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Estate Planning Terminology

When thinking about your estate planning you will often come across legal terminology or phrases which you do not recognise or do not understand simply because you are not familiar with them.

Below we identify some of the common terms or phrases you may encounter with a brief explanation of what they mean.

Administration of a Deceased Estate

This phrase means following the terms of a Will to ensure the testamentary intentions of the deceased person (the instructions in their Will) are followed in order to dispose of or deal with their estate. This is a regulated process in South Australia and can include distributing assets/gifts to beneficiaries, converting assets into cash, closing bank accounts, transferring shares, selling a house, transferring interest in business etc.

The administration of a deceased estate is governed by the Administration and Probate Act 1919.

Advance Care Directives

See our separate page on Advance Care Directives

Beneficiary

This is the person or persons (as the case may be) named in the Last Will of a deceased person who will receive assets from the deceased estate.

A beneficiary can also be a person or persons who are named as beneficiaries in the Administration and Probate Act where the deceased did not make a Will.

Bequest

This is the process of gifting personal property through a Will.

Codicil

Any document which has the legal effect of adding to or amending the terms of an existing Will.

Enduring Power of Attorney

See our separate page on Enduring Powers of Attorney

Executor

This is the person, institution or entity appointed to administer the deceased estate.  The executor can seek legal advice and/or assistance with carrying out this administration.

Grant of Probate (also known as “Probate”)

This is a certificate issued by the Supreme Court of South Australia which authorises the executor to carry out the administration of the estate of the deceased person. Probate confirms that the Last Will of the deceased person is proved and registered in the Court and that the right to administer the estate of the deceased person has been granted to the executor named in the Will.

In order to obtain a Grant of Probate, the executor will instruct a solicitor to prepare the necessary application for Probate which is lodged with the Supreme Court Probate Registry.

The grant of Probate is then produced to the relevant authorities and institutions which the executor is required to deal with during the administration of the deceased estate. For instance, the banks may require Probate to be produced in order to close the deceased’s bank accounts and release the funds held in those accounts to the estate of the deceased person. Also, if land is to be sold, Probate is required in order to transfer or sell real estate owned by the deceased person.

Guardian

In your Will, this is a person who you appoint to be legally responsible and care for any minor child or children. The guardian will take control of the important decisions about the child or children’s welfare including who will care for them, their education and residence.

You are also able to appoint a guardian for an adult child or relative who is incapable of making decision in regards to their living arrangements and personal health due to a mental incapacity/disability. An application is made through the South Australian Civil and Administrative Tribunal where a guardianship order will be made. This order will appoint a guardian to make accommodation, health care and generally lifestyle decisions on behalf of the mentally incapable adult child or relative.

Intestacy

This term applies when a person dies without executing a Will. In this situation, the law determines who receives the assets of the deceased person’s estate.

Joint Tenancy

This describes a form of ownership. If you own property as a joint tenant with another person, you own the property equally with the other person. When a joint tenant dies, that person’s share of the property passes to the surviving joint tenant and is not a willable asset.

Letters of Administration

If the deceased died without making a Will, they are said to die intestate  and the law determines who receives the assets in their estate.

The Administration and Probate Act 1919 determines who the person or persons are who can administer the estate of the deceased person and that person then applies for a document called “Letters of Administration” through the Probate Registry of the Supreme Court of South Australia.

Letters of Administration, like Probate, confirm the death of the deceased person and confirm who is granted the right to administration of the estate. Unlike where there is a valid Will however, the assets of the deceased person who died intestate and the beneficiaries of those assets are determined by provisions of the Administration and Probate Act 1919.

This document is then produced to financial and other institutions, including the Lands Titles Office where there are assets held in the name of the deceased person.

Residue

This is the portion of the estate of a deceased person which remains after payment of all just debts, funeral and testamentary expenses and provision is made for any specific gifts by the Will. In other words, the residue of an estate is all the assets which are left over.

Tenants in Common

This also describes a form of ownership. Unlike joint tenancy however, when you own property as tenant(s) in common with another person you hold an individual, undivided part or portion of the property. Your interest can either by 50% or a percentage which reflects your contribution.

You are able to alienate their share of that property to transfer their interest. A person’s interest does not automatically vest in the other owners/tenant(s) in common. If you have a Will, your interest in the property is transferred pursuant to the instructions in your Will.

Testamentary Trust

A testamentary trust is a trust created by a Will and arises on the death of the testator. This type of trust provides flexibility over an estate, greater control of the beneficiaries over their inheritance and the distribution of assets. Similarly to a family trust, a testamentary trust provides tax effective distribution of capital and income and protection of assets (for example, from spendthrift children or those who find themselves declaring bankruptcy).

Testator/Testatrix

This is the person who has made/written and validly executed a Will or Testamentary Trust.

Trust

The legal relationship between the holder of the title to property and those entitled to benefit from that property.

For example, in circumstances where family farming property, valuable farming equipment and other business assets are involved, it is common for a Family Trust to be established. This will enable the family to protect these farming assets and to pass them down from generation to generation in a tax effective manner.

The trust would be established by a deed with the family members and their direct descendants (for example children and/or grandchildren) as the beneficiaries of the trust. The farming property, farming equipment and other business assets are transferred to the trust and the capital and income generated by these trust assets is distributed to the beneficiaries.

The advantages of this type of trust include:-

  • They are established for the benefit of all the family members;
  • Can provide tax advantages;
  • Can protect the family group’s assets from the actions or liabilities of one family member (for example, if that family member becomes bankrupt);
  • Provides a way to pass family assets to future generations in a tax effective manner;
  • Can avoid challenges to the Will of a senior family member.

Trustee

This is the person(s), institution or entity that is/are appointed to manage or hold property or money on trust for another person (beneficiary) in accordance with the terms of a trust.

The trustee is the legal owner but not the beneficial owner of the trust property. The trustee’s duty is to carry out the terms of the trust in the best interests of the beneficiaries.

A simple example is where in a Will the executor(s) become the trustee of assets or money which the testator has instructed be held on trust for a minor child or children until they turn a particular age.