Glossary of Common Terms Used in Estate Planning & Administration
Beneficiary: A party (person, organization or charity) entitled to receive a benefit or financial plan such as a life insurance or annuity under the terms of a Will.
Capacity: Sufficient understanding and memory to comprehend in a general way the situation in which one finds oneself and the nature, purpose, and consequence of any act or transaction into which one proposes to enter.
Capital Beneficiary: A person who is entitled to a share of the assets held in a trust. The interest of a "capital beneficiary" must be distinguished from that of an "income beneficiary".
Capital Gain: Profit realized on the sale of an asset or the profit deemed to be realized as if the asset had been sold at the time of the owner's death.
Clearance Certificate: A certificate to be obtained from Canada Customs and Revenue Agency by the personal representative of a deceased taxpayer before distributing the assets of the estate. Failure to obtain the certificate can make the personal representative (i.e. the executor) personally liable for the deceased's outstanding tax liability.
Codicil: A written addition to a Will which may add new provisions or change provisions in the existing Will.
Dependant: A family member such as a spouse, parent, grandparent, child or grandchild, brother or sister that the deceased had a legal obligation to provide support for immediately before their death.
Estate: The sum total of a person's assets including bank accounts, investments, personal property, real estate etc.
Executor (male), Executrix (female): The person or trust company appointed in a Will to control and protect the estate's assets, pay off any debts and distribute property as directed by the Will. The value and complexity of the assets and the length of time required to administer the estate are important considerations in choosing an executor or executrix. Executors are also sometimes referred to as ‘Estate Trustees’.
Fiduciary: A fiduciary is a person (i.e. a Trustee) required to act for the benefit of another in matters connected with an undertaking and not for the fiduciary's own personal benefit.
Guardian: A person or trust company who may be appointed to care for the physical well-being of someone who is under the age or majority or an individual who is deemed to be incapable of managing their affairs independently.
Holograph Will: A handwritten Will signed by the deceased which does not require witnesses.
Income Beneficiary: A person who is entitled to share in the income earned on assets held in trust.
Inter Vivos Trust: A trust created by a living person. These trusts can be for a variety of reasons, such as estate planning, contingency planning, protecting assets, making charitable donations and protecting beneficiaries who either have difficulties in managing their cash flow or who have personally challenging situations.
Intestate: Dying without a Will or the person who dies without having made a Will or testamentary disposition of his or her property.
Issue: Descendants of a person, including not only children but grandchildren, great-grandchildren and more remote descendants.
Joint Tenancy: A form of co-ownership under which the interest of a deceased person automatically passes to the co-owners.
Legacy: A gift of personal property transmitted by a Will. A legatee is the recipient of this gift.
Personal Property: All property except for real estate and buildings; also known as 'personalty' (as opposed to 'real property' or 'realty').
Personal Representative: The individual administering an estate whether an executor/executrix or administrator.
Power of Attorney - Property: Authorizes an individual or trust company to be act on another person’s behalf to manage finances and property if an individual loses the ability to do this themselves. The ‘attorney’ cannot change any beneficiary designations or make a new Will on the individual’s behalf.
Power of Attorney – Personal Care: Authorizes an individual to make decisions about another’s personal or health care. A trust company cannot act in a personal care capacity.
Probate: The official confirmation of the validity of the Will by the courts, confirming the executor or executrix's legal authority.
Real Property: Includes land and buildings; also known as 'real estate' or 'realty.'
Residue: That portion of an estate remaining after all debts, taxes and expenses have been paid and all specific bequests and specific devises have been made.
Specific Bequest: A gift under a Will of a specific item of personal property or a specific cash amount.
Specific Devise: A gift under a Will of a specific item of real property.
Surety Bond: Some provinces require an executor who resides outside the jurisdiction of the court overseeing the estate to post a foreign executor surety bond to ensure that they carry out all the duties required of them in good faith. Surety bonds are also required in other estate situations, such as in the case of an intestacy.
Survivorship: The legal right where a person becomes the owner of property by reason of having survived the other person who had an interest in the property.
Testator (male), Testatrix (female): The person who makes the Will.
Testamentary Capacity: This is a legal requirement to the making of a Will and is the ability of a person to know and understand what it means to make a Will, what the nature and extent of their property is, and how they would like their property to be disposed of.
Testamentary Trust: A Trust created by a will; for example, an individual leaves money to a grandchild to be held in trust until the age of 21.
Trustee: This is the person who is appointed to be the decision maker by the granting party to manage property or money.
Trust: Basically, this is a legal structure whereby a trustee deals with property or assets, e.g., cash, stocks, bonds, etc., over which the trustee has control, for the benefit of persons called beneficiaries. There are two main types of trusts: inter-vivos (living) trusts and testamentary trusts. These trusts serve different purposes and objectives and can have different tax implications.
Will: The legal statement of a person's wishes concerning the disposal of his or her property after death. Some assets can be passed on without a Will – for example, jointly-owned assets such as a home plus life insurance proceeds, and, in some circumstances, registered funds, annuities and pensions.
Our Estate and Trust Specialists would be happy to answer any questions you may have. If you would like to learn more about our services or arrange a meeting with one of our Specialists, please contact the TD Waterhouse Private Trust branch nearest you by consulting our Private Trust Branch Directory.
|
