If you’ve been thinking of writing a will or going through the probate process, it’s possible that you may encounter all kinds of unfamiliar jargon. Understanding this terminology is key to navigating estate planning properly and ensuring that all wishes are honored. So that you don’t feel lost, here are 12 of the most essential estate planning terms decoded.

Estate

Let’s start with the most basic one: what exactly is a person’s ‘estate’? It’s a legal term to refer to all the assets and liabilities that belong to a person. This includes their home, belongings, bank accounts and any investments. Certain debts may also be included and passed on after a person’s death. Estate planning is a way of organizing all of these assets and liabilities and deciding where they will all go.

Will

A will is a legal document that outlines how an individual’s assets will be distributed after their death. It includes outlining who will receive which property and funds, as well as who will take over the role of guardian for children or even pets. Wills need to be carefully worded and signed to make sure that they are honored after death, which is why it’s worth working with a legal professional when writing a will. 

Testator

The testator is the person who the will belongs to and the person whose estate is being distributed. In other words, if you’re planning on creating a will, you are the testator. The testator must be of sound mind and legal age when drafting their will – this ensures that their directives are clear, precise and legally binding to avoid future disputes among heirs. 

Beneficiary

The people that receive your assets when you die are the ‘beneficiaries’. The testator designates each beneficiary when writing their will. Beneficiaries can be family members, friends or organizations. It’s possible to set conditions when determining beneficiaries such as only allowing certain individuals to inherit assets if they are of a certain age. If you do not name specific beneficiaries, your assets will be distributed according to local intestacy laws (more on this later). 

Executor

The executor is a person who is appointed to carry out the wishes of the testator’s will following their death. This includes making sure that assets are passed to the right beneficiaries, making sure any outstanding debts are paid and making sure that tax obligations are fulfilled. The executor plays a vital role in the probate process and needs to be someone you completely trust to act on your best interests. An attorney can be appointed to the executor if you feel you need someone neutral, however it’s also possible to appoint a loved one who is also a beneficiary. 

Codicil

It’s possible to amend a will after it is written and signed. These amendments are known as codicils. When executing a codicil, you will need to go through the same steps of writing a will including getting the codicil signed by witnesses and making sure it is properly worded to prevent misinterpretation. A codicil can include adding a new beneficiary, removing a beneficiary or changing asset distributions. If you need to make multiple major changes to your will, it might be easier to simply write a new will – the old one will then become void and there won’t be any confusion. 

Living will

A living will is different to a regular will. It is sometimes known as an ‘advance decision’ or ‘advance directive’, and it is a way of legally declaring your medical preferences if you become too ill or otherwise incapable of expressing your wishes. Such wills often focus on end-of-life care, specifying when certain medical interventions should be made and when they should be avoided. Some people will create a living will while creating a regular will. It is often worthwhile creating if you have developed a chronic or terminal condition and are still currently capable of determining your wishes. 

Lasting power of attorney (LPA)

A lasting power of attorney (LPA) is a document that gives a trusted individual control to manage a person’s affairs – including financial and health decisions – if they become incapacitated. The appointed person is known as the ‘attorney’, but they do not have to be a legal professional – any loved one can be given lasting power of attorney. As with a will, this document can be updated at any time.

Revocable trust

What is a revocable trust? It is essentially a legal arrangement where a person places their assets into a trust during their lifetime. The assets are then automatically passed to a beneficiary when that person dies without having to go through the probate process. Given that probate can last 6 to 12 months, this can help to greatly speed up the distribution process. Just be wary that revocable trusts can be more expensive to set up than wills and do not provide any tax advantages (unlike an irrevocable trust).

Irrevocable trust

While a revocable trust can be altered after it is issued, an irrevocable trust cannot be amended or revoked. This means that you have to be certain about the terms of the trust. The advantage of an irrevocable trust? Assets within this trust are legally removed from a person’s estate and therefore are not liable for tax when that person dies. Like revocable trusts, irrevocable trusts also allow items to be immediately passed over without the need for probate. 

Probate

What exactly is probate? It is essentially the legal process of distributing a person’s estate after they die. This includes checking the will to make sure it is valid, identifying assets, paying debts/taxes, and distributing assets to the right beneficiaries. The probate process can vary in length and complexity depending on the size of a person’s estate and whether there are any disputes.  

Intestacy

What happens if someone dies without creating a will? This is known as ‘intestacy’ – in this case, assets will be distributed depending on local intestacy laws. In most cases, spouses will be prioritized and then children. Stepchildren, unmarried partners, grandchildren and siblings may not automatically receive anything, which is why a will is so important. Even if you are happy with your assets being equally divided among your spouse and children, a will can still help to prevent any disputes.