If you’re making an estate plan, then you’ve likely heard the terms “heir” and “beneficiaries” used to mean someone who will gain from an estate. While these terms are often used interchangeably, they are not the same thing.
Understanding the difference between heirs and beneficiaries can greatly affect your estate plans. Here’s what you should know about each of these terms:
An heir inherits when no will is made
An heir is anybody who would have a claim over your assets if you don’t have a legal will. This would include your spouse, your children (including adopted children), your parents and your siblings — roughly in that order. Finally, any extended family may gain from your estate, such as grandparents and cousins.
Typically, this is only necessary when a legal will isn’t found. If there’s no legal will, then the estate goes through an intestate succession process, which is handled according to the order of heirship as established by the state.
You choose your beneficiaries
Many people want to give assets to multiple people. Testators can use a will to name beneficiaries, who have legal claims over assets. Beneficiaries can be anyone, such as spouses, children, siblings, co-workers, friends or charities.
Testators can also name a primary beneficiary who is the first to gain from an estate, then secondary and contingent beneficiaries to follow.
It’s often important to understand complex legal terms as you plan your estate. You may need to reach out for experienced assistance as you develop your estate plan.