While Colorado residents may use the terms heirs and beneficiaries interchangeably, the truth is that they are not the same when it comes to estate planning. Though the differences are subtle, they are important enough that being aware of them is crucial to ensuring one’s estate plan looks the way intended.
Heirs and beneficiaries
Generally, a heir is someone who is related to the decedent by blood. This could be a child, parent or spouse. Though kin to the decedent, it is not necessary that the heir inherit from them. Beneficiaries on the other hand do, as they are specifically named in the will or trust as recipient of assets upon the decedent’s death. Organizations can also be beneficiaries—it does not have to be a person. Therefore, while heirs can be beneficiaries, beneficiaries do not have to be heirs. They can be friends and pets as well.
Heirs is a term mostly used to describe people who inherit when someone passes away without a will. When someone dies intestate, the probate court is responsible for figuring out who will rightfully inherit. State laws generally dictate the order in which inheritance takes place in this scenario, for example spouse, child and then parent.
How a foolproof estate plan helps
While heirs receive notifications when a blood relative dies, this does not mean they will inherit if there are beneficiaries listed. An estate’s executor will use the estate plan to determine asset distribution, regardless of blood relationships. Therefore, someone who is estranged with their spouse or has a strained relationship with their children might not want them to inherit their assets but without specifying it in a will, this won’t be the result. This is one of the main reasons creating a will and other estate planning documents is incredibly important to ensuring one’s last wishes are fulfilled.