As Wills are an important legal document, it is crucial that you understand what your Will says about your estate.
However Wills, having the very nature of a legal document, often uses difficult legal language and terminology leaving most people confused about what the document u can seek advice from a lawyer to draft and explain your Will and assist in your estate planning.
We have summarised the following most commonly used legal terms in Wills & Estates and attempted to break down the legal jargon:
'Wills'
A Will is a simple legal document where you put in writing who you wish to benefit from your estate and who will carry out those wishes when you pass away.
'Estate'
This is the term used to describe all the net assets (after payment of debts) of a person who has passed away. This includes things such as motor vehicles, shares, cash, personal bank accounts and property owned in the deceased's sole name.
However it does not include assets that were jointly owned. Assets held in joint names will be distributed according to the law of survivorship, i.e. the last remaining surviving joint owner will own the asset. For example, married spouses or de facto partners who own the family home or bank accounts in joint names will not be distributed according to the Will but according to whoever survives the other.
'Executor'
This is the person whom the testator/testatrix appoints to administer and execute the will upon the testator/testatrix's death. Multiple executors can be appointed and can act as a safeguard when one of the executors is unable or unwilling to take up their appointment.
For example, Billy appoints his wife Debra as the executor of his will and his son John as the default executor. However at the time when Billy passes away, Debra is unable to administer the will as she is sick and has gone into hospital. Therefore, John steps in and administers the will according to Billy's wishes as the default executor.
When preparing a Will, you should inform the executors that you have appointed them over your estate and tell them where you have kept a copy of your Will so they can find it and administer it when the time comes.
If you anticipate that the estate will need to be administered for a long period of time, such as when the beneficiaries are young children and cannot inherit yet, then you need to consider the executors' health, age, relationship with beneficiaries, maturity, and level of responsibility and competency.
'Beneficiary'
A beneficiary is the person and beneficiaries are the people to whom the testator/testatrix has given something in their Will, i.e. the person who inherits or benefits from the Will.
You can appoint a few classes of beneficiaries. For example, Billy prepares a Will and nominates his wife, Debra as his primary beneficiary. If Debra has not survived Billy, then Billy can appoint his children, John, Rebecca and Mary as default beneficiaries in equal shares. Further, if any of his children, John, Rebecca and Mary have not survived Billy, then his grandchildren can inherit their parent's share.
'Testator / Testatrix'
This is the person making the will.
If they are a male, the word 'testator' appears. If they are a female, 'testatrix' is used.
'Trustee'
A trustee of an estate is a person appointed to look after the estate for the beneficiaries. This is normally the case where the beneficiaries are minor children of the testator/testatrix, and the trustee will look after whatever has been gifted to them until they reach a certain age (or until certain conditions specified by the testator/testatrix are achieved).
As an estate is a trust, the executor is often appointed as the trustee of the estate. They act on behalf of the estate for the benefit of the beneficiaries in accordance with the Will. The trustee has the power to call upon the assets of the deceased and transfer them into the trust for the estate.
A trustee is a common term used in other situations such as corporate trusts, family trusts, unit trusts, discretionary trusts etc.
'Rest and Residue'
This term means whatever is left over in an estate after debts are paid, all expenses arising out of the administration of the will are deducted and after any specific gifts are made.
'Probate'
Probate is when the Will is approved by the Supreme Court of NSW as the one and only true Will of the deceased.
Along with the original Will the following documents must also be filed, the inventory of assets of the estate, affidavit of the executor, etc. The Probate allows the executors to go to third party entities to administer the Will such as going to the bank, transferring legal titles of real estate to beneficiaries, formally distributing assets etc.
'Letters of Administration'
Letters of Administration is when a person has died without a Will or if the Will is invalid or cannot be administered. The rules of intestacy will apply, which means when a person dies without a Will, then the next of kin will inherit the estate. The next of kin has a hierarchy structure. In NSW, the hierarchy according to the rules of intestate is as follows and in order of priority:
Spouse
Children
Parents
Siblings
Grandparents
Aunts and uncles
First cousins
The NSW Government.
'Legacy'
A pecuniary legacy means a lump sum of cash gifted to a beneficiary or sometimes even a charity. At times, people provide a monetary gift to their executor as a thank you for carrying out their wishes.
A specific legacy means a specified item gifted to a beneficiary. This is commonly used to give family heirlooms, jewellery, watches, war memorabilia, and gold bullion.
'Life Estate'
Someone who is given a life estate under a Will holds an exclusive right of possession, use and enjoyment over the property for the rest of their life.
It is a right to reside in a property to the exclusion of others, while some conditions may be imposed on the person inheriting the life estate, such as a duty to keep the property in good condition. Upon the death of the person inheriting the life estate, the property is inherited by the 'remainderman', who is the ultimate beneficiary nominated in the Will by the testator/testatrix.
The person who enjoys the benefit of the life estate does not own the asset but simply enjoys the use of it.
This is more common in older Wills where the testator/testatrix are concerned that a beneficiary is incapable of holding and owning a significant asset, but they wish to still provide them with the benefit of the asset.
'Who survive me'
This phrase is commonly used in Wills where any appointments of executors or beneficiaries are conditional upon the person surviving the deceased.
In NSW, the requirement of surviving the deceased is 30 days from the date of death of the testator/testatrix. This is to avoid the estates having to incur 2 sets of court filing fees, legal fees and administration of estate costs.
While this may equip you with some basic knowledge of how to understand a Will, it is best to get in touch with a lawyer to help you draft and execute a Will and advise you on Estate Planning.
The above information is based in the NSW jurisdiction.
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