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.