Wills, Life Planning & Probate – Jargon Buster
3 September 2020 by James Bird
This blog is aimed to be more of a glossary for some of the more technical terms that you might be given when dealing with any of the above topics. Hopefully, this blog will help translate some of the “legalese” which lawyers are infamous for.
Glossary of terms – Wills
- Executor – this is the person(s) named in a Will who are appointed to administer the estate of the Testator when the Testator dies. An Executor can be anyone including friends, family, and even professionals (such as solicitors and accountants). They must be 18 or over and you can appoint up to four Executors to work together. You can also appoint substitute Executors to step in if the first choice are unable to take up the role. An Executor’s role only goes up to the finalising the administration of the estate. If there is a trust involved then Trustees will continue to deal with the Trust (though these can be the same people).
- Trustee – Someone who is legally appointed as part of a Trust to administer the Trust, look after the assets, make distributions where required, and take necessary advice on the Trust assets from professionals. The Trustee’s role will continue until the Trust comes to an end (this can be years, even decades in some cases). Trustees can retire from their role and appoint new Trustees (depending on the terms of the Trust).
- Beneficiary – someone who receives a benefit from a Will or Trust (often money, property, shares, possessions, etc). A Beneficiary can be anyone (even children under 18 or charities). Click here if you want to know what happens if you are appointed as a Beneficiary.
- Guardian – someone named in a Will to look after young children should the Testator die before the children are 18. Being appointed Guardian means that the Testator is passing their Parental Responsibility (ie the power to make decisions on behalf of the child) to the Guardian.
- STEP Provisions – STEP is short for the Society of Trusts and Estate Practitioners. Most Wills drafted today will refer to the STEP provisions as they are a document which explains and details all of the rights and powers of Trustees. The document is rather long which is why the provisions are not usually expressly stated in the Will itself. The full provisions can be found here.
- Mutual Wills – a term used to describe Wills made by two (or more) people whereby they have all agreed that none of them can change their Wills going forward without the permission of the others. As a general rule, we do not draft these as they can cause many issues (eg circumstances change and one person may die, the others may wish to amend their Wills but cannot since permission cannot be obtained from the person who passed away).
- Bloodline Wills – a term which is often seen in the newspapers and media. This basically means a Will that passes assets to biological children/grandchildren or children/grandchildren who have been legally adopted. This would therefore not include stepchildren or foster children.
- Mirror Wills – a common term used to describe the Wills of couples. They are called Mirror Wills as the provisions in them tend to be very similar and reflect each other (for instance leave all assets to the surviving spouse and on the second death equally between the children). Although Mirror Wills is a phrase used often, the Wills can still be different to each other. Mirror Wills can be amended by the person who made them at any time regardless of the other person who made a Mirror Will (sometimes confused with Mutual Wills).
- Will – a legal document that states a Testator’s wishes of what happens to their Assets once they die. A Will can be revoked (cancelled) by making a new Will or deliberately destroying the document. In order to be valid, the Will must comply with legal criteria set out in laws of the jurisdiction it is made. Click here to find out more about the FJG free Wills charity scheme.
- Trust – a legal arrangement, sometimes found in Wills, that states how assets are to be used for the benefit of other people. It is administered and controlled by Trustees for the benefit of Beneficiaries. There many types of Trusts, not all of which are found in Wills, but legal advice should be sought for more information.
- Life Interest Trust – a term used to describe a type of Trust that states a Beneficiary is to have the benefit of the Trust assets for the duration of their lifetime. Once the Beneficiary then passes away (or brings the Trust to an end by other means) the Trust assets are distributed according to the terms of the Trust (usually to other Beneficiaries).
- Discretionary Trust – a form of Trust which does not name specific individuals as Beneficiaries but instead names classes of Beneficiaries (such as children or grandchildren). It is then entirely up to the Trustees to decide who should benefit from the assets of the trust (ie at the Trustee’s discretion). There is often a Letter of Wishes drafted to go alongside the Trust document to give guidance to the Trustees (but does not legally force them to carry out the wishes).
