During estate planning, two terms that often come up are “heir” and “beneficiary.” Many people think that they are synonyms that can be used interchangeably. However, that is not the case.
So, what is the difference between the two? When is it appropriate to use “heir” versus “beneficiary”?
Definition of heir
The word “heir” is a legal term to designate those who stand to inherit property from a person should they die without a will. Typically, heirs are related by blood to the decedent. However, if an unrelated adult or child was legally adopted, the same rules of heirship apply.
Spouses are not heirs in the traditional sense, but they have rights to some of the decedent’s property under the laws that govern marital property.
So, who are your beneficiaries?
When an individual writes a will, those designated to receive the testator’s property after the pass are designated as beneficiaries. Some beneficiaries may have heir status while others may be unrelated. Beneficiaries can also collect proceeds of insurance policies and receive disbursements from trusts.
Are all heirs also beneficiaries?
If the decedent died intestate (without a will), there are complex laws of succession hierarchy that determine who will inherit what percentage of the estate. But people are free to designate whomever they choose as beneficiaries. An heir can be legally disinherited during the decedent’s lifetime, except in circumstances where forced heirship laws apply.
Resolve any confusion by writing your will
You can take the guesswork out of inheritance laws in Colorado by including a will with your estate planning documents.