Estate planning can be an intimidating process. One reason for this is that estate planning includes concepts and legal jargon with which the average person is unfamiliar. For example, the words “beneficiaries” and “heirs” are often used interchangeably when, in fact, they are not the same thing. The estate planning attorneys at Wilcox Attorneys, PA explain the similarities and differences between a beneficiary and an heir.
Beneficiaries and Heirs
It may sound like the answer to a logic problem on a test, but 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.
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 Estate Planning Attorneys
For additional information, please sign up for one of our FREE estate planning webinars. If you have additional questions or concerns about estate planning, contact the experienced estate planning attorneys at Wilcox Attorneys, PA by calling 479-443-0062 to schedule your appointment today.