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When creating an estate plan, specific bequests can play a crucial role in ensuring certain items or assets go to the people or organizations you care about most. But what exactly are specific bequests, and how should you approach them? Here are nine essential things to know to help you make informed decisions.
1. What Are Specific Bequests?
Specific bequests are gifts outlined in your will or trust that detail a particular item or asset you want to leave to a specific person or entity. These can include personal belongings, real estate, cash amounts, stocks, or even digital assets. For example: “I leave my grandmother’s engagement ring to my daughter, Emily.” “I leave $10,000 to [Charity Name].”
2. Specific Bequests Take Priority
In estate planning, specific bequests are typically distributed before the remainder of your estate (known as the residuary). This means that if you’ve designated specific items or amounts, those instructions will be followed before dividing the rest of your estate.
3. Be Clear and Detailed
Ambiguity can lead to disputes. For example, if you simply state, “I leave my car to my nephew,” but you own multiple cars, confusion might arise. Clearly describe the item or asset, including unique identifiers like serial numbers, property addresses, or detailed descriptions.
4. Consider the Asset’s Value
Some assets may appreciate or depreciate in value over time. For example, leaving a stock portfolio to one child and cash to another may result in uneven distributions if the stock’s value fluctuates significantly. Periodically review your estate plan to ensure fairness among beneficiaries.
5. Think About Practicalities
Specific bequests can sometimes create practical challenges for beneficiaries. For instance, leaving a piece of real estate may require the recipient to handle property taxes, maintenance, or sell the property. Gifting a business interest might require the beneficiary to assume a role they may not want. Consider whether the recipient is willing and able to manage the bequest.
6. Address “What If” Scenarios
Life is unpredictable, and circumstances may change. Include contingency plans in case the intended beneficiary predeceases you or the asset no longer exists (e.g., if you sell the property or item before your passing). You might include a statement like, “If my engagement ring is no longer in my possession, I leave an equivalent cash gift to my daughter.”
7. Coordinate With Other Estate Documents
Specific bequests in your will should align with other documents like trusts, beneficiary designations, and joint ownership agreements. Conflicting instructions can lead to complications. For example, if your will leaves a bank account to one person but the account has a payable-on-death designation to another, the latter will take precedence.
8. Be Mindful of Taxes
Some specific bequests may have tax implications for your beneficiaries. For instance, gifting a home may result in property taxes for the recipient. Gifting a cash bequest from a retirement account might trigger income tax. Work with an estate planning professional to minimize these burdens and structure your plan effectively.
9. Keep Your Estate Plan Updated
Life changes—relationships evolve, assets are acquired or sold, and your wishes may shift over time. Regularly review and update your estate plan to ensure your specific bequests remain relevant and accurate.
Final Thoughts
Specific bequests allow you to leave meaningful gifts to loved ones and organizations, ensuring your legacy reflects your values. By being clear, thoughtful, and proactive, you can avoid potential disputes and ensure your wishes are carried out smoothly. If you’re unsure where to start or how to refine your plan, working with an estate planning professional can help you navigate the process with confidence.