Lianne looks at the 12 most commonly found terms in wills and what they really mean.
As the UK general election draws closer, it is becoming increasingly difficult to turn on the television without seeing politicians using impassioned speeches as a means of explaining their parties’ policies. Amongst all of this, inevitably, some individuals will be more successful than others in achieving these aims.
The same can often be said for ‘legal’ terms. Whilst we at Hugh James strive to use clear and everyday language when dealing with our clients, in will writing, as with the preparation of many legal documents, it is often difficult to avoid the use of ‘legal’ terms.
Lawyers specialising in will writing will likely come across many of the terms on a daily basis. However, to a person setting out to make their first will, some of these terms may make the process feel daunting and unknown.
The terms below are some of the most common that come up when writing a will.
Estate – the total value of everything that you own at your death:
- Your ‘free’ estate is the term used to describe the assets capable of passing under the terms of your will. This therefore covers all assets not dictated to pass by any other method (for example land held as “joint tenants” (defined below) would not form part of your free estate as it would automatically pass to the surviving co-owner).
- Your residuary estate is usually the bulk of your estate and comprises all that is left of your free estate after debts, taxes and any legacies have been paid.
Chattels – a legal term, defined in law (s.55(1)(x) Administration of Estates Act 1925), which encompasses most items that you would find in your home and extends to include your pets and your car. The term does not cover any items that you use for business purposes.
- As an aside, we did suggest to the Ministry of Justice that the term ‘chattels’ should be replaced by a more ‘user friendly’ definition, such as ‘possessions’. However, for the time being there are no plans to change the name.
Testator is the term used to refer to a person who has made a will. The feminine for testator is sometimes known as a “testatrix” although many acknowledge that this is a little archaic.
Intestate – the description of a person who has died with a will. This could be wholly (where no valid will was left) or partially (where there was a valid will but it failed to dispose of all the testator’s assets). ‘Intestacy’ is the name given for the situation in which a person’s estate is not distributed by a will but, instead, by law. This is governed by s.46 Administration of Estates Act 1925.
Executor – individual (or individuals/organisation) appointed in a will to ensure the testator’s wishes are followed after death. Executors have a legal responsibility to carry out the wishes in the will and to collect in the assets and administer the estate in accordance with the law. Some important considerations to make when appointing an executor can be found here. The feminine for executor is “executrix” although, again, many acknowledge that this is a little archaic.
Guardian – a person who is appointed by someone who has parental responsibility for a child under 18, to have parental responsibility for that child until they reach 18 in the event of their death. The appointment of a guardian need not be made in a will. However, an executed will fulfils the legal requirements of appointment and ensures that it is recorded together with the rest of your wishes.
- Parental responsibility is the legal term for the rights and responsibilities which a parent or guardian has in relation to a child.
- A child refers to a natural or adopted child but does not include a step-child.
Legacy/bequest -a gift made in a will. This could be of a named item or property (known as a specific legacy) or a sum of money (known as a pecuniary legacy).
Trust – an arrangement where assets are looked after by trustees (defined below) for a period of time as defined in the trust document rather than passed on to the beneficiaries (defined below) absolutely immediately. A trust can be set up during your lifetime or by will and whilst there are various types, the two below are often relevant when dealing with wills:
- Statutory trust – comes into effect where a legacy or share of an estate is left to a beneficiary who is under age and where no other trust provision is made in the will. The minimum age at which a child could take their inheritance outright, in law, is 18. Once the child reaches 18, the statutory trust would come to an end and they would take their inheritance outright. It is possible to amend the terms of the statutory trust. However, this may have inheritance tax implications and should de discuss fully with your legal advisor when making your will.
- Discretionary trust – where assets are placed in the care of trustees who then administer them with discretion, often defined within the trust, as to when, how and to whom to distribute those assets. By its very nature, this type of trust is extremely flexible and allows the trustees to take into account changes in circumstances as time goes on. Amongst other reasons, it may be used to protect assets for future generations or provide for a relative who is unable to look after their inheritance personally.
Trustee – a person/persons or corporation which holds or administers assets for the benefit of a third party, known as a beneficiary. If a trust arises under the terms of your will (for example if there is a beneficiary who is too young to inherit their legacy at the date of your death) then your executors will often, but not always, be the persons named as trustees of the trust. This places further importance on the considerations that should be made in appointing an executor and trustee. A discussion of the duties of a trustee can be found here.
Beneficiary – a person who is to receive a legacy or share of an estate under the terms of a will / trust.
Joint tenants – the term used to describe a form of property ownership where the ownership is collective and the specific shares of each owner are not defined. When on co-owner dies, their share of the property automatically passed to the other co-owners. Further discussion on the importance of understanding joint property ownership can be found here. It is possible to ‘sever’ a joint tenancy such that it becomes a tenancy in common (defined below) by serving notice.
Tenancy in common – a term used to describe a form of joint property ownership where each owner’s share is distinct from the others. Unlike with a joint tenancy, in this situation each co-owner can freely deal with their own distinct share during their lifetime and on death i.e. by will. As above, the importance of understanding joint property ownership is discussed further here.