Estate (law)
Encyclopedia
An estate is the net worth
of a person at any point in time. It is the sum of a person's assets - legal rights, interests and entitlements to property
of any kind - less all liabilities at that time. The issue is of special legal significance on a question of bankruptcy
and death of the person. (See inheritance
.)
Depending on the context, the term is also used in reference to an estate in land
or of a particular kind of property (such as real estate
or personal estate
). The term is also used to refer to the sum of a person's assets only.
, the estate of a deceased person consists of all the property, whether real
or personal
, owned by the person at the time of death. Assets that pass to somebody else by operation of law (for example, property held on a joint tenancy basis), do not form part of the deceased estate, even though the person had rights to that property during his or her lifetime. Also, if the deceased owned life insurance
and nominated a beneficiary of the policy, the proceeds of that policy would not pass into the deceased's estate, but would go directly to the nominated beneficiary. Similarly, superannuation death benefits can go directly to a deceased's dependent, bypassing the deceased's estate. (See will
and intestacy
) The estate (or assets) of a deceased person is administered by an executor
(in the case of a will) or administrator
(in the case of intestacy
). The function of the executor and administrator is to protect the assets of the estate, pay out all expenses and the decedent's liabilities and distribute the balance in accordance with the directions in the will.
, a person's estate consists of all assets or property of any kind available for distribution to creditors. The estate (or assets) of a bankrupt person is administered by a trustee in bankruptcy
. The legal position in all common law
countries is similar in this respect.
interest is the most complete ownership that one can have of property in the common law system. An estate can be an estate for years, an estate at will, a life estate
(extinguishing at the death of the holder), an estate pur auter vie (a life interest for the life of another person) or a fee tail
estate (to the heirs of one's body) or some more limited kind of heir (e.g. to heirs male of one's body).
Fee simple estates may be either fee simple absolute or defeasible
(i.e. subject to future conditions) like fee simple determinable and fee simple subject to condition subsequent; this is the complex system of future interests
(q.v.) which allows concepts of trusts and estates to elide into actuarial science
through the use of life contingencies.
Estate in land can also be divided into estates of inheritance
and other estates that are not of inheritance. The fee simple estate and the fee tail estate are estates of inheritance; they pass to the owner's heirs by operation of law
, either without restrictions (in the case of fee simple), or with restrictions (in the case of fee tail). The estate for years and the life estate are estates not of inheritance; the owner owns nothing after the term of years has passed, and cannot pass on anything to his or her heirs.
Legal estates and interests are called rights "in rem", and said to be "good against the world".
s" over the same legal interests. These obligations are called trust
s which will be enforceable in a court
. A trustee
is the person who holds the legal title to property, while the beneficiary
is said to have an equitable interest in the property.
Net worth
In business, net worth is the total assets minus total outside liabilities of an individual or a company. For a company, this is called shareholders' preference and may be referred to as book value. Net worth is stated as at a particular year in time...
of a person at any point in time. It is the sum of a person's assets - legal rights, interests and entitlements to property
Property
Property is any physical or intangible entity that is owned by a person or jointly by a group of people or a legal entity like a corporation...
of any kind - less all liabilities at that time. The issue is of special legal significance on a question of bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
and death of the person. (See inheritance
Inheritance
Inheritance is the practice of passing on property, titles, debts, rights and obligations upon the death of an individual. It has long played an important role in human societies...
.)
Depending on the context, the term is also used in reference to an estate in land
Estate in land
An estate in land is an interest in real property that is or may become possessory.This should be distinguished from an "estate" as used in reference to an area of land, and "estate" as used to refer to property in general....
or of a particular kind of property (such as real estate
Real property
In English Common Law, real property, real estate, realty, or immovable property is any subset of land that has been legally defined and the improvements to it made by human efforts: any buildings, machinery, wells, dams, ponds, mines, canals, roads, various property rights, and so forth...
or personal estate
Personal property
Personal property, roughly speaking, is private property that is moveable, as opposed to real property or real estate. In the common law systems personal property may also be called chattels or personalty. In the civil law systems personal property is often called movable property or movables - any...
). The term is also used to refer to the sum of a person's assets only.
Inheritance
In context of probateProbate
Probate is the legal process of administering the estate of a deceased person by resolving all claims and distributing the deceased person's property under the valid will. A probate court decides the validity of a testator's will...
, the estate of a deceased person consists of all the property, whether real
Real property
In English Common Law, real property, real estate, realty, or immovable property is any subset of land that has been legally defined and the improvements to it made by human efforts: any buildings, machinery, wells, dams, ponds, mines, canals, roads, various property rights, and so forth...
or personal
Personal property
Personal property, roughly speaking, is private property that is moveable, as opposed to real property or real estate. In the common law systems personal property may also be called chattels or personalty. In the civil law systems personal property is often called movable property or movables - any...
, owned by the person at the time of death. Assets that pass to somebody else by operation of law (for example, property held on a joint tenancy basis), do not form part of the deceased estate, even though the person had rights to that property during his or her lifetime. Also, if the deceased owned life insurance
Life insurance
Life insurance is a contract between an insurance policy holder and an insurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger...
and nominated a beneficiary of the policy, the proceeds of that policy would not pass into the deceased's estate, but would go directly to the nominated beneficiary. Similarly, superannuation death benefits can go directly to a deceased's dependent, bypassing the deceased's estate. (See will
Will (law)
A will or testament is a legal declaration by which a person, the testator, names one or more persons to manage his/her estate and provides for the transfer of his/her property at death...
and intestacy
Intestacy
Intestacy is the condition of the estate of a person who dies owning property greater than the sum of their enforceable debts and funeral expenses without having made a valid will or other binding declaration; alternatively where such a will or declaration has been made, but only applies to part of...
