On the surface, an heir and a beneficiary may seem like two terms that can be used interchangeably. But the truth is, when it comes to estate planning, there are rights specific to each role, and it’s important you understand the differences.
What Is an Heir?
An heir is a person who’s legally identified as someone entitled to be the recipient of estate property when no Will or Trust is available. Dying without any estate planning is known as dying intestate, and in cases when this happens, state law dictates how an estate is passed down, and which heirs are entitled to assets.
Types of Heirs
While the overarching meaning of “heir” is simply a person entitled to some or all of a deceased person’s estate or assets, there are some legal aspects to the different types of heirs that need to be taken into account.
An heir apparent: An heir apparent is the person considered the most logical and likely to have rights to receive assets from an estate - his or her claim legally can’t be discounted due to the birth of another heir. In simplest terms, an heir apparent is the first person in line in an order of succession.
Presumptive heir: Unlike an heir apparent, a presumptive heir is entitled to inherit, usually a throne or hereditary honor, but his or her right could be displaced or defeated.
Adoptive heir: Adopted heirs are most often considered to have the same rights as biological children. That said, some states have very specific intestate laws that can potentially prevent adopted children from equally sharing in an estate. For this reason, it’s very important to research the laws in your state.
Collateral heir: A collateral heir is someone who comes from the deceased’s bloodline, but isn’t a direct descendent. For example, a sister, brother, aunt, uncle, cousins, etc. would all be considered collateral heirs.
Rights of Heirs to an Estate
Under a Trust or Will, an heir's rights to an inheritance are concretely laid out. In the absence of a formal Estate Plan, legally, heirs are considered next of kin. This means that if an estate owner dies intestate (without a Will or Trust), his or her heirs would be entitled to any property and assets in the estate. As we noted, succession order is dictated by state law, but in most cases it follows spouse - children - descendants - close relatives.
Keep in mind, there are a number of assets that ideally will be set up to pass directly to a beneficiary, even if a Will or Trust doesn’t dictate it. So, for example, proceeds from a life insurance policy wouldn’t necessarily go to next of kin (an heir) if a beneficiary was listed on the policy.
What Is a Beneficiary?
A beneficiary is a person who’s legally named (by the Grantor/owner) to receive property from an estate. Understanding the role a beneficiary plays in your Estate Plan, and the rights they have to the assets or property you want them to inherit, is important. Deciding who to name can often feel a little overwhelming, but our guide can help you determine who should be your beneficiary.
Heir vs Beneficiary
When looking at an heir vs beneficiary, it’s important to understand that there are some distinct differences between the two terms. At a high-level, the main difference is an heir is a descendent or close relative who is in line to an inheritance if you don’t properly set up your Estate Plans. By contrast, a beneficiary is somebody who you name, through a formal legal document, to be the recipient of your assets or property after you pass away. Failing to properly name beneficiaries could result in state intestacy law, rather than your wishes, dictating who gets what from your estate.
Frequently Asked Questions
What rights do heirs have in probate?
What rights an heir has during the probate process depends on what type of estate planning was done. If there is a Will and it is valid, an heir doesn’t necessarily have any rights. The Estate Plan would spell out who’s entitled to what inheritance. That said, if there isn’t a valid Will, it’s then the state law we talked about that comes into play to determine succession order.
Who inherits an estate when there is no will?
If you die without an Estate Plan, it’s legally referred to as “dying intestate.” If this happens, the courts will step in to appoint a Personal Representative who’ll act as Executor and oversee the distribution of your estate. Heirs will receive assets from the estate as determined by intestacy laws.
Estate Planning with Trust & Will
Estate planning has a lot of terminology, and it’s important you understand the differences, especially about things like heirs vs beneficiaries. Knowing the difference between the two is critical, so you can make sure your Estate Plan is set up the way you want it, with the people you intend to receive benefits actually getting them.
Do you need help planning your estate? Get started today with Trust & Will.