What Are Bequests?

Are you planning your affairs and deciding how your assets will be distributed? If so, you’ll most likely want to incorporate bequests into your plans.

Bequests are a fantastic way to pass on wealth to your immediate family and create a legacy within your local community. Contrary to popular belief, planning for such things is not just for high-net-worth individuals but for anyone with retirement accounts, cash on hand, insurance policies, or property.

In this article, you’ll learn what bequests are, how they work, and how you can incorporate your favorite charity into your plan of giving.

What is a bequest?

A bequest is the gift of personal belongings, money, or real property to designated individuals in one’s will or estate planning documents. Essentially, it is the process of passing down your most important belongings to the people and organizations you care about the most.

Bequests can be bestowed on friends and family members. They can also be assigned to a nonprofit organization, trust, or foundation of your choosing.

Typically, in order to formalize a bequest, you must incorporate it into your will or trust. Within these documents, you will be asked to outline the gifts you’d like to make and designate who the beneficiary will be for each bequest.

What types of bequests are there?

In general, you have four different types of bequests available in your estate planning toolbox.

1. General Bequests are gifts that leave a specific dollar amount or percentage of a person’s estate to an individual or organization. For example, “I leave $20,000 to my granddaughter Lily” or “I bequeath 20% of my estate to St. Luke’s Foundation” are both general bequests.
2. Specific Bequests are gifts of specific items to a beneficiary, such as “the painting in the hallway” or “the luxury handbags in the closet,” to name a few examples.
3. Contingent Bequests are gifts that can only be given after the named beneficiary meets the specific requirements. Within the will, these can look like, “I hereby bequeath $100,000 to my son Max, on the condition that he attends grad school.”
4. Residuary Bequests are the assets that are left over after all other distributions and bequests have been made. The testator, or creator of the trust, for example, can designate their son or daughter to receive everything else not named in the will.

Any of these types of bequests can be used when designating a charity, trust, or foundation as a beneficiary of your assets.

How to make a charitable bequest

To make a bequest, there are certain requirements that you’ll need to meet. If you’re adding the bequest to your will or trust documents in the first draft, then you’ll need to include specific language, such as “I bequeath this property to this foundation.”

If, however, you have a will or living trust that already exists and would like to modify these to add a bequest, then you’ll need to add what is called a codicil to the former, or make an amendment for the latter. Both of which can be arranged by your attorney.

How to leave real estate to charity

If you’re planning to leave real estate to a charitable organization, you’ll have to take the additional step of specifically and thoroughly describing the property within your will or living trust.

This description can be as broad as “my current home” to as specific as a property address and legal description. If it is broad, though, you’ll want to include specific clauses to ensure any replacement property you purchase is covered in the bequest.

You’ll additionally want to let the charitable organization know that you plan to bequeath your home or other investment property to them. They will provide certain forms that you can fill out. Rest assured, these do not serve as contracts that lock you in but merely acknowledge your plans.

Lastly, suppose your property has a mortgage on it. In that case, you’ll want to designate how that is to be paid, for example, by your heirs, by the charitable organization, or by any other remaining assets in your trust. This is a critical step to ensure your donation has the most significant impact on the charity itself.

What are the benefits of a charitable bequest?

As a donor, you gain many benefits from a charitable bequest. The most obvious are the financial benefits. Creating a charitable bequest comes at no cost to you.

Furthermore, at a federal level, your estate can receive an unlimited deduction in an amount equal to the value of the charitable bequests you make. For example, if you decide to leave $5,000,000 in assets to a charity of your choice, your estate can take a full $5,000,000 tax deduction. This powerful tool reduces or eliminates any potential estate tax that could impact your heirs.

An additional benefit of charitable bequests is you can always change them as time passes. By their very nature, you retain the freedom to make adjustments to your bequest instructions in the face of any changes to your estate and its size, providing ultimate flexibility with your desires.

Lastly, and on a deeper level, charitable bequests allow you to create an everlasting legacy at the nonprofit of your choice. Whether it takes the form of a scholarship program, a building, or a school in your name, a charitable bequest is the ultimate step to giving back to the community that has served you.

Using Giving Property to make your charitable bequest

If you feel ready to donate a home or other property to the nonprofit of your choice, Giving Property is here to help. We specialize in working with organizations across the country to create a seamless gift-giving experience for you and the ultimate impact for them

To learn more about getting started, contact us at 844-277-HOME or visit www.GivingProperty.org.

**This article is for informational purposes only and does not constitute formal advice. Individual tax situations may vary so please contact your tax advisor if needed.