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Understanding the difference between heirs and beneficiaries

It often seems like whenever one brings up the issue of estate planning in New York City, many of his or her listeners stop paying attention. Planning for end-of-life matters often seems unimportant to those who believe themselves to still be early (or in the middle) of it. The problem is that many who put off this process rarely get around to completing it. In fact, information shared by the American Association of Retired Persons shows that 60 percent of American adults have yet to prepare a will.

Why do experts encourage people to begin their estate planning early in their adult lives? The primary reason is because no one knows when he or she might die (or become incapacitated). Therefore, before one spends his or her adult life working to acquire assets and property, he or she should ensure that his or her wishes regarding their dispersal to his or her beneficiaries is clearly stated.

Many often confuse the terms “beneficiaries” and “heirs” as being synonymous, when in fact they are not. Section 103 of New York’s Surrogate Court Procedure Act defines a beneficiary as “any person entitled to any part or all of an estate.” Of course, for one to be considered entitled, there must be some article or instrument that creates an entitlement (in this case, a will or a trust).

An heir, on the other hand, is one who would qualify to receive a portion of decedent’s estate were that person to die intestate (without a will). States have their own laws that regulate the transfer of property through intestate succession. Thus, one controls what he or she can leave to beneficiaries, yet has no say over what may go to an heir.

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