- Letter of Wishes – a document (often in the form of a letter) which is drafted by a Testator and placed alongside a Will (or by person putting assets into a Trust). It provides guidance to Executors and Trustees, often giving more details about the Testators wishes. A Letter of Wishes can include information about anything but most commonly might include information about topics such as; how young children should be raised by Guardians, more detailed funeral wishes of the Testator, explanations why the Will (or Trust) has been drafted in the way it has (for example if someone has been deliberately left out), who Trustees should benefit from the Trust assets (with Discretionary Trusts). These are but a few examples. The Letter of Wishes is then usually signed and dated by the Testator (but not witnessed).
- Worldwide Will – a term used to describe a Will which covers assets in various countries. Specialist advice should be sought when making Worldwide Wills as each country has different laws about Wills and passing on assets.
- Foreign Assets – Assets which are in a different country (or jurisdiction). English Wills are governed by the laws for England and Wales so assets in other countries (such as Scotland, France, Spain, etc) may be considered Foreign Assets as they fall within a different legal system.
- Independent Witness – a person who signs a document at the same time as the Testator. They must be 18 years old or over. They are independent if they have no connection to the person making the Will and are not named in the document being signed.
- Attestation Clause – the clause at the end of the Will where a Testator signs and then 2 Independent Witnesses sign afterwards. The date the Will is signed is usually included as part of the clause as well.
- Codicil – a legal document that amends a Will. These are commonly used where there are only a few changes to be made to a Will but the majority of the Will remains the same. The Codicil will usually refer to specific paragraphs in the Will to be amended and is then kept alongside the original Will once completed. This must also be signed and witnessed the same way a Will is signed and witnessed.
- Testator – the legal term used to describe the person making the Will.
- Legacy – something that is left to a Beneficiary in a Will. Commonly known as a gift in a Will. It can be anything but is usually defined in the Will (for example a specific sum of money, a property, certain investments or possession, etc).
- Residue – the Assets which are left to be distributed once all Debts of an estate have been settled and all Legacies distributed. It includes everything not specifically named in the Will.
- Residuary Beneficiary – a Beneficiary who is entitled to the Residue of an estate (or a share of the Residue).
Glossary of terms – Lasting Powers of Attorney
- Lasting Powers of Attorney (LPA) – a legal document that allows the Donor to appoint Attorneys to make decisions on their behalf if they lose Mental Capacity. There are two types: Property & Financial Affairs and Health & Welfare. A Donor can only make a LPA if they have Mental Capacity at the time of signing it. It must be registered with the Office of the Public Guardian before the Attorneys can use the document. Lasting Powers of Attorney replaced Enduring Powers of Attorney on 1 October 2007.
- Enduring Powers of Attorney (EPA) – the legal document that was made for Property and Financial Affairs before LPAs were introduced. EPA’s made before 1 October 2007 are still valid but after this date, only LPAs can now be made. EPAs work in the same way as LPA’s except that they only need to be registered at the Office of the Public Guardian when the Donor is losing (or has lost) Mental Capacity.
- Attorney – a person appointed by a Donor under an LPA/EPA to make decisions on behalf of the Donor. A Donor can appoint as many Attorneys as they wish. If you have been appointed as an Attorney and are unsure what you need to do read our helpful Guide for Attorneys.
- Mental Capacity – the ability to be able to understand and make your own decisions.
- Substitute Attorney – a person appointed to act as Attorney if the first choice Attorney(s) is unable to act.
- Jointly or Jointly and Severally – this describes the way in which attorneys can act if there are 2 or more appointed together. Jointly means all decisions made on behalf of the Donor must be agreed by all appointed Attorneys. Jointly and Severally means Attorneys have the ability to make decisions together (jointly) or individually (severally) on behalf of the Donor. Jointly and Severally is often more practical.
