In honor of National Estate Planning Month, we’re looking at the difference between an heir and a beneficiary. Contrary to popular belief, the two aren’t the same thing and there are some important differences to consider. Understanding what they are and what they mean could change the way you handle your last will and testament.
Jump To Section
Who is an Heir?
If someone dies without estate planning, that’s called dying intestate. In this situation, state law determines how the estate is passed to others and which heirs have the legal right to receive assets. The estate enters the probate process and could take years to settle.
If a person dies intestate, the probate court appoints a personal representative. The person serves as the Executor to oversee asset distribution.
What Rights Do Heirs Have to a Deceased Person’s Estate?
If there’s a valid Last Will and Testament, the heir’s right to an inheritance is clearly spelled out. If there’s no formal estate plan, legally, the next of kin are heirs. State law dictates the intestate succession order. In most situations, it follows this order:
- Close relatives
- Other family members
Can a Parent Be an Heir?
In cases where adult children with assets pass away before marrying and having a family of their own, parents are considered heirs.
Types of Heirs
The term “heir” may describe someone who’s entitled to some portion of a decedent’s property, there are legal considerations for different types of heirs.
This is the person logically to have rights to receive assets. The claim cannot be discounted because another heir is born. The heir apparent is the first person in line for the succession order.
The presumptive heir is someone who is entitled to an inheritance, but their right may be displaced.
Most of the time, an adoptive heir has the same legal right as biological children. Some states have intestate laws that may block adopted children from an equal share of the estate. That’s why it’s crucial to speak to an attorney regarding your state laws.
This is a blood relative of the deceased, but not a direct descendant. For example, it may be siblings, cousins, aunts, uncles, or another family member.
Who is a Beneficiary?
A beneficiary is a person who’s legally named to receive property from an estate. Naming beneficiaries in your Will helps to ensure all your assets go to the people you want them to go to. For instance, if you want to leave property to your grandchild, naming them as the beneficiary in the will supersedes succession order. Without it, the property could go to their parents instead.
If you have strained relationships with your kids and don’t want them to inherit anything, you must have a will in place. Despite the fact that they are your closest heirs, they won’t be legally entitled to claim assets, as long as the will states that they must go elsewhere.
There is an exception for spousal rights, however. If a parent has a will stipulating that all the assets should be divided among the children but remarries without amending the will to include the spouse: spousal rights give the surviving spouse the ability to claim a percentage of assets even though they aren’t listed in the will.
This has to do with community property laws that state any income (or debt), real property, or personal property acquired during the marriage is the property of both spouses, no matter who earns or spends the income. These state laws vary as well, making legal counsel all that more important.
Heir vs Beneficiary
The main difference is that an heir is a close relative in line to receive an inheritance from your estate if you die without a proper estate plan in place. A beneficiary is someone you name with legal documents, to receive your assets upon your death.
If you do not legally name beneficiaries before your death, the state intestacy law, not your last wishes, dictates what happens to your assets. If you want close friends, rather than blood relatives, to have access to your estate, you must name them as beneficiaries. They would not be heirs.
Some assets, such as a life insurance policy, require you to name a beneficiary. This may also be the next of kin but doesn’t have to be. The life insurance funds will always go to the named beneficiary.
Heirs can be beneficiaries – but not all beneficiaries are heirs.
An Heir Can Get A Loan on an estate in probate
An heir can receive a loan or a cash advance on inheritance that is tied up in the probate process. Heir loans are difficult loans to receive and come with high-interest payments. As a result, many heirs opt to receive a cash advance since it is quick and easy to obtain.
Don't Wait for Probate
Can You Contest a Will or Estate Plan?
Yes, any heir who has a valid interest in the estate has the right to contest a relative’s estate plan. To contest means to legally question the last will and testament. For example, the signature may be forged or the deceased was under duress when drafting and signing the will.
To contest a will is not only time-consuming but also expensive. Always seek legal advice before attempting to contest a will.
Do You Have an Inheritance Stuck in Probate?
If your inheritance is in probate, it could be months or even years before the case is settled. If you need money now, it doesn’t help. Contact us today to find out how you can access money without needing to wait for probate.