In the context of death, the term "principal" can mean several different things.
This definitions refers to the amount of money originally invested, deposited, or allocated by the deceased. It represents the core value of an asset or estate, and is used to determine tax calculations, distributions to Beneficiaries, and other financial matters after a person's death.
However, there are other definitions as well, depending upon context.
Scenarios where the term "principal" might be used after a death include:
Estate Planning: In Estate Planning, a principal refers to the main assets owned by a deceased person, such as real estate, financial investments, or other valuable possessions. These assets are considered the core of their estate.
Power of Attorney: A Power of Attorney is a legal document that gives authority to a person to make any and all decisions for someone else if they are unable to do so themselves. In this case, the person giving the authority is known as the "principal", and the person entrusted make decisions is known as the agent or Attorney-in-Fact,
Trusts: If a deceased person had established a Trust before their death, the principal of the trust refers to the assets that were placed into the trust. These assets are managed by a Trustee and are often designated for distribution to beneficiaries according to the terms of the trust.
Investments: When someone passes away, their investment portfolio may consist of various assets, such as stocks, bonds, or mutual funds. The principal in this context would refer to the original amount of money that was initially invested in these assets.
Financial Assets: Principal might also be used to describe the main value of financial accounts, such as savings accounts or certificates of deposit, that form a part of the deceased person's estate.
Annuities: For Annuity contracts, the principal is the initial amount of money that was invested, and the contract might outline how the annuity payments will be made to beneficiaries after the annuitant's death.