Many individuals often use the terms heir and beneficiary interchangeably. They don’t mean the same thing, though. It’s important to understand the difference between the two terms as you begin your estate planning.
An heir is someone related to a deceased person. An heir may qualify for a portion of a decedent’s estate if they die without a will. Whether they qualify for inheritance and how much will depend on a state’s intestate succession.
A beneficiary doesn’t have to be a family member
Beneficiaries are those individuals specifically named in a person’s will or trust. Unlike an heir, there’s no requirement that a beneficiary be related to a testator (the person drafting the will). They can be a friend or a charitable organization, for example.
Beneficiary designations can also be made directly on accounts and insurance policies. They state who will receive specific assets, such as a life insurance policy, when a person dies. If there’s a discrepancy between what the beneficiary designation says and what a will says, the beneficiary designation typically prevails.
Understanding the difference between beneficiaries and heirs is important
If you are in the process of developing your estate plan or are an executive or personal representative for someone’s estate, then it’s important that you understand the difference between a beneficiary and an heir.
Conflict arises when there’s confusion about what these terms refer to. You may want to continue browsing our website to gain a better understanding of the ins and outs of the estate planning process to ensure you’ve done everything necessary to achieve your desired end results.