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B Law 2 Unit 4 Ch 37

Insurance, Wills, and Trusts

TermDefinition
insurance A contract in which, for a stipulated consideration, one party agrees to compensate the other for loss on a specific subject by a specified peril.
risk A prediction concerning potential loss based on known and unknown factors.
risk management In the context of insurance, the transfer of certain risks from the insured to the insurance company by contractual agreement.
policy In insurance law, the contract between the insurer and the insured.
premium In insurance law, the price paid by the insured for insurance protection for a specified period of time.
underwriter In insurance law, the insurer, or the one assuming a risk in return for the payment of a premium.
insurable interest An interest that exists when a person benefits from the preservation of the health or life of the insured or the property to be insured.
binder A written, temporary insurance policy.
incontestability clause A clause in a policy for life or health insurance stating that after the policy has been in force for a specified length of time (usually two or three years), the insurer cannot contest statements made in the policyholder’s application.
will An instrument made by a testator directing what is to be done with his property after death.
testate Having left a will at death.
intestate As a noun, one who has died without having created a valid will. As an adjective, the state of having died without a will.
intestacy laws State statutes that specify how property will be distributed when a person dies intestate.
testator One who makes and executes a will.
executor A person appointed by a testator in a will to administer his estate.
administrator One who is appointed by a court to administer a person’s estate if the decedent died without a valid will or if the executor named in the will cannot serve.
devise A gift of real property by will, or the act of giving real property by will.
bequest A gift of personal property by will (from the verb to bequeath).
legacy A gift of personal property under a will.
devisee One designated in a will to receive a gift of real property.
legatee One designated in a will to receive a gift of personal property.
holographic will A will written entirely in the testator’s handwriting.
nuncupative will An oral will (often called a deathbed will) made before witnesses; usually, limited to transfers of personal property.
codicil A written supplement or modification to a will; must be executed with the same formalities as a will.
probate The process of proving and validating a will and settling all matters pertaining to an estate.
will substitutes Various instruments, such as living trusts or life insurance plans, that may be used to avoid the formal probate process.
per stirpes A method of distributing an intestate’s estate so that each heir in a certain class (such as grandchildren) takes the share to which his deceased ancestor (such as a parent) would have been entitled.
per capita A method of distributing an intestate’s estate so that each heir in a certain class (such as grandchildren) receives an equal share.
trust An arrangement in which title to property is held by one person (a trustee) for the benefit of another (a beneficiary).
living (inter vivos) trust A trust created by the grantor (settlor) and effective during his lifetime.
testamentary trust A trust that is created by will and therefore does not take effect until the death of the testator.
charitable trust A trust in which the property held by the trustee must be used for a charitable purpose, such as the advancement of health, education, or religion.
spendthrift trust A trust created to protect the beneficiary from spending all the funds to which he is entitled. Only a certain portion of the total amount is given to the beneficiary at any one time, and most states prohibit creditors from attaching assets of the trust.
Totten trust A trust created when a person deposits funds in his own name for a specific beneficiary, who will receive the funds on the depositor’s death. The trust is revocable at will until the depositor dies or completes the gift.
constructive trust An equitable trust that is imposed in the interests of fairness and justice when someone wrongfully holds legal title to property.
resulting trust An implied trust arising from the conduct of the parties; when one party holds the actual legal title to another’s property only for that other person’s benefit.
Created by: leighg2011