Who you include, exclude, and don’t mention in your estate can make all the difference in whether someone receives a bequest or is left out of your will
When people consider whether or not they need an Oregon will, or who to include and exclude in their estate, it can get confusing. For example, do you need to mention your stepchildren? Or your cousin or friend? Some people think that they don’t need estate planning because Oregon law has a fallback provision. However, the difference between an heir and a beneficiary can lead to mistakes that can cause big problems—and result in your estate not being distributed the way you want it to be.
Some of the confusion comes into play because it’s not always easy to tell the difference between two crucial terms: heir and beneficiary. You might have heard these words used interchangeably, but they’re not interchangeable. They have very different meanings under Oregon law, and those differences have a very real effect on your will and on the people you might or might not want to receive bequests from your estate.
Difference between an heir and a beneficiary
Under Oregon law there is a distinct difference between an heir and a beneficiary:
- An heir is a biological or legally adopted person who is entitled to inherit either all or a portion of an estate, when a person dies without a will. This is also referred to as intestate.
- A beneficiary is a person or organization who has been named in a will to receive a bequest from the estate, regardless of relation to the will creator.
When there is no valid Oregon will, heirs can receive estate assets regardless of your wishes otherwise
Essentially, if someone dies without a will, Oregon estate law specifies the heirs who may be eligible to receive property and assets from the estate. Or to put it simply, no will, then your estate will only be distributed to your heirs. Heirs can include:
- Adopted or biological children
- Parents; and/or
- Other blood family, such as cousins, siblings, nephews, nieces, uncles, and aunts
Collectively, these fall under one of three categories: direct heirs (such as children and spouse), adoptive heirs (legally adopted children), and collateral heirs (extended blood family). These designations are all based on blood, marital, or legally adopted family (and even then, the law has limitations and blind spots). While these designations may reflect a certain baseline default in Oregon law, that doesn’t mean they reflect your wishes at all.
Naming beneficiaries requires a valid Oregon will
Beneficiaries can only come into play when a person has made a valid Oregon will. No will, no beneficiaries.
When there is a valid will, your wishes can supersede the default heir designations set in Oregon law. Please keep in mind that there are caveats for this as well.
If Oregon law sets heir designations, why bother naming beneficiaries?
It’s true. Oregon law does specify the default family positions for inheritance, such as spouse or children, who can receive bequests when a person dies intestate.
However, the law doesn’t account for anyone else, such as:
- Foster children
- Nonprofit organizations
If you want people such as these to benefit from your estate, Oregon law has no default way to do so. The law leaves it up to you to make those choices, but your will and estate instruments are the legal way to do so. You have the right to name anyone you want as a beneficiary. Furthermore, the law doesn’t help you avoid risks regarding taxes and special needs beneficiaries.
Why these designations matter
Families and family members have varying levels of closeness and conflict. For example, a person might have siblings they wish to exclude from their estate. Instead, they may want their estate to be distributed solely to friends. If this person did not write a will, their estate instead would distribute to their siblings, and their friends would receive nothing. Inside of the framework of the person’s will, however, they could specify the disinheriting of their siblings, and instead name the specific friends who are to be considered beneficiaries.
Or, a person might have two marriages, with biological children from one marriage and stepchildren from the other. Without a will, assets from the estate could pass to the biological children as heirs, but the stepchildren would be excluded and would receive nothing. Only by naming the stepchildren as beneficiaries would they be included in the estate’s distribution of assets. Or another example, without a will, the new spouse would need to share the assets with the children from a separate marriage.
Beneficiary designations can also extend not only to persons, but to organizations. A person might choose to leave all or part of their estate to a favorite charity, a public radio station, or other cause they consider important and want to support as part of their legacy.
Assets can pass to heirs and beneficiaries
Whatever property remains in your estate after any debts or other claims have been settled, it can be distributed to anyone you name. In the event of an intestate circumstance, assets also pass to heirs. This can include:
- Real property (such as a house)
- Vehicles, including boats, cars, trucks, motorcycles, RVs, and more
- Bank accounts (such as a savings or checking)
- Brokerage accounts and other financial instruments and investments
- Family heirlooms and other personal property
Some assets, such as insurance policies or investment accounts, give you the opportunity to name a beneficiary. If you name a beneficiary, that person receives the asset or percentage of asset you designate. If you do not name a beneficiary, then the policy or account will pass down according to estate law’s heir designations or the estate of the decedent.
Not all heirs are equal
However, not all heirs are treated as equal. Typically intestate heir designations follow a hierarchy, which usually looks like this:
- Children (adopted or biological are treated equally)
- Other blood relatives
There are generally no partial distributions. Typically, the estate passes to whoever is next in line in the hierarchy. Of course there are exceptions to this rule, and it depends on the family’s structure.
Creating and maintaining a valid will is essential to protecting your wishes for your beneficiaries
Failing to create a will can mean failing to provide for the people you wanted your estate to benefit. While Oregon law has default designations for heirs, those categories do not necessarily reflect your wishes.
In order to provide for the people or organizations you want your estate to benefit, creating—and keeping up-to-date—a valid Oregon will is essential. Ready to make or update your will?