Heir vs. Beneficiary: Is There a Difference for an Estate?
It’s easy to assume that the terms “heir” and “beneficiary” mean the same thing—but in reality, they have different legal meanings that can significantly impact your estate plan. Deciding how your assets will be distributed after your death is a serious matter, and it’s always best to consult a professional attorney. Keep reading to learn more about heir vs. beneficiary and why it’s important to know the differences.
What is an Heir?
An heir is someone who is entitled to a portion of your estate if you don’t have a valid will. Heirs are determined by state law but are usually close family members like spouses, children, parents, and siblings. If you don’t have a valid will, the state will decide the order of priority for your heirs.
What is a Beneficiary?
A beneficiary doesn’t have to be related to you, and it doesn’t have to be a person! A beneficiary is simply a person or organization who receives assets from your estate as outlined in your will or trust. You can name anyone as a beneficiary, including those who would qualify as an heir. Beneficiaries can receive specific assets or a portion of your overall estate.
Heir vs. Beneficiary
The primary difference between these two terms is how they’re determined. Heirs are determined by state law, while beneficiaries are determined by you. Another important difference to be aware of is the timing in which they will receive assets after you’ve passed. Heirs may only receive assets only if there is no will or estate plan in place, while beneficiaries receive assets according to the terms of a will or trust.
Why Knowing the Difference is Important
While they seem similar on the surface, it’s crucial to understand the difference between heir vs. beneficiary when creating your estate plan. For some people, having the state determine who gets what after you pass isn’t a big deal—you might have the same priorities as the state. However, there is a wide range of circumstances wherein you would not want the state to decide who gets what, and the probate process is typically much more expensive and complicated when there is no will or estate plan in place.
Maybe you have a sibling, but you aren’t close to them, or maybe you have a friend who’s more like a sibling, and you want them to receive part of your estate. Creating a will and naming beneficiaries ensures that your assets go to the people or organizations you want them to instead of letting someone else choose for you.
Ready to Plan Your Estate?
Estate planning can be stressful, but we’re here to help. We can create an estate plan that meets your goals and ensure that your assets are distributed according to your wishes. Get in touch with Kristin Waters Sullivan today to set up a consultation and start securing your legacy!