Heir vs. beneficiary: Who inherits your estate?

You’ll make many decisions when creating your estate plan, and one of the most important is who will receive your assets when you pass away. There are two terms you may have heard to describe these people: “heirs” and “beneficiaries.”

Both terms refer to the people who may inherit something from your estate when you pass away — and many people use "heir" and "beneficiary" interchangeably. But while they are similar, there are important legal differences between the two words.

What is an heir?

An heir is someone who’s legally entitled to inherit your assets if you die intestate, meaning you pass away without a valid will or trust. Your heirs are people related to you by blood or marriage, like your spouse or children.

If you die without an estate plan, your heirs will be determined by your state’s intestate succession laws. These laws lay out the order in which your heirs will receive your property. While it can vary by state, the order of succession is commonly:

1. Your spouse
2. Your children (biological and adopted)
3. Your parents
4. Your siblings
5. Your extended family, or “next of kin” (like nieces, nephews, grandparents, and cousins)

Succession laws generally only include people legally or biologically related to you – no one else is considered a potential heir. This includes foster children or stepchildren. If you want these key people in your life to inherit part of your estate, you must have a plan and name them as beneficiaries.

If you die without a will and the government can’t locate any heirs, the state will inherit your property — but this rarely happens.  

Types of heirs

There are three types of heirs:

• Direct heir: Also known as a lineal heir or an heir apparent, a direct heir is your immediate next of kin. This is the first person in the line of succession to inherit your estate. Your direct heirs usually include your spouse, children, and parents.
• Adoptive heir: This includes any adopted children you may have. Adopted children generally have the same inheritance rights as biological children.
• Collateral heir: Any of your less direct relatives are considered your collateral heirs. This includes your siblings, cousins, aunts or uncles, and nieces or nephews.

What is a beneficiary?

A beneficiary is someone you name in your will or trust to receive specific assets after you pass away. Unlike an heir, a beneficiary doesn’t have to be related to you — they can be anyone you choose, including friends, colleagues, and even charitable organizations.

If you name beneficiaries in your will, they have a legal claim to your estate assets that outranks your heirs.

For example, say you have a very close relationship with your stepchild but are estranged from your biological child. Without a will, your biological child would be in line to inherit your assets, while your stepchild would not be. With a will, however, you can name your stepchild as a beneficiary, and they would inherit any assets you want to pass on to them.

Types of beneficiaries

There are three types of beneficiaries:

• Primary beneficiary: The person or organization you name in your will as the first in line to receive an asset from your estate.
• Contingent (or secondary) beneficiary: The person or organization next in line to receive an asset from your estate if your primary beneficiary can’t. For example, say your primary beneficiary passes away before you or declines the assets you left to them. In this case, your contingent beneficiary would inherit these assets.
• Residuary beneficiary: This is who will receive any remaining assets in your estate after all other gifts have been distributed. You can name multiple residuary beneficiaries, and even choose what percentage you’d like each to receive.

Heir vs. beneficiary: Why does the difference matter?

Many people use the terms “heir” and “beneficiary” interchangeably, which is usually fine — but there are some important legal distinctions between the two. An heir is someone who’s legally entitled to your property if you don’t have a will, while a beneficiary is someone you name in a legal document (your will or trust) to receive your assets.

Understanding the difference matters because:

• Naming beneficiaries lets you pass your assets to people who may not be legally or biologically related to you. This could be your foster or stepchildren, close friends, or caregivers.
• In addition to people you care about, naming beneficiaries lets you support charitable causes close to your heart.
• By naming beneficiaries, you can leave meaningful gifts to people who may appreciate certain items for their sentimental value, rather than their monetary value. This can help preserve precious memories for those you leave behind.

Who inherits my estate if I don’t have a will?

Dying without a will is known as dying intestate. If you die intestate, your estate will be passed on to your legal heirs — and these may not be the people you want to receive your assets. By creating an estate plan, you ensure your property will be distributed to your chosen beneficiaries.

Not having a will can also slow down the probate process, which is the court-supervised process of distributing your assets when you pass away. Probate can be a long process with a will, but dying intestate can make it longer. Having a will and naming your own beneficiaries saves the time of determining, locating, and contacting potential heirs for an intestate estate.

Make your wishes known with a valid estate plan

While your heirs are your closest blood or legal relatives, there may be others in your life you also care about (like a friend, foster child, or charity) who you may want to leave a gift to when you pass away. But if you don’t have a will, these people and organizations won’t have a legal right to any of your assets.  

By creating a will, you have the power to name any beneficiary you want — so you can continue to care for and support the people and causes that matter most to you.

With FreeWill’s free will-making tool, you can create a will from the comfort of your own home and on your own time. Simply answer the guided questionnaire, and you can have a ready-to-sign will in as little as 20 minutes  — completely for free.