Glossary of Estate Planning Terms
Willful was designed to make it so easy to create your own legally-binding will that you can skip the trip to a lawyer and avoid getting your own law degree. That being said, the process of estate planning can be riddled with plenty of confusing lingo.
Here are some of the most common estate planning terms in Canada and what they mean for your estate.
Abatement: Occurs when the value of the residual estate, disposition of property, or bequests exceed assets. This results in the reduction of value of the bequests in order to satisfy repayment of other debts.
There are exceptions to the rule that often are related to the construction of the Will based on the intention of the Testator. For example, courts have made broad interpretations of property intended to be given and have found they can trace the specific investment into a re-investment and, thus, avoid ademption.
Administrator: Someone appointed by the court as the personal representative of the estate in the event that the deceased died without a will. The administrator has the same duties as an executor, only they can’t begin to act on your behalf until the court gives permission - which can take a while.
Advance Healthcare Directive: See Power of Attorney for Personal Care.
Affidavit of Execution: A legal document sworn by one of the witnesses of a will or codocil verifying that they and the other witness (if two witnesses are required) were present for the signing of the document in the Testator’s presence.
Agent: See Attorney.
Attorney: Someone you trust with the authority to make decisions on your behalf about your property, finances, personal life, and medical care in the event of an emergency, should you become incapacitated and be unable to make those decisions for yourself. Also called an Agent or Representative in some provinces.
Assets: Tangible or intangible items of value owned by the Testator. For example: property, vehicles, cash, bank accounts, investments, and patents.
Beneficiary: An individual whom you assign within your will to receive your property or assets after you pass away.
Bequests: Identifiable pieces of property (real or personal) or monetary amounts gifted to specified individuals upon your passing. They are not included in your residual estate. Common bequests include cash, jewelry, art, clothing, or momentos with special meaning. Also referred to as specific gifts.
Codocil: A legal document that amends specific terms outlined in a will in an effort to keep it up-to-date. For example, adding a new child to your Will after giving birth. Online will creation platforms like Willful do not require a codicil to make updates to a will. If you make updates using an online will creation platform, be sure to print and follow the signing and witnessing instructions again to make the Will legally-valid.
Contest: A formal objection to the validity of a will or to dispute the terms outlined in a will.
Contingent beneficiary: An individual or charity you designate to receive your estate in the unlikely case all of your primary beneficiaries are unable to inherit your estate - think of it as an ultimate backup beneficiary. Also known as an Alternate Beneficiary.
Enduring Power of Attorney: See Power of Attorney for Personal Care.
Estate planning: The process of arranging, while alive, the distribution of your assets and wealth (your “estate”) after you die.
Executor: A trusted individual appointed in your will who helps execute the wishes outlined in your Will, and can act on behalf of your business and financial interests when you die. This person may also be your Estate Trustee.
Guardian: A person or people who will assume legal, moral and financial responsibility for your children if you and your spouse pass away. Guardian(s) are usually a family member or close friend.
Healthcare Directive: See Power of Attorney for Personal Care.
Holographic will: A will handwritten (not typed) by you (the Testator) which requires no witnesses. This method is often not recommended, as human error may result in contradictions, omissions, and/or errors to the Will. A holographic will must be signed by the Testator.
Incapacitated: A state of permanent or temporary physical or mental impairment that results in an individual’s lack of sufficient understanding to make rational and responsible decisions related to their healthcare or personal assets.
Inheritance: The assets gifted - or “bequeathed” - to a loved one upon an individual’s passing.
Intestate: Dying without a will. The opposite of dying testate.
Last Will and Testament: A legal document that outlines how you wish to distribute your assets such as property (real or personal), money, or care of minor children after you die. Your will is also where you name your Executor who will be in charge of settling your affairs on your behalf. To be legally-binding, a will in Canada does not need to be created by a lawyer - it just needs to be created by you in sound mind, signed with wet ink, and witnessed by two people who are not named beneficiaries in your Will, or in some provinces, their spouses as well.
Legacy gifts: Specific monetary amounts donated to a charity or nonprofit organization at the time of your passing.
Living will: See Power of Attorney for Personal Care.
Mirrored will: Used to allow two people, usually married couples, to create almost identical wills which leave everything to each other. This would cover both parties’ wishes.
Mirrored wills created through Willful have the unique benefit of requiring only one account to set up, and mirrored sections are auto-filled for quick, easy, and consistent document creation.
Notarization: The process of authenticating a legal document, such as a will. This can include witnessing a document, and verifying that the signatures on the relevant document are legitimate and made by individuals of sound mind. You do not need a notary to create a legal will, although some provinces require Power of Attorney documents to be notarized. You can see a list of the provincial notary requirements here.
Notice to Creditors: A public notice posted by an executor during probate to notify creditors of a testator’s death so creditors may claim outstanding debts. If a Notice to Creditors is not posted, a creditor can make a claim against the estate and the Estate Trustee or Executor may be held liable. NoticeConnect is an online platform in Canada that allows you to post Notices to Creditors.
Power of Attorney (POA): A legal document that gives someone you trust the authority to make decisions, on your behalf, about your property, finances, personal life, and medical care in the event of an emergency or if you become incapacitated and are unable to do so yourself. The individual named in your POA may be named your Attorney, Representative, or Agent.
There are two types of POAs - one governing your healthcare wishes, called a Power of Attorney for Personal Care, Health Care Directive, or Enduring Power of Attorney, and a Power of Attorney for Property, which gives your Attorney the power to make decisions about your finances and property.
Power of Attorney for Personal Care: Governs the medical care you will receive if you are unable to advocate for yourself. Can include the withdrawal of treatment or prolonging of your life should you fall into a persistently vegetative (or incapacitated) state, and your preferences for maximum or limited pain relief if you were unable to communicate. Also known as a Health Care Directive, or Enduring Power of Attorney.
Representative: See Attorney.
Residual estate: Covers all personal, financial, and real property that is not jointly-owned (i.e. a house or bank account), has a named beneficiary, and is not given away as specific gifts (also known as bequests) or lump sum charitable donations (also known as legacy gifts) after debts and taxes have been paid.
Testator: An individual who has written a Last Will and Testament.
Trust: An arrangement that assigns a trustee to hold assets upon specific conditions that are outlined in a Last Will and Testament on behalf of a beneficiary upon the Testator’s death. A trust specifies when and under which conditions the beneficiary may inherit the asset(s). A trust is often used to hold inheritances for minor children until they reach the age of majority.
Trustee: A trusted individual appointed in your Will who holds your estate assets in trust until distributing them to your beneficiaries. This person applies to the court to obtain probate and is also commonly known as an executor.
Will registration: The process of documenting the existence and location of your completed Will through a secure registry, like the Canada Will Registry. This allows your Executor and loved ones to confirm that you have a legally-binding will and easily locate your Will upon your passing (note that in Canada, it’s not legal to digitally sign or store your Will - a will registry may confirm the existence of and location of a will, but it will not provide the full document).
Witness: A person who participates in validating a will or Power of Attorney documents. Two witnesses are required to sign a will or POA documents to confirm that the Testator has indeed created and signed their own documents. The witness(es) will confirm this by signing the documents as well to make them a legal document. A witness to a will cannot be a named beneficiary in the Will, or the spouse of a named beneficiary.