- Wishes – when making a LPA, a Donor can put wishes in the document which are things that they hope the Attorneys will take into account when making a decision but they are not legally bound by this.
- Instructions – when making a LPA, a Donor can put instructions in the document which are things that the Attorneys must comply with when making decisions. Unlike Wishes, these must be followed.
- Donor – the legal term used to describe someone who makes a LPA giving the power to make decisions on their behalf to the Attorneys.
- Registration of Lasting Power of Attorney – before a LPA can be used it must be registered with the Court. This process can take 6-8 weeks and there is often a court fee (currently £82 per document registered).
- Office of the Public Guardian (OPG) – the government body that deals with all matters relating to LPA’s and EPA’s.
- Deputyship Order – if a person has not made an EPA or LPA and they no longer have Mental Capacity to make one, the Court of Protection can make a Deputyship Order which appoints Deputies to make decisions on behalf of the person who has lost Mental Capacity. This can be in respect of their Property & Financial affairs, Health & Welfare or both. Legal advice should be sought when applying for a Deputyship Order on behalf of someone who has lost Mental Capacity.
- Deputy – similar to an Attorney under an LPA, they are the person(s) appointed by the Court of Protection to make decisions on behalf of someone who has lost Mental Capacity.
Glossary of terms – Administration of Estates
- Administration of Estate – the general term used to describe dealing with the affairs of the Deceased. This will involve settling any Debts of the estate (including tax affairs) and then distributing the Assets remaining in accordance with the Will (or the Intestacy Rules if there was no Will).
- Grant of Probate – a legal document issued during the administration of some estates (depending on the Assets and who is a Beneficiary in the Will) where the Deceased left a valid Will. It is issued by the Probate Registry and is usually applied for either by the Executors or a solicitor they have instructed. Find out more about the Grant of Probate process here.
- Letters of Administration – Similar to a Grant of Probate but this is issued where the Deceased did not leave a valid Will (ie died Intestate).
- IHT205/IHT400 – these are inheritance tax forms which must be completed along with the application for either a Grant of Probate or Letters of Administration. IHT205 is used when there is no Inheritance tax payable on the estate and it is a simple estate. IHT400 is used for either estates where there is Inheritance tax payable or for more complex estates (for example that might require the Residence Nil Rate Band to be claimed). There are many other different forms and schedules which may be submitted alongside the IHT205 or IHT400.
- Probate Registry – The Government body that focuses on the administration of estates and the issuing of Grants of Probate and Letters of Administration. There are a number of Probate Registries around the country.
- Executor – See above
- Administrator – a person(s) who applies to administer the estate where the Deceased died Intestate. The role is virtually the same as an Executor. An administrator is usually a Beneficiary of the estate under the Intestacy Rules.
- Debts – something which is owed by the Deceased. For example outstanding mortgage, loan, utility bills, etc. also commonly known as liabilities of the estate.
- Assets – something owned by the Deceased. For example, property, possessions, bank accounts, investments, etc.
- Estate Accounts – an Executor/Administrator has a duty to keep detailed records of all of the Assets and Debts of the estate in case there is ever an issue/dispute regarding the estate. It is often prudent to provide each Executor/Administrator with a copy of these when making the final distributions on an estate and even providing a copy to Residuary Beneficiaries.
- S27 Trustee Act Notices – S27 Trustee Act Notices are placed in a local and national newspaper stating that someone has passed away and providing information of the person administering the estate for any creditors to contact who may be owed money by the Deceased.
- Intestate – someone who dies without a Will
- Intestacy Rules – the rules set out in law which state who is to receive the estate of someone who has died Intestate
- Survivorship/ Rules of Survivorship – where assets are held in joint names, sometimes they might pass automatically to the surviving co-owner(s). This means that any instructions in the Will would be ignored. This most commonly occurs on assets held in joint names such as bank accounts, investments, shares, etc. and, in some instances, property.
