Is There a Difference Between an Heir and a Beneficiary?
For many people, the concepts and legal jargon associated with estate planning can be intimidating because they are unfamiliar. A perfect example can be found in the word “heir” and “beneficiary.” Although these two words are often used interchangeably, they do not have the exact same meaning. Both, however, will likely be found throughout your estate plan. With that in mind, the Loveland estate planning attorneys at Zimmer Law Firm explain the difference between an heir and a beneficiary.
Heirs and Beneficiaries
Although it sounds like a logical riddle, one way to explain the relationship between heirs and beneficiaries is to say that an heir may be a beneficiary but is not always a beneficiary, and vice versa. To understand the difference, you first need to understand the difference between an “inheritance” and a “bequest.” An inheritance is a broad term used to refer to assets, whether tangible or intangible, that are gifted at the time of death. An inheritance could be cash, real property, personal property, or a variety of other things. An inheritance can be in the form of a bequest in a Last Will and Testament but can also take the form of a provision in a trust. Either way, receiving gifts because you are named as a recipient in a Will or trust makes you a beneficiary.
Some people choose to use a trust as the primary method of distributing their estate. A trust is a relationship whereby property is held by one party for the benefit of another (or others). Trusts are broadly divided into living trusts and testamentary trusts with the former activating during the lifetime of the Settlor (the creator of the trust) and the latter typically being activated at the time of the Settlor’s death by a provision in the Settlor’s Will. If you are named as the beneficiary of a trust that distributes assets to you after the death of the Settlor, those assets would be considered an inheritance. That does not mean you are an heir.
If someone dies intestate, or without a Will or trust in place, the Ohio intestate succession laws determine how the decedent’s assets are distributed. In that case, only legal heirs to the estate will inherit assets. Which (if any) heirs survive the decedent determines who receives an “inheritance” as follows:
- Children but no spouse. Children inherit the entire estate
- Spouse but no descendants or parents. Spouse inherits the entire estate
- Spouse and descendants from you and that spouse. Spouse inherits the entire estate.
- Spouse and one child (or descendants of that child) from you and someone other than that spouse. Your spouse inherits the first $20,000 of your intestate property, plus 1/2 of the balance and your descendants inherit everything else.
- Spouse and more than one child or descendants of those children. If the spouse is the natural or adoptive parent of at least one child, the spouse inherits the first $60,000 of your intestate property, plus 1/3 of the balance if the spouse is not the natural or adoptive parent of any of the children, the spouse inherits the first $20,000 of your intestate property, plus 1/3 of the balance and your descendants inherit everything else.
- Parents but no spouse or descendants. Parents inherit everything.
- Siblings but no spouse, descendants, or parents. Siblings inherit everything.
Inheritance vs. Bequest
A bequest is a gift made in a Last Will and Testament. That gift is an inheritance, but not all inheritances are made via a bequest. A Last Will and Testament is a legal document that is used to express an individual’s wishes regarding his/her estate assets and what should be done with them upon the Testator’s (creator of the Will) death. Bequests made in a Will may be general (such as “half my estate”) or specific (such as “my art collection”) and may be made to an unlimited number of beneficiaries. If you receive a bequest, you are a beneficiary. You may also be an heir; however, bequests can be made to non-heirs as well.
Contact a Loveland Estate Planning Attorney
For more information, please join us for an upcoming FREE webinar. If you have additional questions or concerns about estate planning, or you are ready to get started on your plan, contact the experienced Loveland estate planning attorneys at Zimmer Law Firm by calling 513-721-1513 to schedule your appointment today.