A Thrilling Mix of Legal Terms from Old English, Latin and IRS.
June 5, 2015
The vocabulary of estate planning is a thrilling mix of terms from Old English, Latin and IRS abbreviations. Personal favorites include QTIP Trust (Qualified Terminable Interest Property Trust – I wonder if the IRS has to pay royalties to Johnson & Johnson for this one) or enfoifment with livery of seisin (a meaningless collection of Old English legal terms that I saw once in a document prepared by a tax protester asserting that the federal government had no jurisdiction over his home – don’t try this one yourself). Well, they are all my favorites so without further ado:
Will (or more completely Last Will and Testament): legally binding instructions as to what you want done with your property after you die; who will inherit what from your estate.
Personal Representative (or in other jurisdictions executor): The person appointed by the probate court to carry out the instructions contained in your will.
Probate: The legal process of collecting and distributing the assets of someone who has died, supervising the liquidation of assets to pay the debts of the person who died.
Probate Court: Where probate takes place, a county court with the responsibility to oversee the probate process for the estate of people who have died, guardianships of minor children of those who have died, property inherited by minor children, guardianships and conservatorships of adults deemed incapable of managing their property or themselves.
Guardian: Someone appointed by the probate court to be legally responsible for someone else (known as the ward). The Guardian of the Estate is responsible for managing the finances and property of the ward. The Guardian of the Person is responsible for the care of the ward such as housing, medical care, ensuring that their personal needs are met. Typically an adult ward is under a guardianship or conservatorship due to some sort of mental disability. A minor becomes a ward due to the death or disability of the child’s parents. It is very important for parents to name both short and long term guardians for their children (see my website for the Kids Protection Plan).
Trust: A legal arrangement where a trustee owns and manages property for the benefit of a third party (known as the beneficiary) See Blogpost #1 for some examples of trusts and what they can do for you.
Power of Attorney: A legal document that gives someone (known as the attorney in fact) the authority to do anything of a legal nature on your behalf that you could do for yourself. Examples of what is covered by a power of attorney include paying your bills, making insurance claims, filing tax returns etc. This is very important in the event that you become disabled and cannot take these actions on your own behalf. Once a person dies, the power of attorney no longer has any effect, the will then is the controlling document.
Health Care Directive: Also referred to as a Health Care Power of Attorney or a Living Will. Technically, these are three different things but the essence of the document is giving someone the legal authority to make medical decisions for you when you are not able to communicate your wishes. This document also allows you to identify any particular medical care that you want or do not want.
That’s all for this post. In a future post I’ll tackle some more. Let me know if there are any terms or concepts that you have heard and want to know more about. Knowledge is power. Too often people (sometimes even attorneys) use complicated jargon to confuse others, disguising either their lack of understanding or some ulterior motive. Although I reserve the right to start my explanation with “its complicated”, I believe anything can be explained to anyone of reasonable intelligence. A neurosurgeon can explain to me what they are doing. This does not mean that I understand it as well as they do or that I could do it myself. As always, consult a pro, don’t try it yourself.