A guide to terms used in trusts and estates
When an item in a will no longer forms part of the estate at the time of death.
The person(s) appointed to distribute the estate if someone dies without a valid will or without appointing executors, or if the appointed executor is unable or unwilling to act.
The person appointed to judge or decide the result of a dispute.
An item, owned by an individual, which may make up part of an inheritance or be used to pay debts.
A person entitled to benefit from a will or trust. A beneficiary can have either a current/future or contingent interest.
A term sometimes used instead of legacy
The act of giving or leaving (‘bequeathing’) personal property in a will.
The original cost of an asset.
Having the mental capability to make decisions to make a valid will or form a valid contract.
Monies or assets that are used to generate income or held as an investment.
capital gains tax
A tax on the profit made when you sell or give away something that has increased in value.
The office of HM Revenue and Customs that deals with the administration of inheritance tax.
Tangible personal property such as furniture, domestic animals, etc. (excludes land realty).
The party for which professional services are rendered.
A separate document amending the terms of an existing will.
A person or company to whom money is owed (e.g. tax/bills/services).
Anyone who owes money to the individual/trust/estate.
To give land or other realty as by will.
discretionary type trusts
Benefits are allocated at the trustees’ discretion to any one or more of several beneficiaries. The trustees might even decide, for a time, to benefit no one; the income being accumulated for future use.
donatio mortis causa
A gift made in contemplation of death.
A person who draws up documents such as trusts and wills for approval by clients.
The final preparation of a will or document for signing.
All the assets of a person at the time of death.
A one-off tax paid on the value of a deceased's estate above a set threshold. See also ‘inheritance tax’
Person appointed to put into effect the terms of a will.
The relief from liability.
One who acts on behalf of another to manage money or property with responsibility and good faith.
Where a solicitor is instructed to prepare a will for an aged or seriously ill testator, the solicitor should arrange for a medical practitioner to both carry out an assessment and provide a written account of the mental capacity of the testator.
Receipts of rents/interest/dividends for example, produced by capital held.
A tax levied on net personal or business income.
An insurance policy that aims to protect business owners and employees in the event they are found to be at fault for events or actions performed on behalf of a workplace.
At the point of death.
inheritance tax (IHT)
In a number of countries 'inheritance tax' is a tax on the person who inherits the money (beneficiary).
In the UK, however, inheritance tax is a one-off tax paid on the value of a deceased's estate above a set threshold. In many other countries (US, for example) this is referred to as 'estate tax'.
interest in possession trusts
Those where the income or benefit must be given to the specific beneficiary – it is his or hers by right. There may be more than one beneficiary but they will all have a fixed entitlement.
Between living persons – referring to a transfer or gift made during the donor's lifetime, as opposed to in their will after their death.
The condition of a person’s estate after they die in which its value is greater than their debts and funeral expenses and the leftover value has not been allocated in a will.
When a person dies without a valid will they are said to be intestate. The estate is then distributed according to statutory regulations called the Rules of Intestacy.
Children, grandchildren, adopted children but not stepchildren.
A gift under the terms of a will. [See also ‘bequest’]
Letters of Administration
Official acknowledgement by the Court of the appointment of administrators.
Letter of wishes
An informal, non-binding and confidential document that can be drawn up to accompany a will or trust and can be used to assist or guide an executor or trustee.
The condition of being actually or potentially subject to a legal obligation in the event of a range of situations.
The amount for which something can be sold on a given market.
A person under the age of 18 years old.
Separate but identical wills, usually made by a husband and wife or life partners, where each leaves the same gifts to the other and each names the other as executor. Either party can change their mind at any time and make a different will.
In the UK, the amount up to which there is no inheritance tax to pay on the value of the estate.
The current amount is £325,000. For a married couple or civil partnership, the unused part of the nil-rate band can be transferred to their spouse/partner on death, enabling the surviving spouse or civil partner to pass on a maximum of £650,000 tax free.
A fixed sum of money given by will.
Generic term for executors and administrators.
A deceased individual’s personal property.
power of attorney
A legal document that allows someone to make decisions on your behalf should there come a time when you lack the mental capacity to do so yourself.
The court process by which a will is determined to be valid and granted legal effect, or invalid with assets distributed by a personal representative.
probate (grant of)
Official confirmation by the Court of the validity of a will and the executors named in it.
Land and buildings owned by a person.
Where the executor is paid for their services beyond normal ‘out of pocket’ expenditure.
The person(s) who receive what remains of an estate after all other legacies, liabilities, tax and expenses have been paid.
The remainder of the estate after all specific and pecuniary legacies, liabilities, tax and costs have been met.
The person who establishes a trust, held and administered by a trustee for the benefit of another. (In some legal systems, a ‘settlor’ is also referred to as a ‘trustor’, or occasionally, a ‘grantor’ or ‘donor’).
A gift of a particular item (not money) given in a will.
The Society of Trust and Estate Practitioners – membership body for professionals advising on family inheritance and succession.
testator (m); testatrix (f)
The person making a will.
The term used to describe a person's legal and mental ability to make or alter a valid will.
A trust is the formal transfer of assets (it might be property, shares or just cash) to a small group of people (usually two or three) or to a trust company with instructions that they hold the assets for the benefit of others. If the trust is to be made in your lifetime, to take immediate effect, then it is usually evidenced by a trust deed.
A person or firm that holds or administers property or assets for the benefit of a third party.
A legal declaration in which a person names one or more others to manage their estate and oversee the distribution of their property as instructed upon their death.
will drafter/will preparer
The person instructed to prepare the will on behalf of the testator.
When the trust is created on or shortly after death and the trust provisions are set out in the person’s will.
Two adults who are present, together with the will drafter, when they date and sign the will. The witnesses, or any spouse of a witness, cannot receive any benefit from the will.