When it comes to wills and estate planning, there are a few important terms that everyone should know. Two of these terms are “heir” and “beneficiary.” Although they sound similar, these two words have very different meanings. Here’s a closer look at the difference between heirs and beneficiaries.
What Is an Heir?
An heir is someone entitled to inherit another person’s property, usually because of a family or blood relationship. If there’s no will and assets are distributed according to local intestacy laws, the heir is often the first person in the line of succession.
Heirs may also be appointed by a will, in which case they may not be related by blood to the deceased. An heir may also be a beneficiary of a trust, a legal arrangement in which assets are held for the benefit of another person or group of people.
Heirs are often determined by statute or bylaws and usually don’t need the will to inherit. If there’s no will and the deceased had no children, the next living relative would be the heir. If there are no living relatives, the assets go to the state. If there are children but no spouse, the children would be heirs and would share equally in the inheritance. If there’s a spouse but no children, the spouse would be the sole heir.
What Is a Beneficiary?
The definition of a beneficiary is someone who benefits from something. In the context of estate planning, a beneficiary is a person who receives property or money from a will or trust. A will can name one or more beneficiaries, and a trust can name multiple beneficiaries.
Wills and trusts are important estate planning tools that people can use to distribute their assets after they die. A will is a document in which the person who makes it states his or her wishes regarding the distribution of his or her assets after death. A trust is a legal agreement between a trustee and a beneficiary that allows the trustee to manage and distribute the assets of the trust for the benefit of the beneficiary.
There are several factors to consider when naming beneficiaries:
- One should consider who should receive their assets after their death.
- One should consider the tax implications of naming different types of beneficiaries.
- One should make sure that their beneficiaries are capable of accepting the inheritance.
Some people choose to name their spouse as the primary beneficiary because he or she will be entitled to the assets at death without having to pay taxes. Others choose their children as primary beneficiaries because they can benefit from appreciation rules that allow them to avoid capital gains tax on appreciated assets.
One should also consider leaving assets to charity. If so, one can name a charity as a beneficiary. When they die, the charity will receive the assets from their estate tax-free.
What’s the Difference Between an Heir and a Beneficiary?
An heir is someone who has a legal claim to the assets of a deceased person. A beneficiary is someone who is designated to receive money or other benefits from a trust or insurance policy. The main difference between an heir and a beneficiary is that an heir inherits property, while a beneficiary receives money or other benefits.
Heirs usually receive property under a will, while beneficiaries receive money or other benefits under the terms of a trust or insurance policy. Heirs generally must go through a legal process called probate to receive their inheritance, while beneficiaries generally don’t have to go through any legal process to receive their benefits.
Another important difference between heirs and beneficiaries is that heirs are required by law to pay estate taxes on the value of their inheritance, while beneficiaries don’t have to pay estate taxes on the money or other benefits they receive.
Heirs also have a right of survivorship, which means they automatically inherit the deceased person’s assets after his or her death. Beneficiaries don’t have a right of survivorship, meaning they may not automatically inherit money or other benefits from the trust or insurance policy when the beneficiary dies.
Heirs usually must go through a court process, called probate, to receive their inheritance. Probate is the legal process of verifying that the will is valid and distributing the deceased person’s assets according to the will. The beneficiaries usually don’t have to go through probate proceedings because they are already named in the trust assets, the will, or the insurance policy. Here are a few other differences between the two.
An Heir’s Share of an Inheritance May Be Divided Among Many People, While a Beneficiary Usually Receives the Entire Amount
When a will is written, the testator – the person making the will – decides how his or her property should be distributed after death. There are several ways in which an heir’s share of an inheritance may be divided among many people, while a beneficiary usually receives the entire amount.
One reason for this is that an heir assumes responsibility for managing the assets when he or she inherits. This can be difficult if there are many heirs because it can be hard to agree on what to do with the money or property. In contrast, when a beneficiary inherits, he/she can simply take possession of the assets and doesn’t have to worry about sharing them with others.
