Creating And Protecting Your Legacy

What is the difference between an heir and a beneficiary?

On Behalf of | Oct 3, 2023 | Estate Planning |

When creating an estate plan, people are generally leaving their assets to heirs and beneficiaries. These groups may have some overlap, but there are some key distinctions between the two.

To start with, heirs are direct descendants of the deceased. This term is most often used to refer to their adult children. But other family members and close relatives, such as their grandchildren, are also heirs.

Beneficiaries, on the other hand, are those who are given assets in the estate plan. They do not have to be related to the deceased at all. An example could be a coworker or a close family friend. Some people even leave assets to their neighbors. These people are beneficiaries because they were named in the estate plan.

Why is the difference important?

One important thing to keep in mind is that heirs generally have a legal right to inherit. If there was no estate plan, the heirs would inherit the assets from their relative’s estate. This is the outcome they expect unless they are disinherited deliberately.

Other beneficiaries, though, have no claim to that estate unless they are listed in the estate plan. There is no inherent reason for their status other than the fact that this was decided upon by the deceased at the time the plan was drafted. If beneficiaries were not included, they would have no right to inherit.

When drafting an estate plan, it’s important for people to know exactly what various terms mean and how they need to address them. They also need to be sure they understand the legal options they have to craft a plan that works for their heirs and beneficiaries.