Bequest

Updated on January 5, 2024
Article byGayatri Ailani
Edited byShreeya Jain
Reviewed byDheeraj Vaidya, CFA, FRM

Bequest Meaning

Bequest refers to a gift of property or assets specified in a will. Hence, this is to be transferred to one or more individuals or organizations after the death of the person making the will, known as the testator. The purpose of this provision is to allow individuals to make charitable contributions to their dear ones even after death.

Bequest

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It can take many forms, including cash, real estate, securities, personal property, or any other asset the testator wishes to transfer to a beneficiary. In addition, these can be conditional or unconditional. This means that the testator can attach certain conditions or requirements to the gift or leave it outright to the beneficiary. Therefore, people commonly use these provisions to support loved ones, give to charities, and leave a legacy and receive recognition.

Key Takeaways

  • A bequest includes a gift in a will and transfers property or assets to one or more designated individuals after the death of the person who made the will.
  • It can come in various forms. Such as money, land, stocks, personal possessions, or any other type of asset that the person making the will (testator) wants to give to a specific beneficiary.
  • Individuals actively make bequests and devises, transferring property voluntarily through a will. Whereas, inheritance divides a deceased person’s assets among their heirs or beneficiaries.

Bequest Explained

A bequest is a legal term used in estate planning and wills. Hence, the bequest agreement allows the testator to determine who will receive their property and in what manner. Therefore, to create such provisions, individuals work with an attorney or estate planner. They draft a will that clearly outlines their wishes regarding the distribution of their assets. Therefore, determining the value of a bequest is usually based on fair market value or appraisal conducted by professionals in the relevant field.

A bequest agreement involves the following steps:

  • The first step during the bequest is for the testator. Therefore, the testator creates a will that specifies the beneficiaries who will receive the assets after the testator’s death. The testator must sign the will, and at least two other people must witness it, ensuring that it meets all legal requirements in the state where it is created.
  • After the testator passes away, the estate executor is responsible for carrying out the will’s instructions, including distributing the assets or property to the beneficiaries named in the will.
  • Lastly, the specific process for transferring assets or property depends on the type of asset and the instructions in the will. For example, the executor directly transfers cash assets to the beneficiaries, while they are responsible for selling real estate or personal property and distributing the proceeds to the beneficiaries.

Furthermore, it is essential to note that the charitable organization typically provides charitable bequest forms. Thus, this charitable form includes the following elements:

  • Donor information
  • Bequest details
  • Charitable organization information
  • Alternative provisions
  • Witness or Notary requirements

Overall, the effects of a bequest are deeply personal and can have far-reaching implications, both practical and emotional.

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Examples

Let us look at bequest examples to understand the concept better:

Example #1

Suppose John is a wealthy individual with several assets, including a house, a car, and a substantial investment portfolio. He wants to leave instructions on how to distribute his assets after his death. Therefore, in his will, he decides to make the following bequests:

  • Specific bequest: John has a valuable painting that he wants to leave to his sister, Mary. In his will, he directs his executor to transfer the artwork to Mary after his death.
  • General bequest: John wants to leave $200,000 to his favorite charity, the American Cancer Society. He includes a general bequest in his will directing his executor to transfer $200,000 to the charity.
  • Residuary bequest: John wants to leave the remainder of his estate, including his house, car, and investment portfolio, to his daughter, Austen. He includes a residuary bequest in his will, directing his executor to transfer all remaining assets to Jane after fulfilling any specific or general bequests.

Thus, in this example, John used different provisions to distribute his assets after his death. Besides, he has made a specific bequest to give a particular asset to a designated beneficiary, a general requirement to donate a specified amount of money to a charity, and a residuary provision to transfer the remaining assets to his daughter.

Example #2

Two healthcare organizations in Bangor have received a total of $18 million in dispersals. The late John M. Webber’s estate announced in May 2023 that it donated $9 million to Northern Light Eastern Maine Medical Centre and $9 million to St. Joseph Healthcare Foundation.

Following the settlement of the estate, both organizations expect to receive a further confidential payout of a few hundred thousand dollars. The organizations will use the funds to advance technology, improve patient access, and enhance patient outcomes.

According to a news release, John Webber, a native of Bangor and longtime supporter of the community, participated in local schools before serving his nation as a member of the powerful division of the United States Marine Corps. As a result, St. Joseph Healthcare President Mary Prybylo stated that Webber’s bequest would support St. Joseph’s ongoing efforts to offer patient-friendly medical care to the community through improvements to its in-patient and operative facilities.

Taxation

In general, bequests are not taxable for the recipient of the legacy. However, how these provisions are taxed can vary depending on several factors, such as the type of tax, the jurisdiction in which the tax applies, and the specific circumstances of the legacy and the recipient. Here are a few factors that can affect the taxability of this legacy.

  • Estate tax: In some countries, the person who passed away may be subject to an estate tax charged on the value of their assets at the time of their death. Hence, the estate is subjected to the estate tax, and the bequests made in the will may be reduced by the amount of tax owed.
  • Inheritance tax: Some countries have an inheritance tax on the assets received by the heirs or beneficiaries. Therefore, inheritance tax is typically imposed on the recipient of the legacy.
  • Gift tax: If a provision is made during the testator’s lifetime, it may be subject to gift tax instead of the estate tax. Thus, this tax is imposed on the donor rather than the recipient.
  • Tax exemptions and deductions: Many jurisdictions provide exemptions or deductions that can reduce the tax liability associated with these provisions. For instance, exemptions for bequests to spouses or registered charities may exist.

Moreover, under IRS (Internal Revenue Service) rules, these legacies may be subject to estate and gift taxes, and taxes on the transfer of property at death. Therefore, the amount of tax owed depends on the total value of the testator’s estate and the specific instructions in the will.

Bequest vs Devise vs Inheritance

The difference between Bequest and Devise and Inheritance are as follows:

AspectBequestInheritanceDevise
DefinitionA specific gift of property or assets, specified in a person’s willRefers to a broader term that  encompasses the transfer of property, assets, or rights to an heir upon the death of the ownerIt refers to a transfer of real estate or immovable property through a will
ScopeIncludes any type of property or assets, including real estate, money, etcLimited to the transfer of land, buildings, or fixed propertiesConsists of all forms of property transfer, such as intestate succession, and another legal mechanism
Methods of transferThrough a willThrough a will or laws of intestacy when there is no willThrough a will

Frequently Asked Questions (FAQs)

1. How to make a charitable bequest?

There are various steps involved in charitable bequest :
• The first step is to decide which charitable organization or cause an individual would like to support. They can choose any charity recognized as a non-profit by the government.
• Determine the amount of your gift: An individual can leave a specific dollar amount, a percentage of their estate, or a specific asset to the charity.
• Consult with an attorney: It’s essential to consult with an attorney to ensure that their charitable bequest is appropriately drafted and included in their will. They can also help consider any tax implications or legal requirements for making a charitable bequest.

2. What is a pecuniary bequest?

A pecuniary provision is a will where a fixed sum of money is designated to be given to a particular beneficiary. Hence, it involves a specified monetary amount rather than a specific asset or property.

3. Difference between a will and a bequest?

A will is a legal document that states a person’s wishes to distribute their property and assets after death. It typically includes instructions for how the person’s property should be distributed, who should be responsible for carrying out those instructions, and who should be appointed as guardians for minor children. On the other hand, a bequest refers to a specific gift of property or assets that is made in a will. It is a provision in a will that directs a specific item, sum of money, or asset to a particular person or organization.

This article has been a guide to Bequest and its meaning. Here, we compare it with devise and inheritance and explain it with its examples and taxation. You may also find some useful articles here –

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