Helpful explanations for some of the more common words and phrases used in trusts, estate planning and administration.

  • Appointment, Power of


    The legal right given to a person by a Will or other legal document to determine how property is to be distributed at a later time. If you have a power of appointment such as this, you should consult a lawyer to ensure that it is properly exercised. Refer also to Executor.
  • Attestation Clause

    The Attestation Clause appears at the end of a Will and states how it was executed (signed) in the presence of witnesses. Attestation is the formality of witnessing a signature.
  • Attorney

    A person who has been legally authorised by another to act on his or her behalf in financial, medical or lifestyle matters. It may also cover guardianship. A Power of Attorney is the legal document that gives the Attorney his or her authority. A Power of Attorney is either Enduring (at a time when you lose capacity) or General (for a specified period of time).
  • Bare Trust

    A Bare Trust is when the beneficiary has an immediate right to call for a distribution of trust property.
  • Beneficiary

    A beneficiary is someone who will benefit from a Will or trust. 


  • Bequeath

    To bequeath something is the act of giving through a Will

  • Bequest

    A bequest is a gift given by a Will. 


  • Capital (Corpus)

    The capital, or corpus, is the body of the Trust – the assets which generate income for distribution to the life tenant or beneficiary. 



  • Capital Gains Tax (CGT)

    Capital Gains Tax is levied from the profit from the sale of property or investments. An inheritance may be subject to CGT. 




  • Charitable Trust

    Where the income beneficiary is a charitable institution or where the income is distributed for a charitable purpose. A charitable trust can be ongoing, continuing in perpetuity. 



  • Class

    Group of individuals defined in the Trust document as opposed to named beneficiaries e.g. “To all my grandchildren.” 




  • Codicil

    A legal document which alters the provisions in an existing Will. The codicil(s) must be kept with the original Will. For clarity and simplicity, Equity Trustees would recommend preparing a new Will. 





  • Contingent

    A contingent gift is a conditional gift. It is dependent on an event in the future, which may or may not happen e.g. a gift “to my wife but if she pre-deceases me, then to my son John” is contingent. John will not receive the gift unless the wife has passed away. 




  • Co-Trustee

    A person or corporation who acts jointly with the Trustee in all elements of the administration of the Trust. 


  • De Facto

    This describes a relationship between two people living together as a couple, regardless of gender. 


  • Discretionary Beneficiary

    A person or charity who is entitled to be considered for a share of the income generated by the assets of a trust, with the amount of the actual distribution fixed at the discretion of the Trustee. 



  • Discretionary Trust

    Income and/or capital of the Trust is held by the Trustee for the benefit of named beneficiaries or a class of potential beneficiaries. The Trustee has the power to determine how much each beneficiary receives.

     


  • Dry Trust

    The only asset of the Trust is a property in which a life tenant has the right to reside for their lifetime, or the right to receive rent from i.e. there is no capital reserve from which the Trust property can be maintained and outgoings paid. 


  • Enduring Powers of Attorney

    Enduring Power of Attorney is a type of appointment that allows a trusted person, or company, the authority manage your financial affairs if you lose capacity. Refer to Attorney (above).

  • Estate

    All assets including property, money and investments you own when you pass away. 

  • Execution

    This describes the signing of your Will. There must be two witnesses present when you sign and they must also both sign your Will. 


  • Executor

    The person appointed to distribute the assets of your estate according to the wishes outlined in your Will. 

  • Executrix

    Rarely used, this term refers to a female Executor. 


  • Fiduciary Duty

    A legal obligation upon an Attorney, an Executor or a Trustee to act in good faith and in the best interests of the beneficiaries and to avoid conflicts of interest or personal gain in the performance of the role. 


  • Fixed Trust

    Where the Trust Deed defines the beneficiaries and determines their entitlements. 


  • Guardian

    A person you nominate to take care of any dependants, usually children. The Guardian may not necessarily look after the children but will make decisions about who does, their education and their finances.

  • In Specie

    This refers to assets in their current state. If assets are distributed ‘in specie’ this refers to transfer of ownership without selling or otherwise changing the assets.


  • Income Beneficiary

    A person or charity who receives a share of the income generated by the assets of a trust. 


  • Intestate

    Intestate, or intestacy, refers to the situation where someone passes away without leaving a valid Will or where there is no surviving beneficiary to receive their entitlement under a valid Will. 


  • Joint Tenant/Joint Tenancy

    Each joint tenant (co-owner) holds an interest in the property which automatically passes to the surviving tenant should one of them pass away. Unless you are the last to pass, such an interest cannot be transferred under a Will and does not form part of the deceased’s estate. 


