There is nothing more off-putting than being confronted with complicated legal language when trying to manage your own or your family’s affairs. Wills and trusts are full of specialized legal terms, and they can be confusing to navigate, particularly if you have only just begun your estate planning journey.
However, there are often good reasons why lawyers use the language they do. Those unfamiliar terms which seem like unnecessary ‘jargon’ represent important legal concepts that play a special role in estate planning. The best thing you can do is empower yourself with a basic understanding of these concepts, which can be relatively straightforward to understand once they have been described in simple language.
We’ve compiled a list of the most common terms used in wills and trusts to help get you started.
But First – What’s The Difference Between Wills And Trusts?
Wills and trusts are both legal documents, but they serve very different purposes. A will – or ‘last will and testament’ – is a document in which a person stipulates how they want their estate to be distributed upon their death. A person’s ‘estate’ is simply everything that they own (i.e., their ‘assets’) at the time of their death.
This can include property, money, belongings, and even legal rights (such as the right to be repaid a debt, for example). Simply put, a will sets out who will inherit what. Note that a person who dies without a will dies ‘intestate,’ and the distribution of their assets is determined by Florida law.
A trust, on the other hand, is a legal entity (like a company or closed corporation) established by a trust agreement. The title to the person’s property is placed in the trust name and, while the person who creates the Trust (“the settlor, grantor or Trustor”) controls the trust and the property in the trust as Trustee during the Trustor’s lifetime, upon that person’s death, a person designated by the Trustor will serve as Successor Trustee will take over and distribute the Settlor’s assets without th e need for a Probate proceeding.
Common ‘Characters’ In Wills
Let’s begin with a list of the most common ‘characters’ you’ll encounter in a will. Wills typically refer to a ‘testator’ (or ‘testatrix’), ‘executor’ (or ‘personal representative’), and ‘beneficiaries.’ Who are these people?
The testator is simply the person whose estate the will regulates (‘testator’ was traditionally used to refer only to men, and ‘testatrix’ to women, but testator is now generally used to refer to all genders). The named people to whom the testator leaves their assets are ‘beneficiaries.’
The ‘executor,’ ‘administrator,’ or ‘personal representative’ is the person nominated in a will to manage and distribute the decedent’s property in terms of their will once they have died (the term ‘decedent’ is used to describe the testator once they have died).
Some wills also refer to a ‘guardian’: this is a person who is legally responsible for the testator’s minor children after their death. It is common for spouses to enter into mutual and reciprocal wills which stipulates who will become the legal guardian of their minor children in the event that both spouses die simultaneously.
Terms Frequently Used In Wills
While wills can vary greatly depending on the testator and the nature of their assets, there are several terms that you will encounter in most wills and will likely use in your own.
A ‘bequest’ is a term in a will in which a testator leaves personal property to a specific beneficiary – for example, ‘I hereby bequeath my piano to my daughter, Maya’.
A ‘living will’ is that part of a will in which the testator specifies what kind of medical treatment they would want, or whether they would want treatment at all, in certain situations. For example, a living will might stipulate that a person wishes to be taken off life support in certain circumstances.
Some people choose to appoint a ‘healthcare surrogate.’ This is a person who is nominated to make medical decisions for the testator if they are incapacitated and unable to make such decisions themselves.
What Is ‘Probate’?
Probate is the legal court-supervised process through which a decedent’s will is verified and their assets distributed by their personal representative. It can be a lengthy and expensive process, which is why many people try to avoid probate through a range of legal mechanisms. One mechanism used to avoid probate is the revocable living trust. This is where an understanding of both wills and trusts becomes useful. We’ll take a look at the different types of
trusts and the common terms used in them below.
Common ‘Characters’ In Trusts
Understanding the different ‘characters’ you’ll encounter in a trust deed is a good way to grasp how trusts work more generally. The person who creates the trust through the trust deed is the ‘grantor’, ‘settlor’ or ‘trustor’. They grant another person, the ‘trustee’, the right to hold title over and manage property for the benefit of another person, the ‘beneficiary’.
To ‘hold title’ over property is to own it in the eyes of the law. A trustee acts in a ‘fiduciary capacity.’ This means that they owe a duty of care and loyalty to the beneficiaries of the trust. Generally, this means that they must act in the beneficiaries’ best interests, manage the trust property responsibly, and act in accordance with the highest ethical standards. Guardians also act in a fiduciary capacity.
Two Types of Trusts
There are two main types of trusts: ‘testamentary’ trusts and ‘living’ (or ‘intervivos’) trusts. A testamentary trust is a trust established within and as part of a person’s will; that is, the trust only comes into operation after the testator/grantor has died and their estate has been distributed through probate.
Living trusts, on the other hand, are created and come into effect while the grantor is still alive. A ‘revocable trust’ is a living trust, the terms of which can be amended (changed) during the grantor’s lifetime. An ‘irrevocable trust’ is a trust created by a trust deed which cannot be amended.
Usually, people create testamentary trusts to ensure that their assets are managed in a specific way after their death (for example, for the benefit of their incapacitated adult children). There are a number of legal requirements that must be met to create a valid trust, so it is important that you consult an estate planning attorney if you are considering this option.
Wills and Trusts Don’t Need To Be Daunting
While it’s important to empower yourself with a basic knowledge of legal terminology, it’s also wise to consult a lawyer with expertise in drafting and preparing wills and trusts should you wish to begin your estate planning journey.
At the Law Offices of Gary I. Handin, P.A., we have assisted many South Florida residents with their estate planning and would be more than happy to assist you too. Give us a call at 1-877-815-4560 today to find out more about how our experienced estate planning lawyers can help you ensure your loved ones are taken care of after your passing.