Common Terms Used in Estate Planning
Ademption – The failure of a bequest from a will because the property is no longer in the estate. For example, if the decedent leaves "My car to my niece", but owns no car at the time of death.
Assignment – Transfer of property (real or personal) to another including all rights associated with the assignment.
Assignee – One to whom a right, title, or interest is assigned; also referred to as grantee.
Assignor – One who assigns a right, title, or interest to another; also grantor.
Advancement – An advancement is a gift made during a donor’s life to a family member, usually when the donor anticipates his own death. The value of the advancement is included in the calculation of the net probate estate when the donor dies.
Ancestor – The relative of a particular individual from whom that individual is descended directly. For example, a person’s parent, grandparent and great-grandparent are their ancestors.
Anti-lapse Rule – If a testator devises property to a person in his will and that person predeceases the testator, the anti-lapse rule will allow the devised property to pass on to that person’s descendants rather than force the gift to pass through intestacy.
Basis – The value of an asset that is used when determining the gain or loss when the asset is sold.
Class – A group of people with the same rights, usually the same distributive rights that must be apportioned among the group.
Comingling – Refers broadly to the mixing of funds belonging to one party with funds belonging to another party.
Contest – To oppose, dispute, or challenge through formal or legal procedures.
Deadhand Control – The attempt to control how property is utliized after death through legal provisions.
Death Benefit – Insurance or pension money payable to a deceased person's designated beneficiary.
Descendant – A descendant is a person born in a direct biological line. For example, a person's children, grandchildren and great-grandchildren are their descendants.
Elective Share – The legal right of a spouse to a portion of decedent’s estate, regardless of the provisions found in the will.
Emblements – Annual crops to which a tenant who cultivated the land is entitled. If the tenant dies before harvest, the right to harvest the crops will pass to his or her heirs.
Estate – The total property, real and personal, owned by an individual prior to distribution through a trust or will.
Estranged Spouse – When spouses no longer cohabitate and and have a relationship to each other that is characterized by hostility or indifference. The two individuals are still legally married and neither spouse has taken the legal steps required to obtain a divorce.
Execute – To sign or complete all formalities necessary to make a document effective, such as signing, notarizing, or witnessing.
Estate settlement – Settling the affairs of a deceased person, both inside and outside of court.
- Administrator – A person appointed by a court to carry out the instructions found in a will.
- Bequest (legacy) – Personal property received under a will.
- Devise – A transfer of real property by means of a will.
- Decedent – The person who has died.
- Disclaim – When a beneficiary or heir refuses or gives away their right to property they would otherwise be entitled to.
- Executor – A person tasked with administering the estate of the decedent and carrying out the provisions of the will.
- Elective Share – The legal right of a spouse to a portion of decedent’s estate, regardless of the provisions found in the will.
- Escheat – The revision of a person's property to the state when death occurs and there is no will or heir.
- Executor – A person named in a will to carry out its instructions (masculine) executrix (feminine).
- Heirs – In a strict legal sense, those designated by law who will receive the property of the deceased when there is no will. In common parlance, heir refers to anyone who receives property from the deceased individual.
- In-kind – Distribution of the asset directly to the intended reciepient rather than in cash.
- Non-Probate Assets – Assets in which transfer of title is controlled by a survivorship mechanism. These assets will change ownership after the death of an individual outside of probate court.
- Probate court – A court of law that will oversee the transfer of the decedent’s estate. Probate Court has the authority to verify the legality of a will, carry out its instructions, distribute property to the correct individuals, and oversee the executors’ actions.
Fertile Octogenarian Rule – A legal concept that a person is capable of having children no matter the age.
Hotchpot – Putting together or mixing various properties in order to achieve equal division among beneficiaries or heirs.
Joint Tenancy – A type of ownership over an asset where there is a right of survivorship. This asset is owned by multiple people, usually two, who have the right to the whole asset. When one individual dies, their ownership in the asset automatically is absorbed by the other owner(s). Most commonly seen with real estate and banking accounts.
