Glossary of Legal Terms

 

 

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    While we strive as much as possible to use plain English when drafting our clients' wills, trusts, powers of attorney, and other legal documents, we also know that these documents may some day have to be submitted for critical review to such parties as judges, the Internal Revenue Service, the Pennsylvania Department of Revenue, and attorneys for potentially adverse parties.

    These parties will be examining the documents not so much for simplicity or ease of understanding, but to see if the documents contain the necessary legal words and phrases that have precise meaning and effect in the eyes of the law, even if they may not be readily apparent to a layman.

    In other words, purposefully using "legalese" can sometimes be a good thing!

    Nevertheless, we thought it would be helpful to provide our clients with a glossary of certain legal words and terms that are commonly used in the estate planning and estate administration process, but whose meaning may not be obvious.

 

Account.  A record of all the transactions that have occurred in an estate, trust, or guardianship.  An account (sometimes referred to as a "fiduciary account") is typically prepared when either the trust or estate is terminating, or when the trustee or other fiduciary seeks to be dismissed.  The form of the account must follow the traditional court-approved format.  For example, a financial statement prepared by an accountant would probably not be an acceptable substitute for an account.  The purpose of the account is to give interested parties a detailed picture of what assets the fiduciary started out with, what was sold or otherwise disposed of, all disbursements of principal.  Income earned on the assets is also accounted for.

Administration.  The process of handling the affairs of a deceased person's estate or a trust.

Administrator. The person or financial institution that is appointed to take care of the estate of a deceased person who died without a will. Another term for this person is "personal representative."

Adult: In Pennsylvania, a person who is 18 years of age or older.

Agent.  Someone who is authorized to act on behalf of another person (the "principal").  The agent's authority can be very broadly defined or limited to one or more specific acts.

Ancillary Administration. Probate proceedings in another state. This is usually necessary when the deceased person owned real estate, cars, or a boat in a state other than his or her domicile state.

Attorney-in Fact.  The same as an agent (see above).

Beneficiary. A generic term that usually refers to a person or entity that is entitled to receive something, for example, a beneficiary of an estate or trust, or a beneficiary of life insurance or retirement benefits.

Bond. At the time a personal representative, trustee, or guardian is appointed, the Register of Wills or the Orphans’ Court may require a fiduciary bond to be obtained. This bond is essentially an insurance policy that protects the estate or trust if the fiduciary would wrongfully take money or assets from the estate or trust. Annual premiums have to be paid for this bond. Normally the posting of a bond is excused by the Will, since the testator trusts the persons being named as personal representatives and wants to avoid the expense of annual bond premiums.

Claim. This refers to funeral expenses, the debts of a deceased person, and expenses of administration.

Codicil. A written amendment to a will.

Custodian.  A custodian generally is someone who is charged with safeguarding and protecting the property of another.  When a Pennsylvania Uniform Transfers to Minors Act ("PUTMA") is used, Custodian is the title given to a person holding the minor's property.  

Descendant.  A multi-generational term referring to someone who is directly descended from an ancestor.  A descendant can include not only a child, but also a grandchild, great-grandchild, or more remote lineal heirs.

Devise. When used as a noun, "devise" refers to an inheritance of real or personal property under a will. When the word is used as a verb, it generally means a gift of real estate by will.

Devisee. A person or entity designated in a will to receive a devise.

Disclaim.  To give up one's right to receive an asset.

Disclaimer Trust. A trust that has been designed to receive the property that someone has disclaimed.

Domicile: One's permanent home. A person can have several residences, but only one domicile. The test for determining one’s domicile is basically subjective: Where did he or she intend to make his permanent home? However, there are certain objective tests for determining domicile, such as length of time spent in a particular place, where one is registered to vote, etc. The state in which a person is domiciled will have the right to tax his intangible assets at death. Real estate and tangible personal property, however, are taxed only by the state where they are located, regardless of the owner’s domicile.

Donee: The recipient of a gift.

Donor: A person who makes a gift.

Durable Power of Attorney.

Estate: This word has a number of meanings depending on the context in which it is used. For federal estate tax and Pennsylvania inheritance purposes, "estate" refers to all of the deceased person's assets that are included in that person's gross estate for tax purposes. However, "estate" is also used to refer to those items of property that are subject to probate and estate administration.

Estate Planning: The process of arranging one's personal and financial affairs.

Estate Tax.  The tax that is paid to the government on account of the transfer of property at death.

Executor: The person or financial institution that is appointed to administer the estate of a deceased person who died with a will. This position is also called "personal representative."

Fiduciary: This word comes from a Latin word meaning trust and confidence. This is a generic word used to refer to any person or entity that serves in a representative capacity. Personal representatives, trustees, guardians, and agents acting under powers of attorney are all fiduciaries. A fiduciary stands in a position of confidence and trust with respect to each heir, devisee, and/or beneficiary.