Another reason is that an heir’s share may be divided among many people because this is often considered fairer. For example, if one child receives more money or property than another, it could lead to jealousy and conflict. Dividing the inheritance equally among all heirs can help avoid this.
Finally, an heir’s share of an inheritance may be divided among several people because one person can’t take the entire inheritance. For example, if someone dies and leaves a large estate, it may be too difficult or too expensive for one person to manage it alone. In this case, it may make more sense to divide the inheritance among several people.
Overall, there are several reasons why an heir’s share of an inheritance may be divided among several people, while one beneficiary usually receives the entire amount. Each situation is unique and should be considered on a case-by-case basis.
Heirs Can Contest the Will if They Disagree With Its Contents, While Beneficiaries Cannot Contest a Trust or Policy
Heirs can contest the will if they disagree with its contents for two reasons. First, a will is a legally binding document, which means that the court will enforce its terms if an heir challenges it. This can be important if an heir feels that he or she didn’t get his or her fair share of the estate or that the will was written unfairly.
Second, the will is public during probate, which means anyone can see it. This can be important if an heir wants to make sure that the public knows about any unfairness in the will.
Beneficiaries cannot contest a trust or policy because trusts and policies aren’t legally binding documents. Instead, they are simply agreements between the beneficiary and the insurance company or trust. This can be important if a beneficiary has a problem with the terms of their trust or policy.
For example, if a beneficiary feels that he/she is not receiving enough money from the trust, he/she can negotiate with the company and try to agree. However, if an agreement cannot be reached, the beneficiary cannot take the company to court.
An Heir Can Sell or Give Away His/her Inheritance, While a Beneficiary Cannot Do So Without the Permission of the Trustor or the Insurance Company
The ability of an heir to sell or give away his/her inheritance without obtaining permission from the trustor or insurance company is based on two principles: privity of contract and freedom of alienation.
Privity of contract refers to the fact that an heir is a party to the contract of the estate, while a beneficiary isn’t. This means that an heir may dispose of his/her interest in the estate as he/she pleases, subject to any restrictions in the will. A beneficiary, on the other hand, cannot do anything with his/her interest in the estate without obtaining permission from the trustor or the insurance company. This is because a beneficiary has no contractual relationship with the estate; his/her only relationship is with the trustor or the insurance company.
Freedom of alienation refers to the right of a person to transfer his/her property rights to another person. An heir has this right because he/she is a party to a contract with the estate.
Heirs Usually Receive a Larger Share of the Estate Than the Beneficiaries
When a person dies, he or she usually leaves a will specifying how his or her estate should be divided among beneficiaries. Heirs, or those who are entitled to inherit under state law, usually receive a larger share of the estate than the beneficiaries. This is because intestate succession, i.e. inheritance without a will, generally favors heirs over other beneficiaries.
One reason for this is that the law presumes that an heir has a closer relationship with the deceased than other beneficiaries. In addition, intestate succession takes into account the size of the estate and whether there are descendants. This means that an heir who is not related to the deceased or has no descendants may not receive anything from the estate.
Another reason is that heirs are often entitled to assets that aren’t passed on to other beneficiaries. These assets may include real estate and money that the decedent acquired during his or her lifetime. In contrast, other beneficiaries usually only receive assets that are specifically named in the will.
Frequently Asked Questions
What are the three types of beneficiaries?
There are three types of beneficiaries: irrevocable, revocable, and contingent.
Irrevocable beneficiaries are people who are granted specific rights in a will that cannot be revoked or changed by the person who made the will. This type of beneficiary is often used when someone wants to ensure that a specific person receives a gift or money from his or her estate, even if he or she dies first. For example, a parent may name his or her child as an irrevocable beneficiary to ensure that the child inherits his or her assets, regardless of what happens to the parent.
Revocable beneficiaries are people who can be removed from the will by the person making the will. This type of beneficiary is often used when someone wants to change their will after it’s made. For example, if a person’s circumstances change and they want to leave their estate to other people, they can remove the original beneficiaries and name new ones in their place.
