Here's The Difference Between An Heir And A Beneficiary

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Many people use the terms "heir" and "beneficiary" interchangeably, but there are important differences between the two designations. Here's how an heir and a beneficiary differ:

Who is an heir?

An heir is a relative who is legally entitled to an inheritance from a deceased relative's estate when the decedent did not have a legal last will and testament. 

When there's no will, which is called "dying intestate," an estate typically passes to the closest living relatives in prescribed shares, then to more distant relatives if close relatives are not living. While a surviving spouse is not an heir in the strict definition of the word, a spouse or registered domestic partner is typically first in line for assets through a state's marital or community property laws.

Assets pass first to a living spouse or immediate descendants (children or grandchildren, biological as well as adopted). If they're not living, then to parents, and if they're not living, to descendants of grandparents (aunts, uncles, and cousins). If all heirs are deceased, then the estate assets pass to the state, which is called escheatment. 

Who gets how much is determined by each state's particular intestate succession laws, which are blueprints for how an estate will be divided if a person dies without a valid will in place. It's the probate court's job to make sure the net assets of the estate pass to the people who are legally entitled to them.

Who is not an heir? An unmarried partner, no matter the length of the relationship, would not be considered an heir. Neither would close friends, stepchildren, in-laws, legally divorced spouses, foster children, or a charity. This is one reason why it's so important to make sure you have a legal last will and testament if you wish to leave your estate to someone who is not considered a legal heir.

Who is a beneficiary?

A beneficiary is someone named in a decedent's will, trust, life insurance policy, and/or financial account who has been selected to receive the assets.

A beneficiary need not be an heir: a friend, a long-term partner, a stepchild, or a charity can be a beneficiary. Even a pet can be a beneficiary! And while heirs can be beneficiaries, it's not always a given they'll inherit. Take, for example, parents who leave the bulk of their estates to romantic partners instead of their living children or grandparents who cut wayward grandchildren out of their wills.

To make matters more interesting: while a last will and testament provides direction for how the decedent wants their assets distributed, it doesn't necessarily determine who will inherit the assets because they're often passed on through a beneficiary designation at a credit union, bank, insurance company, or other financial institution.

For example, a will may direct financial accounts to be divided evenly between two children, but if all beneficiary designations for all these accounts are in the decedent's ex-spouse's name, that ex-spouse is entitled to the assets. The children won't get anything unless there are accounts in the estate with no beneficiary designations; then the children would be entitled to those assets.

It's important to remember: Beneficiary designations trump wills! This is why you should continually check your beneficiary designations and make changes when there's a life event such as a birth, adoption, death, marriage, divorce, or remarriage.

And unlike heirs, who inherit assets based on prescribed shares determined by a state's guidelines, beneficiaries get amounts determined by the decedent. There can also be more than one primary beneficiary, as well as more than one secondary or contingent beneficiary in case the primary beneficiary(ies) is (are) deceased. Also unlike heirs, beneficiaries can get distributions from the estate in percentage amounts based on the decedent's directives. For example, a spouse could get 100% of an insurance policy benefit, but they could also get 34%, with two adult children each getting 33%. 

There are many reasons that go beyond inheritance why having a last will and testament in place is a good idea. But if you'd rather give your assets to someone other than your heirs, check all your financial accounts to ensure you've made your beneficiary designations and then make an appointment with an estate or family law attorney to iron out all of your last wishes.*

If you seek assistance with your estate planning, our advisors at Hanscom Investment Services† are available to help. To schedule an appointment, call 800-656-4328 ext. 2236.

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*This is not a substitute for professional legal advice — consult an attorney to discuss your individual estate planning requirements.

Securities and advisory services are offered through LPL Financial (LPL), a  registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Hanscom Federal Credit Union is not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Hanscom Investment Services, and may also be employees of Hanscom Federal Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Hanscom Federal Credit Union. Securities and insurance offered through LPL or its affiliates are: 

Not Insured by NCUA or Any Other Government Agency / Not Hanscom Federal Credit Union Guaranteed / Not Hanscom Federal Credit Union Deposits or Obligations / May Lose Value


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About Author

Diana Burrell
Diana Burrell

Diana Burrell is the marketing communications director at Hanscom FCU. She has a background in magazine journalism, as well as marketing, advertising, and public relations, and has authored over a dozen books. You can reach her at

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