In the estate planning process as well as probate, it is common to hear the terms “heir” and “beneficiary” thrown around and even used interchangeably.
However, there is a difference between these terms, and it is critical to recognize that difference.
What do these terms mean?
The important distinction between these terms is:
- An heir is someone related to the deceased by blood. This includes an individual’s spouse. Even if someone is legally an heir, they might not be listed specifically in the will; and
- A beneficiary is an individual specifically listed in a will, trust or even an insurance policy to receive assets. Beneficiaries can be a family member, friend or an organization. Therefore, a beneficiary of a trust very well might be someone’s heir, but that is not necessary. In some cases, an heir (including a spouse or child) can be omitted altogether in a will or trust.
For example: As a son or daughter, you are your parent’s heir automatically under California law. You become their beneficiary if your parent lists you in their will or in a trust to receive property or financial assets after they pass away.
Why should you know the difference?
If your parent establishes an estate plan, the difference between heir and beneficiary will not likely impact you significantly. However, it is most critical to understand the difference in these terms if your loved one passes away without a will.
When someone passes away without a will, the law states that they pass away intestate. This means that without a will directing how to distribute their assets, the probate court will distribute the estate according to California’s intestate succession laws.
Intestate succession is complex. It is often beneficial to consult an experienced probate attorney to understand the details of intestate succession, but it generally depends on your family’s circumstances – and who your loved one’s legal heirs are. In these situations, it is the heirs-at-law who inherit assets from the estate, including your loved one’s surviving spouse and their children, and in some cases their parents or siblings. With no will, there are rarely any beneficiaries in these situations.
There are many elements of the estate planning and probate processes to understand, but the more you know as you move forward, the more you can prevent confusion and stress while you protect your loved one’s wishes.