Contingent beneficiaries are individuals who receive benefits only if something happens to the primary beneficiary. This type of beneficiary is often used when someone wants to make sure his or her dependents are taken care of financially if he or she dies first.
For example, a parent might name his or her spouse and children as contingent beneficiaries, so that the spouse inherits all the assets if the spouse dies first, the children will receive everything.
An irrevocable beneficiary is someone who cannot be changed or removed from the will, while a revocable beneficiary can be changed or removed at any time. A contingent beneficiary is someone who only receives benefits if something happens to the primary beneficiary.
For example, if a person leaves their estate to their spouse and children, and their spouse predeceases them, the children become the contingent beneficiaries.
What are the different types of heirs?
There are three types of heirs: legal heirs, intestate, and testate heirs:
Legal heirs are those who inherit according to a will or the laws of the state where the property is located. Intestate heirs are those who inherit when there’s no will. Testate heirs are those who inherit when there’s a will. Since most people die without a will, most of the inheritance goes to the intestate heirs.
Intestate heirs can be divided into two categories of heirs: those who inherit automatically and those who must petition to inherit. Automatic heirs are those who are designated by law to inherit, such as spouses and children. Petitioners are those who must file a petition with the court to receive their inheritance. This category includes siblings, parents, and other relatives.
The division of the estate can be complicated depending on the laws of the state where the property is located. However, the estate is usually divided among the automatic heirs first, and then the petitioners share any remaining assets. This process can be contentious if there are multiple beneficiaries or if some beneficiaries believe they should receive more than they are legally entitled to.
Testate heirs inherit according to the terms of a will. A will can be quite specific about how assets are to be distributed, or it can be general. If there’s no will, the estate is distributed according to state law.
In most cases, the spouse and children of the deceased receive most of the assets. If there’s no spouse and children, other relatives receive portions of the estate depending on their relationship with the deceased. This distribution can also be complex and vary from state to state.
Who has a greater right to your estate: heirs or beneficiaries?
The answer to this question isn’t easy to answer. There are several things to consider when answering this question.
It’s important to determine what exactly is included in the estate. Generally, an estate includes all money or property that a person owns at the time of death. However, there may be certain assets that are specifically excluded from the estate.
For example, life insurance policies or retirement accounts may have specific beneficiaries who receive the proceeds after the policyholder’s death or the account holder’s retirement.
If the estate only includes assets that are probated outside of the will, the answer is relatively simple. Heirs have the greater right to the estate because they receive ownership of the assets after the deceased’s death. However, if the estate contains assets that must go through probate, the answer isn’t so clear.
In most cases, beneficiaries are entitled to the proceeds from the sale of assets or payments from the liabilities of the estate. However, if there’s a valid will naming specific heirs, those heirs are entitled to those assets regardless of who the beneficiaries are.
Ultimately, deciding who has a greater right to an estate depends on a variety of factors that apply to each case. It’s important to consult an attorney if you have questions about who should inherit your assets after your death.
Can you contest a will or estate plan?
When someone dies, their estate is settled according to the will or the probate code if they didn’t have a will. However, sometimes people feel that the will or estate plan wasn’t written correctly, and they can contest it.
Before you can contest a will or estate plan, you need to consider a few things:
Whether you have standing to sue, meaning whether you have a legal interest in the outcome of the case.
You must also prove that the will or estate plan was invalid because of a mistake. This may be because the person who made the will wasn’t of sound mind or because they were unduly influenced by someone else. There are other reasons why a will or estate plan may be invalid. It’s best to talk to an attorney to find out if you have a case.
If you decide to contest a will or estate plan, it’s important to act quickly. The sooner you take action, the better chance you have of being successful. It’s also important to remember that this is a very complicated process and there’s no guarantee that you will win. Therefore, you must talk to a lawyer before you take any action.
Conclusion
As you can see, there’s a big difference between heirs and beneficiaries. It’s important to know the difference between these two terms so you can use them correctly in conversation (and understand them when others use them).
