Estate Jargon: Key Concepts Explained
The range of jargon surrounding estate law can be overwhelming. Many people with no previous experience of this area of the law find it very off-putting, and this often leads to poor decisions.
It is likely that you will be affected by estate law at some point in your life, whether as a testator, beneficiary or administrator. We have compiled a guide to some of the most common jargon with which you will have to contend, in order to get you off to a head start.
Estate.Your total assets are referred to as your ‘estate’. It is commonly thought that estates only come into being upon the death of an individual, but this is not the case. Your estate simply represents your total net worth at any given moment.
Probate.This is the process by which an estate is dealt with following the death of an individual. The probate process will involve valuing the estate, reading and interpreting the will (if one exists), paying outstanding liabilities, and distributing assets from the estate to the appointed beneficiaries. Probate can be a long process, particularly when there is disagreement over a will.
Intestacy.When an individual dies without leaving a will, they are said to have died intestate. This can have significant implications for the probate process and the eventual disbursement of assets.
Trust.A trust is a legal agreement that provides a means by which property can be managed by one party, on behalf of or for the benefit of another. Trusts have a number of potential uses, but are often established in an effort to ensure that assets are disbursed according to an individual’s wishes on their death.
Settlor.The party establishing a trust. They ‘settle’ assets by transferring them into trust.
Beneficiary.The party on whose behalf the assets in a trust are managed. The beneficiary may or may not be specifically named when the trust is established, depending on the trust type.
A trust that is created upon the death of the settlor. This type of trust is often created in a will.
Capital Gains Tax.
Often referred to as CGT, this tax is paid when an asset is disposed of, and it has increased in value since it was acquired. CGT is levied at a rate of 18 per cent for basic rate taxpayers, and 28 per cent for higher rate taxpayers.
This tax (referred to as IHT) is levied in the event that an estate is worth more than the Nil-Rate Band, which is currently set at £325,000. IHT is charged at 40 per cent, and avoiding it is a key concern for many people.
This describes the measures taken to plan for the successful disbursement of assets following an individual’s death. Success can be judged in a number of ways; Inheritance Tax mitigation is one of the most common. There is a range of estate planning techniques available, many of which are explored on this site.
Remember that you may have to seek help from a solicitor or other legal professional to help ensure that your affairs are dealt with properly. If you are in any doubt, make sure that you seek this help before taking action.