Your Will: Understanding the Different Types of Bequests

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It’s no secret that having a Will is important but creating one doesn’t exactly rank high on the list of things to do on a Saturday night. Regardless of your thoughts about drafting a Will, if you’re unable to advocate for yourself, it can give power to someone you trust to speak on your behalf and it will make things much easier for your family and friends to manage your assets after you are gone.

If you don’t have a large complex estate, making a Will isn’t complicated. A simple Will can take care of the basics like property, children, investments, and personal items. In fact, you can even create one online if you choose!

One of the most detailed portions of your will may be your bequests – or gifts that you leave to someone in your will. You can leave bequests to as many people or organizations as you want, but it’s important to know what types of bequests to choose and how they work.

There are 5 main types of bequests:

General – financial gifts that come out of the estate’s general assets, not from a specific source. For example, your estate is worth $500,000 and you leave $10,000 to your best friend. The money for the best friend could come from the sale of your home, your retirement account, or from another part of the estate. As long as they get the funds, it doesn’t matter where the money came from.

Demonstrative  – financial gifts that come from a specific source. An example of this could be leaving a child the funds in a 401(k) or your life insurance policy in your Will. However, this can be tricky because accounts similar to these often have a beneficiary listed on the accounts as well. Regardless of who you name in your Will, whoever is listed as the beneficiary on the account will receive the funds. Make sure your Will,  and policy beneficiary match.

Specific – when you give a piece of physical property to a particular person. A good example could be a family heirloom or a piece of jewelry. These types of bequests are often used when you value certain items or know that someone else really values something you have and you want to make sure it goes to the right person.

Residuary – what’s left over after the main part is gone. These are gifts that get distributed after your debts are paid and all the other bequests have been distributed. Since it’s hard to know what will be left after the estate is settled, these are typically listed as a percentage. An example would be residuary bequests of 50% to each child – meaning the balance of the estate will be split between your 2 children. It could be a little or it could be a lot, it won’t be determined until everything else is paid and doled out.

Charitable – a gift that you leave to a charitable organization or cause instead of a person. You can leave a charitable bequest using any of the types of bequests listed above as well. Many people choose to leave residual gifts to the causes they support. Charitable bequests are very popular because it allows someone to leave a legacy behind and continue to support the causes they love.

After your passing, your Will goes through probate – paying off debts, settling legal affairs, and distributing assets. Bequests can take a while to distribute if they are conditional or executory.

Conditional bequests are typically gifts that require someone to do something. A good example would be a niece who may receive $20,000 extra IF they decide to go to college. If they don’t go to college, they don’t receive the money.

Executory bequests typically involve a life event or are given after something happens. You may leave a grandchild 15% of your estate after they turn 18 or after they graduate college or after they get married. You can set time limits on these to speed up the process if needed.

You can make a bequest both executory and conditional, just know that it may take months or years to execute and if you have residual bequests, it could hold up those beneficiaries from receiving funds. It’s also important to note that the Executor of your Will is needed until the estate is completely settled.

Creating your Will should be done with some thought and consideration since these are your final wishes for how you want your estate cared for or distributed. If you have any questions, it’s wise to consult with an attorney who specializes in wills and estates.

Margret Warner

Margret K. Warner
Vice President, Commercial Lender
860.393.9151

Author: Margret Warner

Margret Warner started her career at Litchfield Bancorp in 2000 as Branch Manager in Washington Depot and has subsequently served as Branch Manager of the Litchfield office, Business Development Officer and is currently a Commercial Lender based in the Watertown market. With over 25 years of banking experience, Margret brings her extensive knowledge of the financial services industry to area businesses. Margret resides in Torrington and is committed to the communities where she works and lives as a member of the Watertown Rotary and advisor of Leadership NW. In addition, she serves on the board of the Watertown/Oakville Chamber, the United Way of Northwest Connecticut, VNA Northwest, Inc., and the NW CT Chamber of Commerce. She is a graduate of the esteemed ABA Stonier Graduate School of Banking, and holds a BBA in Accounting from Hofstra University.