To establish an effective estate plan, individuals need to understand their options. Testators can draft wills where they explain what should happen with their property and appoint people to positions of trust, including the executor of their estate.
People can fund trusts to provide long-term support for loved ones or limit how they make use of inherited property. Testators can also establish documents that protect them if they become incapacitated but do not die. Choosing how to allocate property and also who should inherit different assets can prove challenging during estate planning.
Some people have certain rights as heirs, while others derive legal protection as the beneficiaries of an estate. Testators need to know the difference between beneficiaries and heirs to effectively control the descent of their property.
Heirs have a legal right to inherit
Many adults do not have formal estate plans. They never draft wills or any other documents discussing the distribution of their property after their passing. Without a will or a trust, intestate succession laws apply during estate administration.
Intestate succession laws protect the rights of close family members to inherit as the heirs of an estate. Usually, spouses and children are the heirs who inherit from an estate when someone dies without a will. Both spouses and children have protection under state statutes. Exactly how they split the estate depends on whether the surviving spouse is the legal or biological parent of the children.
If the person who dies intestate does not have a spouse or children, then other family members may have rights as heirs. Parents, siblings and more distant relatives can inherit from an intestate estate as heirs when the person who died did not have a spouse or children.
People can choose their own beneficiaries
Heirs have protection under the law, but beneficiaries derive protection from estate planning documents. Wills and trusts can name specific people to inherit from an estate. Beneficiaries do not need to have a legal or biological relationship to the testator.
People can leave resources for romantic partners whom they did not marry. They can provide inheritances for their close friends. Some people even name charitable causes as beneficiaries when drafting wills or funding trusts.
Typically, the act of naming beneficiaries largely eliminates the need to identify errors. However, certain parties, including spouses, still have protected inheritance rights even if an individual establishes an estate plan.
Reviewing personal estate planning priorities can help people determine who might inherit from their estate and arrange for beneficiaries of their choosing to receive specific assets. The estate planning decisions of testators can have life-altering implications for the beneficiaries or heirs who outlive them.