A bequest is a financial and legal term for giving assets, such as stocks, bonds, jewelry, and cash, to individuals or organizations through a will or an estate plan. The recipients of these bequests can be family members, friends, institutions, or charities.
The gift in a trust structure is commonly utilized by parents or grandparents seeking to establish a trust fund for their children or grandchildren. Charitable gifts after death are known as legacy gifts. If the bequest is intended for a particular purpose, it is called an endowment.
There is a benefit in making an estate plan for people looking to store their assets and preserve them for future generations. You need to plan for certain things through this process to start making an estate plan. Below are some of these steps:
- Creating a will;
- Assigning an executor of the estate to manage the provisions of the will;
- Limiting estate taxes by placing the trust accounts in the name of the beneficiaries;
- Appointing a guardian for living dependents;
- Revising plans such as life insurance, IRAs, and 401(k)s;
- Establishing gifting to qualified charitable and nonprofit organizations to reduce the taxable estate and;
- Selecting a durable power of attorney (POA) to direct other assets and investments.
What Are the Different Types of Bequests?
A bequest is a personal property gifted to beneficiaries (family, friends, or organizations) through the terms of a will when the testator passes away, as stated above. A bequest can include cash, stocks, bonds, jewelry, or other personal items, but not real estate. When real estate is given to another person through a will or trust, it is called a devise. There are four distinct types of bequests:
- Specific;
- General;
- Demonstrative and;
- Residuary.
A specific bequest is an asset given to a particular person. It can be any of the items mentioned earlier. A general bequest is a gift, usually monetary, taken from the person’s general assets. However, a demonstrative bequest is a gift from a source such as a bank account or retirement fund. Lastly, a residuary bequest is a gift provided once the estate fully pays all the debts and other bequests are made.
The original owner can also leave assets for a nonprofit organization or religious or educational institution as a charitable bequest. These bequests can be either specific, general, demonstrative, or residuary.
One thought to keep in mind when planning your estate is to think about gathering all your assets and maintaining a mental inventory of them. You can seek guidance from a financial advisor and start determining the value of your assets.
Especially for the larger assets, a trust can be a viable option. A trust can be modified during one’s lifetime, meaning it is revocable. Forming a trust is an effective way to transfer assets to beneficiaries and reduce the taxes that the estate may owe.
Furthermore, there may be situations that could lead to estate disputes. The biggest problem with unequal bequests is that they may lead to issues among the beneficiaries. This is especially true if there are already family tensions among the siblings and one sibling believes they deserve more than they are receiving. This can cause family rifts and make bequests that much more complicated. Therefore, prioritizing equal distribution among the family members is one way to avoid intense estate battles in the future.
Even if there is no legal dispute, it can cause families to drift apart. Relationships can break down and force the families to battle it out in court over the estates. However, if there is a genuine concern about the financial being of one innocent over the other, then you, as the testator, can determine this and divide your property accordingly.
Planning your estate is your matter and should not have undue influence from others. The final decision is yours, but it is recommended that you carefully plan how you will distribute bequests to avoid unnecessary family disputes. Learning how to plan this legally is crucial, and you can seek more resources through LegalMatch.com.
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How to Avoid Disputes Over Bequests?
Undoubtedly, disputes will arise in estate planning within the family. However, there are ways to avoid issues and ensure each family member feels valued. Each family functions differently, and sentiments are attached to various things of value. When a grandparent decides to give a gift to their grandchild instead of the child, it can be a joyous occasion or a resentful one, depending on the family dynamics.
People have different levels of interest and influence in their families. There is a healthy sense of sibling rivalry, but it can become damaging when both are valued differently by their parents. There are times when parents genuinely want to equalize gifts. It can be because they want to finance one child’s medical education, but the other child only completed a bachelor’s degree.
According to a CNBC article, regardless of the parents’ reasoning, unequal bequests can lead to family and legal woes, states Larry Lehmann, president of the National Association of Estate Planners and Councils. Children have the right to challenge their parents’ choice of the will. They want to ensure that the will did not form under the undue influence of their siblings. Some cases deal with unequal distributions of bequests, resulting in a family fallout.
It can be configured that through sound estate planning, siblings and the surviving spouse will stay out of court. Consider having a family meeting to discuss your plans for your distribution of assets. This will allow the families to deliberate and not be surprised about who receives what and when. Sometimes, even if there are no grounds for a legal challenge, there could be familial rifts over the decision. Most parents prefer their children to get along and not cause conflicts with each other, especially when it comes to their last wishes.
Discussing the issues with your children beforehand can lead to a transparent conversation regarding your intentions, which will be useful for them. Communicate to your kids regarding which items they might desire and include in your estate plan pictures and a detailed list of who will receive what. You can also draft a letter with the will explaining your reasoning for the bequests.
But it is recommended to hash these things down while you are still alive and can clarify your intentions with your children. The blame game often causes a fallout in families due to the unequal division of wealth.
You can allow for open discussion among your children while you are still living. A family meeting can be critical in these moments to understand each other and show support for one another. The public setting can also limit claims after you have died of undue influence or diminished capacity. Reviewing your estate plan periodically and updating it as needed to reflect changing situations is suggested.
When Do I Need to Contact a Lawyer?
Family members can get into a dispute regarding the distribution of any assets. Especially if your parent specifically gives one particular bequest to one child rather than the other. Most parents are well-intentioned and do not want their children to fight over any bequests given to them. However, the reality is more bitter than reflected in these situations.
If you have an issue regarding a bequest, you can contact your local will contest lawyer to help you resolve it.
