Two terms that are often used interchangeably when people plan their estate are “beneficiaries” and “heirs.” Both of these terms mean that someone can benefit from a decedent’s estate. However, the definitions of these terms are different and using them in the wrong context can drastically change an estate plan depending on which one is being used.
If you’re planning your estate, then knowing the difference between beneficiary and heir can greatly alter your choices. Here’s what you should know:
Who benefits from an estate when there’s no will?
If there is no will, then the decedent will die intestate. Intestate means that a decedent did not make any last wishes as to how their estate should be handled and who would be in charge of settling the estate.
As a result, the state has to assign an executor to disperse assets. Without the will, the executor doesn’t know who the testator intended to pass on their assets to. Instead, the executor will reach out to heirs. An heir is a close relative to the decedent. This may be a spouse, child, sibling, parent or grandparent. However, an heir may not be the decedent’s first choice to inherit from their estate. This is why it’s always recommended for people to have a will.
Naming the people you want to benefit from your estate
With a will, a testator can name exactly who should benefit from their estate. A person who is named in a will is called a beneficiary. A beneficiary can be anyone, such as a spouse, adopted child, friend or charity. Having a will and naming beneficiaries allows a testator to have their estate settled exactly how they wish and can keep assets away from those who are not close to the testator.
There are a lot of legal terms to learn as you plan your estate. Reaching out for legal guidance can help to avoid issues with your estate plan.