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What Is a Bequest, and When Does Your Estate Plan Need Them?

You worked hard your whole life to amass the assets in your estate, and at your death, you want to ensure that they go where you want them to go. You don’t want the government to distribute them or have them absorbed by estate taxes. 

Protecting your assets requires a commitment to estate planning, which may involve bequests. This refers to gifts given to an individual or organization after your death, as outlined in your will or estate plan. Leaving your heirs cash, tangible property, or all other types of assets are examples of bequests. Real estate bequests have a specific name, and they are referred to as a devise

This guide covers the essential questions about what is a bequest, how to set one up, and why you need to work with a wealth management professional.

The 4 Types of Bequests

Bequests fall into a few different categories, depending on the type of asset and a few other factors. You may use one or all of the following types of bequests when you create your estate plan

General Bequests

General bequests refer to gifts of cash or property from an estate’s general assets, and these bequests are not pegged to a specific source. They may include a bequest such as leaving $10,000 to a particular person or a charity, but this category can also include directives such as leaving three heirs each a third of your total estate.

Demonstrative Bequests

A demonstrative bequest is a type of general bequest pegged to a specific source. This may include a bequest such as the entirety of a retirement account or a set amount of money from a particular bank account.

Specific Bequests

A specific bequest refers to assets that are easily identifiable and distinguishable from the other assets in your estate. Examples include a home, a certain number of stocks from a specific company, or a particular asset such as a sports car, an expensive painting, or a piece of jewelry.

Residual Bequests 

Residual bequests refer to amounts distributed after the estate has settled all its debts and distributed all its general and specific bequests. Your estate plan may contain directions to give $1 million to each of your three favorite charities, it may list who receives specific valuables, then it may declare that the remaining estate should be split equally between your three children. The splitting of your remaining estate between your children, in this situation, is referred to as a residual bequest. 

You should think about these four categories when pondering the question “What is a bequest?” An essential part of wealth management is using these various types of bequests to minimize the estate tax and pass as many assets as possible to your heirs or the organizations of your choice.

a man signing a will with a lawyer

How to Set Up a Bequest

Setting up a bequest can be relatively simple. You can write a will that says you want to pass your home to this person, give your favorite charity a certain amount of money, distribute your stocks in the family business to your nephew, and split the residual amount between your nieces. Even the most rudimentary will is legally binding. 

You should go beyond writing a basic will, however, when you’re dealing with a sizable estate. Check out these steps on how to set up a bequest:

1. Think About Where You Want Your Assets to Go

The most important reason to set up a bequest is to control what happens to your assets after your death. The state’s testamentary laws decide where your assets go if you don’t have a will, so you need to be proactive. You can also designate a guardian for your minor children. 

2. Consider Setting Up a Trust

A will dictates where your assets go, but your estate will still need to go through probate in most cases. This is a legal process that verifies the legitimacy of your will, pays your estate’s debts, and distributes your assets according to the directions in your will. Probate can be a time-consuming step.

A trust allows your assets to pass to your heirs without going through probate, and it also lets you create specific instructions that may take years to follow. You can distribute your assets to your heirs incrementally over time, for example. Your trust can also prevent your heirs from receiving anything until they reach a certain age, unless they want funds for a specific purpose such as buying a home, going to school, or starting a business. These are just a few basic examples of how you can use a trust.

3. Name an Executor or a Trustee

An executor oversees your estate after your death and ensures your wishes are carried out as outlined in your will. A trustee administers your trust. You can choose a family member, a friend, or an attorney as the executor of your estate, but ideally, if you have a trust, you should select a professional trustee.

4. Update the Beneficiaries on All Your Accounts

Life insurance plans and retirement accounts require you to name a beneficiary, and this information typically supersedes the instructions in your will. Your will might say you want your estate to be split evenly between your two closest friends, for instance, but your life insurance policy still lists your ex-wife as a beneficiary. She will receive those funds after your death instead of the heirs named in your will. Updating your beneficiaries prevents this type of scenario from happening. 

5. Work With an Estate Planning Professional

Wealth management is a complicated process, and if you want to preserve your intergenerational wealth, you need to work with a specialist. A wealth management professional can help answer questions like what is a bequest. They can also help you understand the most effective ways to leverage trusts and other wealth management tools, so your assets go where you want them to go after your death.

Trust is at the center of everything we do at Bogart Wealth. We want to see your assets stay in the family. We want to help you minimize the estate tax. We are ready to answer your questions and help you make a plan. Our team is dedicated to helping you achieve peace of mind by preserving and maximizing your wealth for you and your heirs. 

To learn more and discuss your wealth management needs, contact us today.

IMPORTANT DISCLOSURE INFORMATION:
Please remember that past performance is no guarantee of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Bogart Wealth, LLC [“Bogart Wealth”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Bogart Wealth. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Bogart Wealth is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Bogart Wealth’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.bogartwealth.com
Please Note: Bogart Wealth does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Bogart Wealth’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. 
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