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Caring For Generations

Heir or Beneficiary – What’s the Dif?

On Behalf of | Feb 19, 2020 | Uncategorized

You might say estates involve heirs, while estate planning involves beneficiaries. Is there a difference? Yes, and it’s an important one. An heir is a relative or other person who is legally entitled to an inheritance if there is no document specifying otherwise. A beneficiary, in contrast, is chosen and named in a document such as:

  • a will
  • a trust
  • a life insurance policy
  • a financial account beneficiary designation

In other words, without documents proving the intent of the person who died, the law in each state decides the outcome. When planning is done, beneficiary designations always “trump” wills, and wills always trump state laws of intestacy.

The law awards assets “by position” – the heir will be a child, or other relative, while beneficiaries are often listed by their actual names. (Spouses are typically not referred to as heirs, because they are entitled to receive property via marital laws rather than through state laws of intestacy.)

Indiana laws of intestacy
In Indiana, if you die:

  • with children but no spouse – the children inherit everything.
  • with a spouse but no descendants or parents – spouse inherits everything.
  • with a spouse and children from you and that spouse – spouse inherits half, children half.
  • with a spouse and living parents – spouse inherits ¾, parents ¼.
  • with parents but no spouse or children – parents inherit everything.
  • with siblings but no spouse, parents, or children – siblings inherit everything.
  • with siblings and parents, but no spouse or children – siblings and parents share equally.

What about foster children, stepchildren, and adopted children? Legally adopted children have the same rights as biological children; foster children and stepchildren will not automatically receive a share. A grandchild will receive a share only if his or her parent is not alive to receive it.

The whole idea behind personalized estate planning, we believe at Rebecca W. Geyer & Associates, is for you to take control over your own affairs, rather than just ceding control of those affairs to these very “impersonal” and inflexible rules. A thoughtful plan is built around your circumstances and your unique needs.

What is estate planning? You might say it means knowing the difference between having state-determined heir “slots” and choosing the people whom you want as your beneficiaries.

– by Rebecca W. Geyer