Grantor: In a trust context, this refers to a person who establishes a living trust. It is also used to refer to one who is transferring real estate in a deed.

Guardian of the Estate: An adult person or financial institution appointed by a court, who is responsible for a minor child's or incapacitated adult person’s property until that minor child becomes an adult or the incapacitated person dies or becomes competent to be responsible for his or her own property.

Guardian of the Person: An adult person or agency appointed by a court, who is responsible for the health care needs of a legally incapacitated person until the legally incapacitated person becomes dies or competent to be responsible for his or her own health care decision making. Guardian of the Person also refers to the adult having custody of a minor who has no parent or other natural guardian.

Heir: A person who inherits property from the estate of a deceased person who died without a will. Heirs are determined by statute.

Incapacitated Person:  A person who has been determined by a court as not capable of handling his or her personal and financial affairsA person who has been found by the Court to be unab

Income:  For a trust, income is what is earned on assets -- the "fruit" of the tree.  Income does not include capital gains, which are treated as return of principal.

Inheritance Tax.

 

Intangible Personal Property: This type of property usually includes such items as stock, bonds, mutual funds, bank accounts, and cash.

Inter Vivos Trust: See living trust below.

Intestate: Refers to dying without a will.

 

Irrevocable Trust: A trust that can no longer be amended or revoked by anyone. Usually trusts are made irrevocable for tax reasons, to prove that there was a completed transfer of ownership of an asset. Most revocable trusts become irrevocable at some time, for example, when the person who established the trust dies.

Issue.  

 

Letters of Administration.

 

Letters Testamentary.

 

Living Trust: A trust that one establishes during one's lifetime which is not part of one's will, but is usually established by a separate written trust agreement. The same as "inter vivos trust." This type of document is also sometimes referred to as a revocable living trust. \

Living Will.

Minor: in Pennsylvania, a person who is under the age of 18.

 

Pecuniary Gift.

 

Permanently Unconscious

 

Per stirpes:  This phrase is of Norman French origin, and literally means "through the roots."  It refers to a situation where property will be passing to multiple generations of beneficiaries. If the property passes per stripes, it means that the beneficiaries belonging to a younger generation will sub-divide the share of a predeceased parent or other senior generation member through whom they are inheriting.  The opposite of per stirpes is per capita; in the latter method all beneficiaries, regardless of which generation they belong to, will take equal shares of an estate or trust.

 

Personal Representative: The person or financial institution appointed by the probate register or the court to administer a deceased person’s estate.

 

Personal Property.

 

Personal Representative.

Power of Appointment.

 

Power of Attorney.

 

Principal:

Probate: The system for clearing title to a decedent’s probate property and determining who is entitled to receive such property.

 

Probate Property: This refers to those assets that are subject to administration in the probate court, i.e., those assets that were in the name of the deceased person only. Sometimes these assets are referred to collectively as the "estate." Assets owned jointly with a surviving joint owner, life insurance proceeds, and retirement plan proceeds payable to a named beneficiary other than the estate are normally not part of the estate because they are not subject to probate.

 

Real Property.

Register of Wills: An employee of the probate court authorized to perform certain acts such as the admission of a will to probate in an informal proceeding.

 

Residuary Estate.

Revocable Living Trust: A living trust or inter vivos trust that can be amended and revoked, usually by the person who established the trust. This trust may become irrevocable and non-amendable when the only person who can amend or revoke the trust dies or becomes incompetent.

 

Specific Gift.

Tangible Personal Property: Property that you can touch, such as cars, dishes, jewelry, tools, sporting equipment, etc.

 

Terminal Illness.

 

Testament.

Testamentary Trust: A trust that is part of a person's will.

Testate: Refers to dying with a will.

Testator: A person who makes a will.

Trust: An arrangement, usually established by a written document, to provide for the management and disposition of assets. It normally involves three parties: the person who establishes the trust (sometimes called a donor, grantor, settlor, or trustor), a trustee, and one or more beneficiaries.

Trustee: An adult individual or financial institution that is designated to be responsible for the administration of a trust.

 

Uniform Transfers to Minors Act.

 

Will.

 

 

DISCLAIMER

Martin J. Hagan is licensed to practice law in the Commonwealth of Pennsylvania. This website is intended solely for informational use and is not intended to solicit clients. Likewise, any information contained in or obtained from this web site is for informational purposes only and is not intended to be used as legal advice.

IRS CIRCULAR 230 DISCLAIMER:   Pursuant to Treasury guidelines, any tax advice contained in this website (or any link from it) does not constitute a formal opinion. Accordingly, any tax advice contained in this website (or any link from it) is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be asserted by the Internal Revenue Service. You should seek advice based on your particular circumstances from an independent tax advisor.

Send mail to mhagan@haganlaw.net  with questions or comments about this web site.
Copyright © 2007 Martin J. Hagan, One Gateway Center - 8 South; Pittsburgh, PA 15222-1435
Last Updated: 10/03/07