) The estate (or assets) of a deceased person is administered by an executor
Executor
An executor, in the broadest sense, is one who carries something out .-Overview:...
(in the case of a will) or administrator
Administrator (law)
In law an administrator can be:* a person appointed by the court to handle the estate of someone who died without a will ....
(in the case of intestacy
Intestacy
Intestacy is the condition of the estate of a person who dies owning property greater than the sum of their enforceable debts and funeral expenses without having made a valid will or other binding declaration; alternatively where such a will or declaration has been made, but only applies to part of...
). The function of the executor and administrator is to protect the assets of the estate, pay out all expenses and the decedent's liabilities and distribute the balance in accordance with the directions in the will.
Bankruptcy
Under US bankruptcy lawBankruptcy in the United States
Bankruptcy in the United States is governed under the United States Constitution which authorizes Congress to enact "uniform Laws on the subject of Bankruptcies throughout the United States." Congress has exercised this authority several times since 1801, most recently by adopting the Bankruptcy...
, a person's estate consists of all assets or property of any kind available for distribution to creditors. The estate (or assets) of a bankrupt person is administered by a trustee in bankruptcy
Trustee in bankruptcy
A trustee in bankruptcy is an entity, often an individual, in charge of administering a bankruptcy estate.- United States :In the United States, a Trustee in Bankruptcy is a person who is appointed by the United States Department of Justice or by the creditors involved in a bankruptcy case.In a...
. The legal position in all common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
countries is similar in this respect.
Legal estate in land
In land law, the term "estate" is a remnant of the English feudal system, which created a complex hierarchy of estates and interests in land. The allodial or fee simpleFee simple
In English law, a fee simple is an estate in land, a form of freehold ownership. It is the most common way that real estate is owned in common law countries, and is ordinarily the most complete ownership interest that can be had in real property short of allodial title, which is often reserved...
interest is the most complete ownership that one can have of property in the common law system. An estate can be an estate for years, an estate at will, a life estate
Life estate
A life estate is a concept used in common law and statutory law to designate the ownership of land for the duration of a person's life. In legal terms it is an estate in real property that ends at death when there is a "reversion" to the original owner...
(extinguishing at the death of the holder), an estate pur auter vie (a life interest for the life of another person) or a fee tail
Fee tail
At common law, fee tail or entail is an estate of inheritance in real property which cannot be sold, devised by will, or otherwise alienated by the owner, but which passes by operation of law to the owner's heirs upon his death...
estate (to the heirs of one's body) or some more limited kind of heir (e.g. to heirs male of one's body).
Fee simple estates may be either fee simple absolute or defeasible
Defeasible estate
A defeasible estate is created when a grantor transfers land conditionally. Upon the happening of the event or condition stated by the grantor, the transfer may be void or at least subject to annulment...
(i.e. subject to future conditions) like fee simple determinable and fee simple subject to condition subsequent; this is the complex system of future interests
Future interests
Future interests is the subset of actuarial math that divides enjoyment of property -- usually the right to an income stream either from an annuity, a trust, royalties, or rents -- based usually on the future survival of one or more persons ....
(q.v.) which allows concepts of trusts and estates to elide into actuarial science
Actuarial science
Actuarial science is the discipline that applies mathematical and statistical methods to assess risk in the insurance and finance industries. Actuaries are professionals who are qualified in this field through education and experience...
through the use of life contingencies.
Estate in land can also be divided into estates of inheritance
Inheritance
Inheritance is the practice of passing on property, titles, debts, rights and obligations upon the death of an individual. It has long played an important role in human societies...
and other estates that are not of inheritance. The fee simple estate and the fee tail estate are estates of inheritance; they pass to the owner's heirs by operation of law
Operation of law
The phrase "by operation of law" is a legal term that indicates that a right or liability has been created for a party, irrespective of the intent of that party, because it is dictated by existing legal principles. For example, if a person dies without a will, his heirs are determined by operation...
, either without restrictions (in the case of fee simple), or with restrictions (in the case of fee tail). The estate for years and the life estate are estates not of inheritance; the owner owns nothing after the term of years has passed, and cannot pass on anything to his or her heirs.
Legal estates and interests are called rights "in rem", and said to be "good against the world".
Equitable estates
Superimposed on the legal estate and interests in land, English courts also created "equitable interestEquitable interest
An equitable interest is an "interest held by virtue of an equitable title or claimed on equitable grounds, such as the interest held by a trust beneficiary." The equitable interest is a right in equity that, if violated , is subject to satisfaction...
s" over the same legal interests. These obligations are called trust
Trust law
In common law legal systems, a trust is a relationship whereby property is held by one party for the benefit of another...
s which will be enforceable in a court
Court
A court is a form of tribunal, often a governmental institution, with the authority to adjudicate legal disputes between parties and carry out the administration of justice in civil, criminal, and administrative matters in accordance with the rule of law...
. A trustee
Trustee
Trustee is a legal term which, in its broadest sense, can refer to any person who holds property, authority, or a position of trust or responsibility for the benefit of another...
is the person who holds the legal title to property, while the beneficiary
Beneficiary
A beneficiary in the broadest sense is a natural person or other legal entity who receives money or other benefits from a benefactor. For example: The beneficiary of a life insurance policy, is the person who receives the payment of the amount of insurance after the death of the insured...
is said to have an equitable interest in the property.