One of the things that many people do as they plan their estate is use the terms “heir” and “beneficiary” interchangeably. While an heir and beneficiary are both terms that mean someone who has a legal right to gain from the deceased’s estate, they aren’t typically used in the same context.
If you’re planning your estate, it can help to know the difference between heir and beneficiary. Here’s what you should know:
Who is your next of kin?
You could die without a valid will. As a result, you’ll die intestate, which means the state has to oversee the distribution of your estate. Without your will, the state would need to reach out to your heirs to distribute property. Your heirs are your next of kin or blood relatives. A next of kin may be a spouse, child, adopted child, parents, siblings, cousins or grandparents. There’s typically an exact order of heirs if there’s no valid will.
Who can you name in a will?
You may wish to ensure your assets go to the people you believe have a right to your estate. Your will can include beneficiaries. Beneficiaries can be anyone from your spouse, children, friends, colleagues or charities. The exact order of beneficiaries is typically up to you.
Many people name primary beneficiaries who have the first right to gain from an estate. Assets left over may go to a secondary or contingent beneficiary. This typically happens when a primary beneficiary can’t be reached. More than one primary beneficiary may be named to gain a percentage of an estate.
There’s a lot of legal terminology when estate planning. You may need to reach out for legal guidance as you make your estate plan.