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Bequest Management

Types of Charitable Bequests and What They Mean

June 20, 2019
Types of Charitable Bequests and What They Mean

Generally speaking, bequests are gifts that are made as part of a will or a trust. Anyone can make a bequest, in any amount, to an individual or organization. Bequests can be simple, such as giving a specific monetary amount to a family member, or complex, with conditions about how the gifts can be used. To make a bequest, you must leave instructions, typically in the will. In your will, you can detail different types of bequests and continue to update it throughout your life. If you do not leave any instructions, state law will dictate where your property goes when you pass away

What are Charitable Bequests?

A charitable bequest in particular is a gift traditionally made through a will that enables you to make a significant contribution to a charity or nonprofit organization. There are many reasons as to why people make charitable bequests. For example, if donors are inspired by an organization’s mission or what an organization does, they may want to contribute to its continual growth. There are four main types of charitable bequests, including the following:

General Bequests

A general bequest is a testamentary gift that is paid out of the general assets of the estate. In other words, it is an exact dollar amount that is not designated from any asset. When an individual makes a general bequest, he or she should have an attorney evaluate the need to adjust the bequest should the value of an estate increase or decrease. For example, attorneys focusing on bequest management can incorporate language that binds the bequest to a percentage of the estate as a limit. Therefore, if the size of the estate decreases significantly, the general bequest can be adjusted downward as well. Importantly, this helps preserve the donor’s assets that might be designated for other types of bequests.

Specific Bequests

Specific bequests are those that allocate a particular asset to a specific beneficiary. Examples of specific bequests include personal effects, jewelry, collectibles, real property, and more. Depending on the particular asset, some specific bequests may be made by a handwritten note or memorandum rather than in the will itself. Specific bequests can be easily identified and distinguished from all other property in the donor’s estate.

Demonstrative Bequests

Demonstrative bequests are gifts that come from an explicit source or are paid from a specific fund, such as a bank account. For example, a donor can indicate in a will that he or she would like $5,000 paid to a certain charity or non-profit organization from his or her savings account. When distributing stocks or funds, it is important to state that the bequest of the stock in a company shall survive in the event that the organization is acquired by another entity.

Residuary Bequests

Residuary bequests include all property and assets not included in the other three forms of bequests. The make up the gifts made after all of the other debts and expenses are paid as well. Residuary bequests tend to comprise the majority of the estate.

Importantly, charitable bequests can fall into any of these four categories and an individual’s will can contain more than one type. It is common to see individuals leave specific or demonstrative bequests to family members or other individuals and then leave a residuary charitable bequest to a charity or non-profit organization. In doing so, specific people will receive the exact amount or items the donor wants to leave them, and the charity receives the funds that remain.