Boost Your Estate Vocabulary: Essential Terms You Must Know

Being in the world of Wills, Estates and Trusts can feel a lot like trying to order coffee at Starbucks for the first time. 

Venti? Chai who? What the heck is a Misto and why isn’t it on the menu? 

I’m a smart person, I can read a blackboard just fine, but still have NO idea what’s going on there.

Whether it’s your first time dealing with an estate or your first order of a cuppa at Starbucks, you’ll find yourself in one of these 2 camps:

Camp 1: dive head-first into the process, making assumptions and finding out too late that you’ve made a misstep.   

Camp 2: seem savvy but shy away from taking any step at all because you have no command of the lingo.

Sound familiar?

After listening for years to people butchering words and phrases – referring to themselves as the “Trustee of the Will” or including joint accounts or IRAs with beneficiaries on a list of “probate” assets…

…I thought I’d help crack the secret code and give some simple definitions and context to get you more comfortable and on track with the world of estates and trusts, should you choose or be chosen to be a part of it.

So….ask the barrista for a Misto(*), and let’s get cracking….

Topping the list of tricky vocab is a consistently misunderstood term: 

Power of Attorney, also known as a “POA”.

First off – you can’t be a Power of Attorney!  This is a document created to name someone (called an Agent) to make financial or medical decisions for another person while they’re alive and if they become incapacitated.  

Second – When the creator of the POA dies, the Agent’s power to act or make all those decisions dies too. Effectively, the POA document is totally null and void. If needed, the Will becomes the controlling document and the Executor or Administrator, if any, takes over.

Decedent – the person who died  (aka ‘the deceased’)

DOD/DOB – date of death, date of birth. Be sure to read all forms carefully and definitely not mix up these two terms.

Fiduciary – Pretty much a catch-all. Can be anyone who is named or appointed to a position of trust e.g. Executor, Administrator, Personal Representative, Trustee, Agent.

Executor – A person named in the Last Will to take charge of property (AKA probate assets), pay debts and file final ilncome tax returns.   Their power starts only once they are court-appointed.

The Executor [or PR] has no power to act unless the Will is filed and approved by the court.  

Administrator – Somebody who is the deceased’s next of kin that is appointed by the court to handle the deceased’s estate when there is no Will.  

Laws of Intestacy – Every state has laws that control who can be Administrator and who can inherit from the estate; this short list is made up of the Decedent’s ‘next of kin’; states like NJ have a strict cut-off on next of kin: beyond 1st cousin once removed (children of 1st cousins), so even if someone survived the deceased person they could be too remote to inherit anything

Last Will and Testament – the ‘Will’ is a document created by one person (a Testator) to name someone (called an Executor or Personal Representative) to take charge of certain property and to do’s after death and to make sure beneficiaries receive their inheritances.   

First – Don’t rush to file with the probate court– track down and look closely at all the assets because there might not be any assets that a Will would control.  

Second – The Will may also name a Funeral Agent to carry out special instruction for cremation, burial, funeral wishes.

Third – there are different types of beneficiaries:

Specific Beneficiary

Residuary Beneficiary

Probate Asset – something that the deceased owned in their name alone and did not name a beneficiary for it (e.g. car); if the deceased owned a probate asset, then someone needs to be court-appointed to manage/sell

Non-Probate Asset – something that either the deceased owned with another person (jointly) or owned by the deceased and they named a beneficiary on forms during their lifetime (e.g. house owned between husband and wife, an IRA or 401K that lists a ‘designated beneficiary’ on a contract, a bank account that is POD or TOD to another person

The Will doesn’t control this, so the Executor doesn’t need to do anything here

TOD / POD –  these are designations you Transferrable On Death / Payable on Death, meaning the account or asset gets transferred directly from the deceased’s name to the beneficiary

Letters Testamentary / Letters of Administration – formal original paperwork given by the court to the Executor/Administrator to prove they’ve been appointed and can do things

Short Certificate – a shorter version of the Letters (above), usually a one-pager but still with the court’s raised seal, given by the court to prove appointment that can be given to banks and brokerage firms  

    FUN FACT: it’s called a ‘short certificate’ because it used to be printed on a short piece of paper (half the size of 8-1/2 x 11)

Real Property – real estate; a house or timeshare, any property where a deed is proof of ownership

Personal Property – essentially anything that is not real property, but there are 2 types:

    Tangible Personal Property – stuff you can touch; cars, boats, jewelry, artwork, bits & bobs

Intangible Personal Property – stuff you can’t touch like investments (stocks & bonds, retirement accounts), copyrights and patents, LLCs, leases, software and cash

Inheritance tax – tax due to the State on inheritances received by beneficiaries in certain classes; 6 states have an inheritance tax  (e.g. NJ has no tax on inheritances to kids; PA has 4.5% tax; paid either by the estate or the individual beneficiary

Estate tax – tax due to the State or IRS based upon the total size of the Decedent’s estate and if its bigger than the tax threshold

I really hope this clears some things up for you – remember: nothing takes the place of a conversation with an attorney who practices estate and trust law who can explain vocabulary and other relevant terms and phrases and how they apply to your situation.