Adults should have an estate plan created that outlines what is going to happen with their things when they pass away. These plans can be rather simple but some are complex. It’s imperative that anyone who’s dealing with an estate plan, whether you’re doing this as the creator or when you handle a loved one’s estate, understand some basic terms.
While some of these terms will apply to all estate plans, others may not be relevant. You may find that knowing what these mean can save you time and effort as you handle things related to the estate.
Heir vs. beneficiary
Many people use heir and beneficiary interchangeably, but these have different meanings. An heir is a person who is entitled to receive the proceeds from an estate when a person passes away without a will. A beneficiary is a person who’s named in the estate plan on in the payable on death designations for financial accounts or life insurance policies.
Descendant vs. decedent
A descendant is a person who is related to the person who passed away. These individuals can be related through blood or adoption. Grandparents, parents, siblings and stepchildren aren’t considered descendants for the purpose of estate planning. The person who passes away is known as the decedent.
Executor vs. administrator
An executor is the person who handles the will and ensures compliance with the applicable laws and will terms. This person is sometimes called the personal representative. The administrator only serves if there is no executor for the estate because one wasn’t appointed or because the person who was named can’t take on the duties.
Revocable vs. irrevocable
Trusts are categorized as either revocable or irrevocable. A revocable trust is one that the creator can change or dissolve. These don’t offer any protection from creditors. An irrevocable trust can’t be changed or dissolved by the creator. This type of trust can’t be claimed by creditors. Within these categories, there are various types of trusts that serve different purposes. For example, a special needs trust is an irrevocable trust that’s set up to care for a person who relies on needs-based assistance programs.
Your attorney can help you navigate the ins and outs of the estate plan and probate process. Be sure you work with someone you’re comfortable with so that you know the estate plan is being handled properly.