Two important terms to understand during the estate planning process are “beneficiary” and “heir.” Both of these terms are related to who has the benefit of inheriting assets from an estate after the testator passes away. However, these terms are used in different contexts.
As you begin the estate planning process, it can help to learn about the difference between beneficiaries and heirs. Here are the basics:
Choosing who should inherit from your estate
In cases when people pass away without an estate plan, they are said to have died intestate. Intestate is a situation where the testator’s last wishes are not established and, thus, the state is responsible for directing what happens next.
The state will name an executor who oversees the execution of the estate and settles the estate according to statutory rules. The “heirs” of the estate are determined by a succession schedule that is unique to each state – but this may or may not reflect the testator’s wishes. Heirs are direct relatives of the deceased who can generally expect to inherit.
In comparison, a proactive testator can choose to designate anybody they want as a beneficiary of their estate. It merely requires a valid will for a testator to express their wishes. For example, the testator can name their spouse and children as their beneficiaries – but they can also name friends, co-workers or charities as beneficiaries. This can help divvy up an estate exactly how a testator envisions it.
If you’re starting to think about your own mortality and you want control over how your estate is distributed, don’t wait – get a will in place. Experienced legal guidance can help.