Below are some of the legalese terms you might have heard of in the past or may come across as you explore setting up your estate plan. I hope you find this helpful. As always, if you have any questions, please feel free to call me --Allen Heneveld, an experienced estate planning attorney. 616.498.5112.
Attested Will: a written will that is witnessed by others when it is being executed (signed).
Attorney-in-fact: a person who is given authority by a Power of Attorney to act on behalf of another. The person can also be called an agent.
Beneficiary: any person or entity (like a charity) who is to receive assets or profits from an estate, a trust, an insurance policy or any instrument in which there is a distribution.
Codicil: an amendment to a will.
Community Property: is property acquired during a marriage by either spouse that is considered owned equally by husband and wife. Ten states have community property ownership. Michigan does not.
Conservator: a person appointed by the court to protect and manage the financial affairs for a person due to the person’s age (a minor), physical or mental limitations or old age.
Durable Power of Attorney: a Power of Attorney that continues after you are unable to make decisions for yourself. This is typically used for healthcare and finances.
Grantor: the person who creates a trust. If we prepare trusts for you, you would be the Grantor. The person is also sometimes referred to as a settlor or trustor.
Guardian: a person appointed by the court who is invested with the power, and charged with the obligation, of taking care of and managing the property and rights of a person who, because of age (being a minor) or mental limitations is considered incapable of administering his or her own affairs.
Health Care Power of Attorney: a Power of Attorney where you name a person (in Michigan called a Patient Advocate) to make your medical decisions in the event that you are not able to make them for yourself.
Heir: An individual who receives an interest in, or ownership of assets from an ancestor who has died intestate (without a will) according to the distribution laws of the State where the ancestor’s domicile (his/her permanent residence).
Holographic Will: a will that is handwritten and unwitnessed.
Intestate: when someone dies without a valid will.
Irrevocable Trust: a trust that cannot be modified, revoked or made void, cancelled, rescinded or reversed by anyone.
Irrevocable Life Insurance Trust: an irrevocable trust that holds your life insurance policy and then after your death it distributes the life insurance proceeds according to the trust provisions.
Issue: a person's children or other lineal descendants such as grandchildren and great-grandchildren. It does not mean all heirs, but only direct bloodline descendants.
Joint Tenancy with Right of Survivorship: a form of joint ownership of assets (called “joint tenancy”) where upon death of the first owner, the deceased owner’s ownership is terminated and the remaining joint owners’ ownership is increased accordingly. This continues until the last surviving owner has 100% ownership. In Michigan, it can only be used for real estate, stocks and similar investments and indebtedness (such as, bonds, mortgages, promissory notes, etc.).
Living Will: a written document in which you inform doctors, family members and others what type of medical care you wish to receive should you become terminally ill or permanently unconscious. This is not used in Michigan.
Living Trust: a revocable trust used to hold your assets and then distribute them according to the trust provisions. Its principle purpose is to avoid probate.
Per Capita: is a method of distributing estate assets to heirs/beneficiaries. The formula determines the number of “shares” and then distributes the estate assets equally to each share. Each living descendant receives a share. For example, assume there are: (a) 3 living children who have a total of 9 living children (this is 12 shares – the 3 children plus the 9 grandchildren); (b) one deceased child with 4 living children (this is 4 shares); and (c) one deceased child without living children (this is zero shares). Then, the total shares would be 16. Each of the living children and grandchildren would receive 1/16th of the estate value.
Per Stirpes: is a method of distributing estate assets to heirs/beneficiaries. The formula determines the number of “shares” and then distributes the estate assets equally to each share. Each living child (at the time of the giver’s death) receives a share and each deceased child who has living issue receives a share. For example, assume there are: (a) 3 living children (this is 3 shares); (b) one deceased child with 3 living children (this is 1 share); and (c) one deceased child without living children (this is zero shares). Then, the total shares would be 4. The 3 living children would each receive 1/4th of the estate value, while the 4 deceased child’s children would each receive 1/16th of the estate value (splitting the remaining 1/4th equally amongst the 4 of them).
P.O.D. (payable on death) Account: an account that designates who the account should be payable to upon the account holder’s death.
Personal Representative: A person appointed in your will to close your estate. In some states this person is called an executor/executrix. Michigan uses the Personal Representative term.
Post-nuptial: an agreement made after marriage between couples that are still married. It typically addresses separation agreements, settlements in contemplation of separation or divorce, or property settlements with no intention to separate.
Power of Attorney: a document where one person gives another person (the agent) authority to act on his/her behalf (the principal).
Pre-nuptial: an agreement between a future husband and wife that details how their financial affairs will be handled during the marriage and in the event of divorce.
Probate: is a court oversight process to disburse a decedent’s assets (called his/her “estate”) to heirs or beneficiaries. It might include appointing guardianship of minors, appointing a conservator for minors and proving the validity of a will.
Revocable Trust: a trust where you or someone you name has the power to change or revoke the trust. A Living Trust is a revocable trust.
Right of Survivorship: a method of joint ownership that entitles one owner of property to take title to the property when the other owner dies.
Settlor: The person who creates and funds a trust. Also referred to as trustor or grantor.
T.O.D (transferable on death) Account: an account that designates who the account should be transferred to upon the account holder’s death.
Tenancy by Entirety: ownership of property by a husband and wife as one entity. When one dies, the other then owns the entire property.
Tenancy (Tenants) in Common: joint ownership of property in which, upon death, each owner’s share goes to his or her heirs or designated beneficiaries. Each tenant in common is free to sell or transfer its interest at any time.
Testamentary Trust: a trust that is contained in a will.
Testator: the person who is making a will.
Trust: an entity created by a legal document to hold title of property put into the Trust. The property must be maintained, protected and used as set forth in the Trust document. The property is typically used and/or distributed for the benefit of another person or entity.
Trustee: the person or entity named to carry out the directives contained in a trust document. The Trustee also holds legal title to the trust property. The Trustee has a fiduciary duty (a high standard of faithfulness) to the trust beneficiaries to faithfully execute the trust provisions
Trustor: the person who created and funded a trust. Also referred to as settlor or grantor.
Will: the document that directs and instructs your personal representative to distribute your property after you are gone and nominates guardians and conservators for your minor children.
I look forward to helping you develop an estate plan that minimizes estate taxes and fulfills your legacy desires. Allen Heneveld, a Grand Rapids estate planning attorney.