Individual Retirement Account (IRA) – An IRA is an individual retirement account which allows you to put money away for retirement in a tax-advantaged way.
- Traditional IRA – A designated retirement account where an individual contributes pre-tax dollars where investments grow tax-deferred until withdrawal during retirement.
- Roth IRA – A designated retirement account where an individual contributes post-tax money and then all future allowable withdrawals are tax-free.
- SIMPLE IRA – A retirement savings plan that can be used by most small businesses with 100 or fewer employees. Employers can choose to make a 2% retirement account contribution to all employees or an optional matching contribution of up to 3%.
- SEP IRA – A simplified employee pension (SEP) IRA is a retirement savings plan established by employers, including a self-employed individual, for the benefit of their employees and themselves. Employers may make tax-deductible contributions on behalf of eligible employees to their SEP IRAs.
Issue – The lineal descendants of an individual. Examples include children, grandchildren, and great-grandchildren.
Lapse – The termination of a right, interest, duty or obligation as a result of the passage of time, or failure of a condition, or a change in circumstance.
Life estate – The conveyance of an interest for the duration of someone's life.
Life tenant – One who holds a property interest for the period of their lifetime or that of another specified person.
Payable-on-Death – When an asset is titled in order to allow a named beneficiary to receive the property immediately upon the original owner’s death without having to utilize the probate court, but the beneficiary does not have equal access to the property during the original owner’s life. This is only allowed with certain assets, typically bank accounts or stock portfolios.
Power of attorney – A written authorization to another to act on one's behalf or as one's agent.
- Financial Power of Attorney – A written authorization to another to act on one’s behalf for financial purposes; also referred to as durable power of attorney.
- Healthcare Power of Attorney – A written authorization to another to act on one’s behalf for healthcare purposes.
- Living Will – A written document by which a person directs that his or her life is not prolonged by extraordinary measures when there is no reasonable expectation of recovery from severe mental or physical disability; different from “Do Not Resuscitate” (DNR) directives.
Partition – To divide co-owned property into distinct portions so that each co-owner may hold his or her proportionate share separately.
Property ownership – Below are definitions of various ways of owning property.
- Fee simple – Owner is entitled to the entire property with unconditional power to both use and transfer. This is the highest level of ownership.
- Joint tenancy – A form of property co-ownership that features the right of survivorship.
- Right of survivorship – A feature of joint tenancy whereby the surviving tenant or joint tenants automatically acquire all the right, title, and interest of the deceased joint tenant.
- Tenants in common – The shared ownership of a single property among two or more persons. The interests need not be equal and no right of survivorship exists.
- Undivided interest – Ownership by two or more persons that gives each the right to use the entire property.
Remainder interest – A future interest in property held by a remainder person usually following a life estate or term interest.
Remainder person – One who is entitled to hold a remainder interest. Commonly referred to as a remainder man.
Slayer Rule – A murderer cannot retain a property interest in his victim’s estate.
Small Estate – An estate that contains property with a value small enough to be eligible, under state law, for simplified probate procedures or out-of-court transfers of the deceased person's property.
Sound Mind – The ability to understand in general what one owns, one's family relationships, and the meaning and effect of the will or trust that one is creating.
Statute of Limitations (SOL) – A legal limit on the amount of time one has to bring an action or claim in front of a Court.
Stepped-up Basis – A tax policy that looks at the market value of assets at the time a person inherits them instead of the value when the prior owner purchased the assets. This usually results in reduced capital gains taxes if a beneficiary sells the asset.
Trust – Ownership held by a trustee for the benefit of another.
- Beneficiary – One who receives the benefit of the trust.
- Discretionary Trust – A trust where the trustee decides how much or when to distribute income or assets to a beneficiary.
- Distribution – The dispensing of assets or income to a beneficiary.
