(The News-Enterprise) - 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. Understanding some basic terminology is the first step to preparing a tailored estate plan.
The most fundamental terms necessary to all estate planning are “principal” and “fiduciary.” The principal is the individual on whose behalf the document is being created. This is usually the person who signs the document and is always the person giving some kind of power to another person.
A fiduciary is a person (or business) which has a legal responsibility to act for another person. The fiduciary must act responsibly and in good faith toward the other person and his or her property. Fiduciary designations and specific duties are included in nearly every estate planning document.
Within a last will and testament, the most common terms for people listed are those of “testator,” “beneficiary,” “executor,” “guardian,” “conservator,” and “trustee.” A few other common terms that do not reference people are “specific distributions,” “residuary estate,” “contingent beneficiary” and “per stirpes.”
The testator (or sometimes rendered as testatrix for females) is the principal, the person creating and signing the will.
Beneficiaries are those who will receive any property from the estate after death and contingent beneficiaries are the backup beneficiaries in case the intended beneficiaries are unable to receive the inheritance.
In most wills, beneficiaries are listed “or to his descendants, per stirpes,” which means that if the beneficiary dies before the testator, the beneficiary’s children will receive his designated share.
In most wills, “specific distributions” are made first. These are specific pieces of property or dollar amounts designated for a specific person or class of people (an example of a class would be “to all of my grandchildren”). Charitable contributions commonly are included within specific distributions.
After all specifically named items are distributed, the rest of the probate estate is called the “residuary” estate. The residuary estate would include everything else that must pass through the will and is divided by percentages to beneficiaries.
The “administrator” or the “executor” is the fiduciary who handles the work of actually gathering the property, paying bills and ultimately handing out property and money to beneficiaries. The administrator and executor are essentially the same role, but an executor is simply the term used for an administrator in a case with a last will and testament. If there is no will, the fiduciary is an administrator.
When a beneficiary is unable to take possession of his inheritance on his own behalf, usually because of age or incapacity, he may need to have a “conservator” appointed. A conservator is a court-appointed fiduciary who is in charge of taking care of the minor or incapacitated beneficiary’s property.
Whereas a conservator takes care of the beneficiary’s property, a “guardian” may be appointed to take care of the beneficiary himself or herself. A guardian generally is named in a will to care for the testator’s minor or disabled children.
Trust lingo is nearly the same as that used within a last will and testament. However, the principal of a trust is the grantor, also known as the settlor, trustor or trustmaker. Instead of an executor, the fiduciary of a trust is a trustee.
Starting down the road of estate planning can feel a bit daunting when the language is unfamiliar. By keeping in mind the primary terms, principals can be equipped to better understand and better prepare their legal estate plans.
By Cynthia Griffin
Jan 18, 2022
Cynthia Griffin is an elder law and estate planning attorney at Burnett and Griffin PLLC in Elizabethtown.
