.
Issue - All descendents of a particular person. The term
includes children, grandchildren, and other descendents.
Joint Tenancy With Right of Survivorship - A title that is
often placed on co-owned property. At the death of one owner, the
other owner will be legally entitled to sole possession of the
property, regardless of what provisions are made in a will. A husband
and wife often use this form of ownership.Â
Memorandum of Disposition - A separate writing or memorandum
which disposes of tangible personal property upon a person's death.
It is not legally binding, however, the executor is instructed to
distribute tangible personal property according to the memorandum if
one is in existence.
Outside of the Will - Some property passes outside of the
specifications in a will. The beneficiary of such property is
determined by your directions (beneficiary designations) when you
opened the financial account (or acquired the property) and not by
your Last Will & Testament. This may include P.O.D. accounts (see
below), certificates of deposit, bank accounts, retirement accounts,
annuity contracts, life insurance, and property held as joint tenants
with right of survivorship. Beneficiary designations should be
updated on all such assets to reflect the wishes of the owner.
Payable on Death (P.O.D.) - Many financial accounts are
"P.O.D." accounts. This means that the account will go to the
person you designate as the beneficiary on the account records with
the bank, broker, or insurance agent, and not in accordance with your
will. Also called Transfer on Death or "T.O.D." accounts.
Per Capita -
Per capita is another Latin term that means "by the head". The
living members in a class of beneficiaries who are closest in
relationship to the testator (typically children) will receive an
equal share. However, if a member in this class of beneficiaries
predeceases the testator, such member's share will be used to
increase the remaining member's shares in this same class. The
deceased member's share will not pass by representation to their
heirs (children). In other words, in a typical family situation the
children of the deceased parent (who would also be the grandchildren
of the testator) would be disinherited.
Per Capita at
Each Generation- A newer system of distribution known as per
capita at each generation has been adopted by a few states and the
Uniform Probate Code, including Colorado. This approach views the family horizontally and
treats equally those who are equally distant from the testator. The
initial division of shares is made at the level where one or more
descendants are alive. However, the shares of deceased beneficiaries
at that same level are treated as one pot and are dropped down and
divided equally among the representatives on the next generational
level.
Per Stirpes - Per stirpes is a Latin term that technically
means "by the roots or by representation". This approach views
the family vertically. The living members in a class of beneficiaries
who are closest in relationship to the testator (typically children)
will receive an equal share. However, if a member in the class of
beneficiaries who are closest in relationship to the testator
predeceases the testator, such members issue (children; who would
also be grandchildren of the testator) take by representation what
their deceased parent would have taken.
Personal Representative - A person, who, after your death,
collects all your assets, pays all your bills and distributes the
balance as you direct in your will.
Power of Attorney - A written document that gives one person
the legal authority to act on behalf of another person.
Probate - A process whereby a court reviews a will to make
sure that it is authentic, allows others to make legal challenges to
the will, and ensures that the instructions in the will are properly
carried out by the executor.
Self Proving Affidavit - An attachment to a Last Will &
Testament that eliminates the need for the witnesses to a will to be
found and sign a formal document answering several questions when the
will is offered for probate.
Testator -
Someone who makes or has made a Will, or one who dies leaving a
Will.
Trust - A written document providing that property be held by
one (the "trustee") for the benefit of another (the
"beneficiary"). A trust may be created during the grantor's
lifetime or after his or her death.
Trustee - A person named in a trust document who will manage
property owned by the trust, and distribute the trust income or
property according to the terms of the trust document. A trustee may
be an individual or a business.
Will - A document that directs how property shall be
distributed upon a deceased person's death.
* The terms herein are offered to provide some basic understanding
of estate planning legal concepts. However, they are not meant in any
way to constitute legal and/or tax advice.