Sanctification:
To make whole, holy. To be forgiven all the penalties justice would demand for each sin one has committed. Sin is breaking the law of God, which always brings harm to others. Sin creates a debt which must be repaid in full for the debtor to be forgiven for having sinned.
Terrestrial repayment is one for one: an eye for an eye, a tooth for a tooth. (See Exodus 21:23–25)
Celestial repayment is four-fold. (See D&C 98:44, Luke 19:8)
Sanctification from and by Jesus Christ is all or nothing.
To obtain sanctification, one must believe in Christ, be baptized by one having authority, be confirmed a member of the Church of Jesus Christ of Latter-day Saints, and actually receive the Holy Ghost. It is the actual and present companionship of the Holy Ghost that allows a person to being forgiven. (2 Nephi 31:17) If one has been forgiven, sanctified, and sins again, the debt for all the former sins returns. (D&C 82:7) To regain sanctification, a church member may do so by worthily partaking of the sacrament. It is most desirable to die the mortal death in a state of sanctification.
Justification
All mortals individually need to become justified because they fall short of perfect obedience to God, having become “carnal, sensual and devilish” through transgression (Moses 5:13; Mosiah 16:3) In this plight, they cannot be justified through subsequent obedience to the law and cannot change their own nature to become obedient. Furthermore, they are severed from the source of divine power that can change or sanctify them.
When humans who are accountable have faith in Jesus, are truly repentant, call upon His name, and are baptized, they become eligible for the redeeming grace extended through Jesus Christ. As they act always in faith in Jesus Christ, they are sanctified (forgiven of their sins) and justified, becoming keepers of the law of God. To endure to the end is to continue to make every act an act of faith in Christ, to rely “alone upon the merits of Christ” (1Nephi 10:6, Moroni 6:4). The faith by which one receives this grace manifests itself in an active determination to follow Christ in all things. It is demonstrated by obedience to the commandment to repent and be baptized, followed by a life of submission and obedience and service to God and others. (2 Nephi 31:16–20; Moroni 8:25–26).
Justification directly opens the way to sanctification by establishing a “right” relationship of mortals with God. Thus God, without denying justice, can bless them with the sanctifying power of the Holy Ghost (Mosiah 5:1–2; 3 Nephi 27:20). Justification starts the believer on the path toward righteousness. [CCR: This is the reverse of the reality, for it is sanctification which makes it possible to proceed with justification.]
Pseudo-justification: Declaring that a person is just, law-abiding, when they are not.
Real justification: Being strengthened and empowered until one does keep the law of God and have come unto the fullness of the stature of Christ. Through exercise of full faith in Christ, they have followed the Holy Spirit’s promptings until they have learned to keep every law and commandment of Christ, not matter what the cost. They have become a just person made perfect through faith in Christ, having come to rely alone on the merits of Christ. Only truly justified persons can be exalted. For exalted beings must live and work in a universe where sin is always possible and pressure to sin is always great. Before a person can be trusted with exaltation, they must prove, having been tested to the limit, that they will not break any law of God, that they will do the works of righteousness completely, even as Christ did and does. (D&C 76:50–70.)
Just as we justify a margin by getting all of the lines to measure up to a common length, so the character of a human being is justified by following the Holy Spirit until one comes unto Christ and becomes just like Him, keeping the commandments of the Father perfectly, completely, justly. Justification is a matter of degree. The more one can resist temptation to do evil (break the law of God) the more just one becomes. God will allow Satan to tempt his servants mightily, even to their limit, to cause them to be strengthened in resisting evil. As each is faithful, each disciple becomes stronger and stronger until finally there is nothing which Satan can throw at him which will get him to sin. Then he is justified: He has become a fully just person.
The process of justification is to treasure and master everything that is virtuous, lovely, of good report or praiseworthy, habit by habit, until one’s character comes to the measure of the stature of Christ, the great exemplar. If one does that, learning to love God and neighbor with all heart, might, mind and strength, and does not finish that growth in this life, then they will be able to continue that growth in the spirit world and eventually attain the fullness.
The scriptures provide a good summary: “That by reason of transgression cometh the fall, which fall bringeth death, and inasmuch as ye were born into the world by water, and blood, and the spirit, which I have made, and so became of dust a living soul, even so ye must be born again into the kingdom of heaven, of water, and of the Spirit, and be cleansed by blood, even the blood of mine Only Begotten; that ye might be sanctified from all sin, and enjoy the words of eternal life in this world, and eternal life in the world to come, even immortal glory; For by the water ye keep the commandment; by the Spirit ye are justified, and by the blood ye are sanctified;” (Moses 6:59–60)