Beneficiary vs. Heir: What Is the Difference Between an Heir and a Beneficiary?
By: Barry E. Haimo, Esq.
August 20, 2021
You need to understand the difference between your heirs and beneficiaries. Not doing so could change the way you plan your estate, and later cause unnecessary confusion and complications among your surviving family members and friends.
During the planning stages, questions like this often surface: “Won’t my children end up with everything anyway?” Or “Will my daughter-in-law ultimately inherit the assets in my will or trust?”
In this post, we will take a deep dive into the question of “beneficiary vs. heir.” Most importantly, we will explain the difference between an heir and a beneficiary and how this could impact your estate.
Defining the Inheritors of Your Estate
The terms “heir” and “beneficiary” are often considered interchangeable. However, each of the terms actually have very specific legal definitions.
Who Are My Heirs?
According to Florida law, your heirs are your surviving spouse and blood relatives. They are entitled to your money and property after you pass away based on the default rules of intestate succession.
Usually, the term “heir” is used when discussing the estate of a person who has died without a will. In these cases, the estate’s administrator must research who is to rightfully inherit the decedent’s property.
What Is a Beneficiary?
A beneficiary, on the other hand, is a person or entity specifically named in a will or trust. A beneficiary can be anyone or any entity — a relative, a close friend, a charitable organization close to your heart. It can even be a pet!
Why All the Confusion, Then?
Here’s the point at which things can become confusing. Your named beneficiaries can also be your natural heirs. But not all natural heirs necessarily become beneficiaries of your estate.
When you decide who the recipients of your estate’s assets will be, your properly documented wishes may supersede the order of succession outlined by Florida’s intestate law.
Let us explain…
Who Has Greater Right to Your Estate: Heirs or Beneficiaries?
Here’s the easiest way to understand the question of beneficiary vs. heir in terms of who has first rights. Your legally expressed wishes always take precedence regarding who will receive your remaining assets after probate.
Beneficiaries First, Then Heirs
However, if you do not execute a will, your assets are simply distributed to your heirs according to the statutory predetermined order.
Spousal Rights Are the Exception
Regardless of whether you have included your current spouse in your estate plans, certain circumstances entitle them to a portion of your estate by Florida law.
For instance, say you update your will to disinherit an estranged spouse, but remain married. Under the law, he or she may still be entitled to 30 percent of your estate. This is called “elective share.”
A surviving spouse is also often granted the right to reside in the property that served as your marital home.
In other words, in the battle of beneficiary vs. heir, beneficiaries always win — except where spouses are concerned.
Beneficiary vs. Heir: How Discerning These Terms Impacts Your Estate
Knowing the difference between your heirs and beneficiaries, and understanding the rights they have to your estate will help you determine your most effective strategy in having your posthumous wishes met.
A particularly important fact is that being your blood relative does not automatically guarantee that your loved one will benefit from your estate.
This is why is it imperative to consult with an experienced estate planning firm like Haimo Law when developing your will or trusts. Get in touch for the guidance you need on defining your heirs and beneficiaries. That way, you can best protect your loved ones’ inheritance against time-consuming and costly contests and disputes.
Originally published 12/9/19. Updated 8/20/21.
Barry E. Haimo, Esq.
Strategic Planning With Purpose®
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