  • Kin (next of)

    The person who is your closest living relation. If you do not have a valid Will, he or she may have to administer (manage) your estate and may also receive some or all of your estate. 


  • Legacy

    A gift left in a Will; usually a monetary gift.

  • Life Interest Trust

    Income from the assets of the Trust is paid to the life tenant(s) during their lifetime and, on the death of the life tenant, the assets are distributed to the remaining beneficiaries.

     


  • Life Tenant

    A person entitled to the use of a property during their lifetime. 

  • Minor

    A person who has not yet attained their age of legal majority, currently 18 years. 

  • Minor Trust

    Where the assets in the Trust are maintained by the Trustee for the benefit of a beneficiary until they reach the age of 18 or an age defined in the Trust Deed. 


  • Perpetuity

    Continuing forever. A Charitable Trust can continue in perpetuity as there is no fixed time limit on its existence.

  • Presumptive

    A presumptive beneficiary is one who will receive a benefit unless some other event happens. 

  • Probate

    Confirmation by a court of the validity of a Will and the appointment of the executor to manage the deceased’s estate. 

  • Probate Duty

    The tax that was once levied against the estate of a deceased person. Probate, estate and succession duties have been abolished for many years.

  • Protective Trust

    Similar to a Discretionary Trust, however, the beneficiary cannot assign or discontinue their right or interest in the Trust. If they attempt to do so, the Trust automatically becomes a Discretionary Trust, and the class of beneficiaries become the primary beneficiary and his or her spouse and children. 

  • Remainder Beneficiary

    The person or charity who receives the assets of the Trust when the Trust ends. 

  • Residue

    The portion of the estate which remains after payment of all taxes, funeral and testamentary expenses and provision is made for any specific gifts given in the Will. 


  • Revoke

    To revoke a Will or Power of Attorney is to have it cancelled or rendered invalid. Making a new Will usually revokes previous Wills. However, other acts such as marriage can have the effect of revoking a Will, whether this is the intention or not. 


  • Scheme of Appropriation

    A schedule setting out the allocation of assets between beneficiaries of a trust/estate. When prepared by Equity Trustees, the scheme outlines beneficiaries’ individual entitlements in the Trust/estate and differing characteristics of the distributable assets including their CGT costs bases and acquisition dates.

  • Settlor

    Person who creates the Trust by deed. 


  • Special Disability Trust (SDT)

    The primary purpose of this type of trust is to provide for the future of children with a severe disability (their care and accommodation) over their lifetime. Funds donated to a SDT receive means-tested concessions for the beneficiary and attract fewer gifting restrictions on behalf of eligible donors.
  • Specific Bequest

    A gift made by Will of a particular item. 

  • Specific Devise

    A gift made by Will of a particular piece of land. 

  • Tenant in Common

    Where each tenant (part owner) holds separate shares in the property. Your interest as a tenant in common forms part of your estate to be distributed in accordance with your Will. 


  • Testamentary

    Anything which is testamentary is something that relates to the distribution of your assets after your death. 

  • Testamentary Trust

    A trust created by a Will which takes effect on a person’s death. 


  • Testator

    The person making the Will. The feminine of testator is testatrix although the term is now used less frequently. 


  • Testator’s Family Maintenance

    The court may decide that despite the intentions of the deceased, according to their Will, they have a moral obligation to provide for a family member or members.


  • Trust

    The legal relationship between the holder of the title to property and those entitled to benefit from that property. Assets that are held on trust are legally owned by the Trustee for the benefit of others.


  • Trust Deed

    A documented legal instrument which when put into effect creates rights, interests or legally enforceable arrangements to hold assets on trust. 


  • Trust Income

    The income generated by the Trust which may differ in law from tax income as defined by Commonwealth Tax law. 

  • Trust Property

    Assets of a Trust, held by the Trustee for the benefit of others.

  • Trustee

    Person(s) or entity that manage or hold property or money on trust for another (beneficiary) in accordance with the terms of a trust. 

  • Vested

    A vested interest is an entitlement which a person already has acquired, and which cannot be lost because of any event. 


  • Vesting Date

    Date that beneficiaries become entitled to the assets of the Trust. A trust must have a vesting date. The only exception to this rule is a Perpetual Charitable Trust, which can exist in perpetuity. 


  • Will

    A Will is a document which states what is to happen to your assets after your death. It does not take effect until your death and can be changed by you at any time as long as you have the capacity to do so. The Will may also contain other information such as funeral wishes. 


  • Witness

    One of two people who witness the signing of your Will. It is advisable that someone not act as a witness if he or she or their spouse or de facto partner is also a beneficiary of the Will.