California Partition Law Blog
“Who” gets “what” is the most important part of creating a will, trust, or other similar instrument. Often the terms heirs and beneficiaries come up and can be disputed during the probate process. The two terms often are mentioned in the same document and can seem like they refer to the same people. However, while heirs and beneficiaries can overlap in a will or trust they do have important differences to note.
What is a beneficiary?
A beneficiary can be anyone. Under California’s Probate Code, a beneficiary is designated as someone able to take an interest in something. (Prob. Code § 262.) This interest can be personal or real property, different assets, or an estate in property. A beneficiary’s interest may also be the right or power to control property. (Prob. Code § 267.) This could be something like the right to drill for and produce oil on land. (Gerhard v. Stephens (1968) 68 Cal.2d 864, 878–879.) A beneficiary is given this interest by a testamentary instrument, which can be a trust or will.
A beneficiary may have a present or future interest. This means the person receives a donative transfer of property or becomes a decedent’s successor in interest. (Prob. Code, § 24(a).) For example, a beneficiary of a trust may also be someone entitled to enforce a trust giving them a present interest and a future interest once the person dies. A beneficiary may also disclaim or refuse the interest granted to them by the instrument. (Prob. Code §264.)
The beneficiary can expressly accept their interest or implicitly accept it through their actions they take. (In re Kolb (9th Cir. 2003) 326 F.3d 1030, 1037–1038.)
Beneficiary under will
A will can give property to individuals, corporations, or other entities and designate those parties as beneficiaries. (Prob. Code § 6102.) Because a will can grant such valuable property and rights and that will is usually adhered to by courts, there are protections provided by the Probate Code. A will cannot be executed or revoked under duress, fraud, undue influence. (Prob. Code § 6104.) A will can give transfers for no value but subject to certain restrictions. For example, a transfer cannot be made from a dependent adult to a care custodian. (Jenkins v. Teegarden (2014) 230 Cal. App. 4th 1128, 1142-1143.)
Beneficiary under trust
Private trusts can be created only if there is a beneficiary. This means the trust lists a beneficiary or class of beneficiaries and designates a trustee to manage the trust. (Prob. Code § 15205.) Anyone who can take an interest in property can be a beneficiary, which is why the specificity is required. A charitable trust does not need specific beneficiaries because it is meant to benefit a community. (Estate of Heil (1989) 210 Cal. App. 3d 1503, 1510.)
Beneficiaries that are made up of a class of persons may hold an interest as a future interest. This means it vests when one or more members come into existence and can be ascertained or determined. This usually applies to children or grandchildren. (Estate of Woodworth (1993) 18 Cal.App.4th 936, 942.)
What is an heir?
An heir can be a beneficiary, but not all beneficiaries are heirs. Heirs always are the children of a decedent but may include other individuals. (In re Hassell’s Estate (1914) 168 Cal. 287, 289.) An heir can even be a half sibling. (Estate of Griswold (2001) 25 Cal.4th 904, 908.) This means they receive property or an interest as a spouse or family member. This ensures the property of asset transfers to them if the decedent did not have an estate or will to transfer property at their death. (Prob. Code § 44, 6400.) So, a person who receives property through intestate succession is an heir. This is different from a beneficiary, because a beneficiary could be anyone while an heir implies a closer familial relationship with the decedent. As an heir they hold a future interest that vests upon death of the property holder.
Heirs in Wills
A will may distribute an interest directly to the heir or assignee, like it does to a beneficiary. (Prob. Code § 11604.) Being an heir is an important status because where a will is open to two interpretations as to who it is passing an interest to, it will be interpreted in favor of an heir (blood relative). (Estate of Murphy (1979) 92 Cal.App.3d 413, 427.) In a will, the court may be bound by a prior determination by an heir hunter or probate court as to who that will gives an interest to. However, a court still has jurisdiction to interpret that will on its own and decide who is a valid heir. (Estate of Neubauer (1958) 49 Cal.2d 740, 747.)
Heirs in Trusts
A testator may decide to disinherit certain people or classes of people. This means they are providing for them outside of a will or trust. However, the Probate Code limits an ability to disinherit a spouse or children in a trust or will. This is done with the goal of protecting surviving spouses and children in the case of an accident, mistake, or change in condition relating to the trust or will. (In re Torregano’s Estate (1960) 54 Cal.2d 234, 249.) The intent to disinherit heirs is determined based on when the will was executed. (Estate of Katleman (1993) 13 Cal.App.4th 51, 60.)
What is an example of the difference between an heir and beneficiary?
For example, Julie executes a trust and places her home and personal property into it. She designates Shawn as a beneficiary. This means Shawn will receive that property once Julie passes away. This would work if Shawn was someone who could take that interest in property, and it would not matter if he was a relative or just a friend.
Alternatively, if Julie dies intestate, meaning without a will or other document to designate what she wants to happen other property, whether Shawn is an heir or beneficiary has more importance. If Shawn was Julie’s son or blood relative, then he would be presumed to get the same interest in property over any other potential beneficiaries or people with interest. Being an heir generally makes a court’s determination of a will or trust more likely to come out in favor of the heir.
Conclusion
The Underwood Law Firm has a team of experienced lawyers who can help resolve your property interest disputes at trial and help you pursue solutions like partition. We are here to help.