It’s common for individuals to confuse the words heir and beneficiary. This is especially the case if an executor has been tasked with handling their first New Jersey estate administration case. There is a difference between the two terms though.
An heir is someone related to a deceased person. If the person dies without a will, then they are legally entitled to receive a portion of the person’s estate. Someone is said to have died intestate if they hadn’t yet sat down and drafted a will at the time of their death. A decedent’s estate is subject to intestate succession laws in such instances.
A beneficiary is someone specifically named in a person’s will. They don’t have to be related to the testator like the heir has to. That individual can instead be the testator’s friend, a charitable organization or even a pet. Whoever was assigned as a designee will generally prevail if there’s some type of dispute between the beneficiary designation and a decedent’s will.
Beneficiary designations are survivor benefits that declare who will receive specific assets when a person dies. An example of this is a beneficiary to a life insurance policy. If the life insurance policyholder named their spouse as the beneficiary, but in their will, they named one of their children, then their spouse would still receive the life insurance payout.
When a person dies, their assets often aren’t distributed by the estate. They’re split up based upon the beneficiary designations that the financial institutions or insurance companies may have in place instead. Your beneficiary designations must be in line with your will’s directives if you’re looking to avoid any potential disputes down the road.
There are a lot of complexities associated with drafting a will in itself. If you’re planning to draft any powers of attorney, to complete any beneficiary designations or set up a trust, then this can further complicate matters. An attorney in Cherry Hill can explain the difference between beneficiaries and heirs and help you sort through the legal maze of questions you might have about them.