If you’re planning for the future, then you may be thinking about making an estate plan. An estate plan allows you to anticipate your passing and instruct what happens to your assets afterward. The main legal document in your estate plan is your will.
A will includes an itemization of your assets and people with whom you wish to have a legal inheritance. The people whom you wish to inherit from the estate are considered beneficiaries. However, the term “beneficiary” often gets confused with the term “heir.” This is common since both heirs and beneficiaries can benefit from estates after a testator passes away, but each term has different legal purposes.
Because of this, many people make mistakes that have consequences on their estate plans. Here’s what you should know about these terms:
Understanding the difference between heirs and beneficiaries
An heir is someone who benefits from an estate if there is no legal will. Without a legal will, the state won’t know what the testator’s last wishes were. As a result, they have to resort to giving assets to heirs.
An heir can, for example, be a spouse who is legally married to the testator. An heir could also be the next of kin. The next of kin is the closest relative to the testator through blood, marriage or legal bond. The next of kin could be a child or adopted child, sibling, grandparent or cousin.
Many people want to control who inherits from their estate a little more closely. As mentioned above, the testator can name beneficiaries in their will to receive bequests after they are gone. A beneficiary could be anyone from a family member or a friend to a colleague or charity.
It’s often important to understand the differences in key legal terms. You may need to reach out for legal guidance as you draft your estate plan.