29th Apr 2013

The terms “heir” and “beneficiary” are often used interchangeably by many people and I do so as well from time to time.

However, there is an important difference between an “heir” and a “beneficiary”.

An “heir” is someone who has a right to receive an inheritance, and that right is created by law.  For example, the California Probate Code sets forth a formula for determining a decedent’s heirs when that decedent has passed away without a will or living trust.   

A “beneficiary” is someone who has a right to receive a benefit from an estate, and that right is created by a written instrument.  In other words, the right to benefit is a right created by contract.  Examples of a beneficiary right would include being named in a will or living trust, and being named as a beneficiary on life insurance policy, retirement plan, or annuity.

An “heir” is someone who by the default of the inaction of the decedent is awarded an inheritance by law; and a beneficiary is someone who receives a financial benefit from the affirmative action of the decedent who created a will or trust, or named beneficiaries on his or her retirement or life insurance.

Naming a beneficiary puts the power into your hands to determine who receives your money, property, and assets.    

Dwight Edward Tompkins,
Estate Planning Lawyer.

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