What Do All Those Legal Words Mean?
Lawyers often use words that are unfamiliar. What’s even worse is that often, legal terminology is not even consistent throughout the states. Additionally, a legal concept, such as “Homestead” can have several different meanings in different situations.
The area of Estate Planning is full of legal terms that you should know and understand. Let’s identify a few of those terms and explain what they mean.
The first term, of course, is “Estate Planning” which, in its simplest form, means making a plan in advance that names whom you want to receive the things you own after you die and also gives instructions for your care and the care of your loved ones if you become disabled before you die. This is done through use of Wills, Trusts, advance healthcare directives, and durable powers of attorney. If you don’t have a plan, then the State of Florida will control how things are managed. A good estate plan also involves documents that help you during your lifetime as you age, or if you become incapacitated, which many people don’t often consider when they think of Estate Planning.
Everyone knows that a “Will” or “Last Will and Testament” is a written document in which you direct who gets the things you own at your death (called your “estate”). A Florida Will must be executed in strict compliance with the requirements of Florida law in order to be valid. Surprisingly, only half of Americans have a Will when they die. Dying without a Will is referred to as dying “intestate.” If you die intestate, the Florida statutes dictate who gets your assets– which may or may not be how you would have wanted your estate to be distributed. Not having a Will or a Trust can add additional expense for your family members and may result in a need for minors’ guardianships which are expensive and cumbersome (and can be avoided with some Estate Planning).
“Probate” is the court-supervised process for administering an estate. This involves identifying and gathering the assets that a deceased person owned at death, paying debts, retitling assets, and distributing them as directed by a Will or Trust (or if you didn’t have a Will then to the people selected by the Florida legislature in the intestacy statutes). A Will is not effective to re-title assets until it is “admitted to Probate.” This happens when a Circuit Judge signs an Order determining the Will to be valid, and appoints a Personal Representative (sometimes called an “Executor” in other states), to carry out the duties of administering the estate.
Probate doesn’t automatically have to happen. Some people use trusts to re-title and distribute assets after death. Having a Trust and properly funding it during your lifetime is a way to avoid Probate and not involving the court system in the distribution of assets.
Some people do not need to have a probate after their death because they did not own any assets titled solely in their name at their death. For example, life insurance with a validly named beneficiary, joint bank accounts or joint investment accounts, bank accounts that are payable or transferable on death to another, an annuity contract with a properly named beneficiary, or an IRA payable to properly named beneficiaries would not be part of your “Probate Estate” because they automatically belong to another the moment you die. That’s right; your Will doesn’t control those types of assets because they are contracts and you have already directed where the asset goes when you die. Only if there isn’t a valid beneficiary designation would your Will come into play.
The above are a few Estate Planning legal terms that most people eventually run into. The next installment of “What Do All Those Legal Words Mean?” will identify more estate planning terms you should know.
Estate Planning is something that everyone needs. Don’t let others make decisions for you. Our lawyers are here to guide you through this in an easy-to-understand way.