What is the difference between heirs and beneficiaries?
Estate planning has a lot of unique legal words, such as heir and beneficiary. Heirs and beneficiaries are often used interchangeably to mean someone who would gain assets from the deceased’s will or trust.
However, the use of these words depends on specific situations. Here’s what you should know:
Who inherits from your estate without a will?
Intestate happens when someone dies without a legal will. Without a legal will, the people who gain from an estate are known as an heir. An heir is typically someone who is related to the deceased by blood.
There are several kinds of heirs. A direct heir is the next of kin, or the person who is meant to inherit from an estate first. A direct heir may include a spouse, children or parents. If the deceased adopted a child, they may have the same inheritance rights as a biological child.
If a direct heir isn’t found, then a collateral heir would inherit from an estate next. A collateral heir is someone less directly related by blood, such as a sibling, grandparent or cousin.
Who benefits from your estate with a will?
If a testator makes a valid will, they can name beneficiaries. A beneficiary has a legal claim over assets. Beneficiaries can be anyone, including a spouse, child, friend or colleague. However, a beneficiary could also be a charity or pet, for example.
Testators often have primary beneficiaries who are first to gain from an estate. A secondary beneficiary could be named if the primary beneficiary is unable to do so, which may happen if they pass away. Residuary beneficiaries gain whatever is left in an estate.
Understanding more about how estates work can be helpful as you make your plans. Legal guidance can make it possible to tailor your estate plans to your needs.