Bequests

A bequest is an instruction in your written will that states how to distribute some or all of your estate.

There are four types of bequests:

• A specific bequest is a gift of a particular asset (e.g., 100 shares of XYZ Corporation).
• A percentage bequest is a gift of some part of the value of the estate (e.g., 20% of my net estate).
• A residual bequest is a gift of the remainder of the estate after all taxes, expenses, and other bequests have been satisfied.
• A contingent bequest is a gift that will be made to a second beneficiary in the event that the original beneficiary is deceased or does not accept that gift.

The type of bequest language you choose should fit what you want to accomplish. Carefully consider how your gift can help the person or organization when deciding what bequests to include.

In your will, you choose an executor as the person entrusted with the responsibility of carrying out your wishes. The executor has to account for the entire estate (including debts and liabilities) and distribute money and property according to the law and your instructions.

If you change your mind about a bequest, you may amend your will with a codicil or execute an entirely new will.

It is a good idea to update your will on a regular basis to keep up with changes in laws and your own objectives. Also, remember that if you decide to leave a specific asset such as a car or a vacation home to a beneficiary in your will, but later decide to sell or otherwise dispose of the asset, the specific bequest will fail and that beneficiary will receive nothing.

Because a bequest is revocable, it does not qualify for an income tax deduction. However, it does qualify for an estate tax deduction.

No. Assets such as life insurance policies and retirement accounts pass outside the will using a named beneficiary. Therefore, a bequest will not impact the distribution of those assets. Instead, it is possible to name a charitable beneficiary if you wish.

If you do not leave a will, you cannot be sure that your property will be distributed as you intend. Without a will, your property will be distributed by a preset formula according to state intestacy laws, and it is possible that family members, close friends, and worthwhile charities will receive no part of your estate. Making a will is one way to be sure that the people and causes you care for will receive your generous gifts.

A gift in your will has a number of benefits:

• It is easy to understand and implement.
• You can change it if your circumstances or goals change.
• You retain the use of the gift property during life, meaning there is no out-of-pocket cost to your gift. This may make it possible to create a larger gift than you would feel comfortable making otherwise.
• You have the option to make your gift more personal by directing it to a specific program or area or making your gift in honor or in memory of a loved one.