- Income – The total of amount of financial gain that is made from the assets/principal of the trust. Can be in the form of dividends, capital gains, interest, rents, and/or royalties.
- Income Beneficiary – One who receives the income generated by the trust.
- Inter vivos trust (living trust) – A trust that takes effect during the life of its creator. However, the trust may continue after death.
- Irrevocable living trust – The trust is created while the grantor is alive and the grantor cannot amend, revoke, or alter the trust after it has been created.
- Life Beneficiary – A person who has been granted benefits that last for their lifetime.
- Pour-over Will – A will that contains a provision to “pour over” any residual estate assets into a living trust to be overseen by a trustee upon the testator’s death.
- Remainder Beneficiary – The person or people who receive the benefit of the trust after another individual.
- Residuary Beneficiary – The person or people who receive any property from a trust that is not specifically left to another designated beneficiary or beneficiaries.
- Revocable living trust – The trust is created while the grantor is alive and the grantor retains the power or right to amend, revoke, or alter the trust.
- Special Needs Trust – A trust designed to hold and disburse property for the benefit of an Supplemental Security Income (SSI) recipient so that SSI and Medicaid won't consider the trust property or disbursements to be a resource or income.
- Spendthrift Clause - A provision in a trust that restricts a beneficiary's ability to transfer rights to future payments of income or capital under the trust to a third party.
- Support Trust – a trust that contains a provision directing the trustee to pay to the beneficiary as much of the income and principal as is necessary for the beneficiary’s education and support. This trust is a non-discretionary trust.
- Testamentary trust – A trust that often takes effect at death and is typically placed in someone's will.
- Trustee – One who holds property in trust for another.
- Trustor – One who creates the trust. Also referred to as Grantor or Settlor.
- Trust corpus – The definite and ascertainable property and assets that are placed into the trust. Also referred to as principal.
Uniform Transfer to Minors Act – A statute, adopted by almost all states, that provides a method for transferring property to minors and arranging for an adult to manage it until the child is old enough to receive it. Currently, Iowa Code Chapter 565B.
Will – A legal document directing the disposal of one's property after death.
- Alternate Beneficiary – A person, organization, or institution that receives property through a will when the first named beneficiary is unable or refuses to take the property.
- Attestation Clause – A clause at the end of will, which sets forth the legal requirements the document must satisfy, states that those requirements have been met, and is signed by one or more witnesses. An attestation clause strengthens the presumption that the legal requirements to validate the will have been met.
- Beneficiary – An individual who receives something from the estate through the will.
- Codicil – A written supplement or amendment to modify an existing will.
- Disinherit – To intentionally deny an inheritance to someone.
- General Bequest – A bequest of a designated quantity or value of property or money out of the general assets of the testator's estate, rather than from any specific fund or property.
- Holographic will – One that is entirely handwritten and signed by the testator but not witnessed. This type of will is not valid in Iowa and will not control after death.
- Intestate – To die without a last will and testament.
- Intestate succession – State Laws that direct how a deceased's assets shall be divided when there is no will.
- No Contest Clause – A clause in a will that discourages a beneficiary from challenging the will. A typical no-contest clause states that a beneficiary who contests the will shall receive either nothing or have any gifts they would otherwise receive reduced to only a nominal amount, such as one dollar.
- Nuncupative will – A will made orally. This type of will is not valid in Iowa and will not control after death.
- Omitted Child – A child who is not included in a will because the will was created before their existence in the family (birth or adoption date). Usually, this child will still be able to receive a portion of their parent’s estate.
- Residuary Estate – the portion of the state that is not specifically identified and bequeathed; often identified as the “rest, residue and remainder”.
- Specific Bequest – A specific item of property that is left to a named beneficiary under a will.
- Testate – To die with a last will and testament.
- Testator – A person who makes a will (masculine), testatrix (feminine).
The definitions were taken, in part, from the following sources: