Heirs, Legatees and Beneficiaries…oh my!

Many people do not have an estate plan in place. People think it’s expensive, or arduous, or that they just don’t have the time to think about it. Estate planning is key to protecting and providing for your family when you die or become incapacitated. You can also make plans for your funeral/burial, prepare for a long term illness, and make sure the right people receive your assets when you die.

There are many ways to do this, including having a will or a trust. But what do the terms “heir”, “legatee” and “beneficiary” mean? They are not interchangeable, although some people think they are.

In some ways, the terms may overlap. You may have a child who is an heir, legatee and a beneficiary, but in separate ways.

So what do these terms mean?

What is an Heir?

Heirs inherit through the laws of intestate in Illinois. There is a state mandated order in which people can inherit from another person. Heirs may include the decedent’s surviving spouse and children, as well as more extended family members such as parents and grandparents, siblings, nieces and nephews, aunts and uncles, and grandchildren. 

If a person dies with a living spouse and children, the intestate estate laws dictate that the spouse would receive 50% of the estate and the living children would split the other 50%. If a child has passed before the decedent, their share would pass to the decedent’s grandchildren (the child’s kids).

If a person dies with no living spouse or children, their surviving parents and siblings would inherit in equal shares. If there are no surviving parents or siblings, the inheritance would reach farther into extended family.

If you are married and want your spouse to inherit 100% of your estate when you pass, you must have an estate plan to dictate this.

What is a Legatee?

A legatee is anyone who receives a item through estate planning. (i.e. Joe leaves his coin collection to his son Bob).

Legatees do not have to be related to the decedent, unlike an heir. A legatee is anyone who is name in the decedent’s will. This could be anyone.

What is a Beneficiary?

Beneficiaries are anyone who receives property from a decedent (they could be an heir or a legatee). They could also be the beneficiary of something that is “payable” or “transfer” on death, such as life insurance or a pension plan. These are non-probate transfers and automatically transfer upon the person’s death.

Many individuals utilize these “nonprobate” transfers to help streamline and speed up the estate administration process, while ensuring that their loved ones are able to access certain assets quickly and seamlessly.  

Illinois also has a transfer-on-death instrument (TODI) which can be applied for real estate and motor vehicles.

For anyone who owns real estate especially, or any significant assets, I always recommend having a trust. Those assets held in a trust are not considered part of a probate estate. A trust allows your trustee to manage your estate without court oversight. They also protect your family’s privacy and can provide for underage children or people with special needs.

Estate planning can be easy and reasonably priced. Contact me today for information.