- Joint Assets – assets held in the names of more than one person (for example husband and wife). The Rules of Survivorship may apply to Joint Assets.
- Sole Assets – Assets held in the sole name of the Deceased.
- Death Certificate – an official document confirming a person has passed away providing their information, details of the person who registered the death, and the cause of death.
- Coroner’s Fact of Death/Interim Death Certificate – where a death has occurred and the coroner carries out an investigation in order to confirm the cause of death, they may issue a Coroner’s Fact of Death/Interim Death Certificate. This confirms that the person has died but does not state the cause of death. In the interim, it can be used like a death certificate so that the administration of the estate can begin. Once the coroner has completed their investigation to establish the cause of death, a full Death Certificate is then issued.
- Funeral Costs – costs associated with the funeral for the Deceased.
- Inheritance Tax – the tax which is associated most commonly with when someone dies. If the Assets of the estate (and the value of any gifts made in 7 years before the date of death) exceeds the tax allowances (Nil Rate Band and Residence Nil Rate Band) and does not benefit from a tax exemption then the estate may be subject to Inheritance Tax. This is currently charged at 40% on the value of the estate exceeding the allowances (or not falling within an exemption). Inheritance Tax is sometimes known as death duties.
- Spousal Exemption – an Inheritance Tax exemption. This can be claimed on estates for assets which pass to a surviving spouse or civil partner of the Deceased. Anything passing to a surviving spouse or civil partner does not have to pay Inheritance Tax.
- Agricultural Relief – a type of Inheritance Tax exemption/relief which is applicable to assets associated with agriculture assuming the necessary criteria are met. Advice should be sought from a financial adviser or accountant for further information.
- Business Property Relief (BPR) – a type of Inheritance Tax exemption/relief which is applicable to assets associated with a limited company assuming the necessary criteria are met. Advice should be sought from a financial adviser or accountant for further information.
- Nil Rate Band (NRB) – a type of Inheritance Tax allowance which a Deceased person can receive for their estate. Assets within this allowance are not subject to paying Inheritance Tax. This allowance varies depending on the date of death but is currently £325,000.
- Transferable Nil Rate Band (TNRB) – Where a spouse or civil partner died before the Deceased and did not use some (or all) of their Nil Rate Band at the time of their passing, the unused allowance may be claimed by the estate of the Deceased. This is subject to certain criteria which advice should be sought on.
- Residence Nil Rate Band/Residential Nil Rate Band (RNRB) – a type of Inheritance Tax allowance first introduced in April 2017 which applies to property (ie a main residence) which passes to direct descendants (such as children or grandchildren) and is based on the value/equity of the property. This allowance varies depending on the date of death but is currently £175,000.
- Transferable Residence Nil Rate Band (TRNRB) – a similar principle to the Transferable Nil Rate Band. Where a spouse or civil partner died before the Deceased and did not use any (or all) of their Residence Nil Rate Band at the time of their passing, the unused allowance may be claimed by the estate of the Deceased. This is subject to certain criteria which advice should be sought on.
- Personal Representative (PR) – a general term used to describe the Executor(s) or Administrator(s) of an estate.
- Deceased – the person who has died.
- Deed of Variation – a legal document which allows the Personal Representatives or the Beneficiaries of an estate to change the provisions made in the Will (or the intestacy rules) if everyone is in agreement. It must be made within 2 years of the date of death of the Deceased. It can be used for tax planning purposes as well as to amend the wishes of a Beneficiary. There are conditions to making a Deed of Variation and advice should be sought if considering one.
At Fisher Jones Greenwood Solicitors, Our Wills, Life Planning & Probate Team offers a complete Wills and Probate service which includes. From January 2020, we have offered Wills for free and this scheme continues to be ongoing despite the Covid-19 crisis. To take part in our free Wills scheme, call 01206 700113 or email [email protected].