What's the Difference Between an Heir and a Beneficiary?

Q. I've been researching what I need to know to do my Will and set up a Living Trust, and I'm getting confused by some of the materials I've been reading. I keep seeing separate references to 'heirs' and 'beneficiaries'. Are they not the same thing? My son is the heir to my estate, isn't he? Doesn't that also make him the beneficiary?

A. That's an excellent question, and the answer is 'No'. I hope the following will clear this up for you.

Beneficiaries are the persons you name in your Will to receive all or part of your estate property (or the persons designated in a Trust Deed to receive all or part of the trust property). They're called beneficiaries because they benefit from the terms of the Will or Trust. Any person or organization can be a beneficiary - it's up to you to distribute your property among them as you see fit. Most people choose to distribute their estate among their family members and close friends. You may also wish to gift a certain amount to a charity, club, society or service organization that is important to you.

Heirs, on the other hand, are determined by the laws of descent. An heir is someone who will inherit the property of a person (decedent) who dies intestate, i.e. without a valid Will. The laws of the jurisdiction in which the decedent's property lies will determine what the order of succession will be, but in general, the estate may go wholly or partially to the surviving spouse, the decedent's children (or if none of them survive, to the grandchildren), the decedent's parents, and the siblings. If there are no surviving members of the immediate family, the inheritance may then pass to other blood relatives - aunts, uncles, cousins, nieces and nephews. All of this depends on the degree of family kinship and the applicable laws.

So as you can see, there are very distinct differences between a beneficiary and an heir. Beneficiaries are chosen by you when you make your Will or establish a Trust. You can name yourself as a beneficiary of a trust, in many cases. And gifts can be distributed to beneficiaries through a trust during your lifetime. Heirs are determined by law in cases where the decedent has died without a Will. As long as you are alive, you have no heirs. They only become your heirs after you die.