Substantive Tip – Specific Bequests
When clients tell us how they want their assets distributed, they are clear about who they want to receive most of their wealth. They often want to leave smaller amounts to one or more individuals and charities. For example, a client may want most of their wealth to pass to their spouse and children (residuary bequest), but also may want to make smaller gifts to other family members, friends, their church, their alma mater or one or more other charitable organizations (specific bequests or general bequests). A specific bequest may involve a specific asset (for example, a lake house or business interest) but more often it involves an amount of money from the general estate (hence this is sometimes called a general bequest). We have found this general rule works best: if the gift is less than 5% of the estate, make a specific bequest in a specific dollar amount; if the gift is more than 10% of the estate, make a residuary bequest in a specific percentage amount. We use this rule because although we know the value of the estate at the time the will or trust is written, we don’t know what the value of the estate will be when the client dies some years later. For example, if a client with an estate of $3,000,000 wants to leave $10,000 to each nephew and niece, $300,000 to a named charity, and the rest to her only child, what if at the time of death, the estate shrank to $1,000,000 or grew to $5,000,000? Usually, the client opts to keep the smaller gifts at a fixed dollar amount and let the larger gifts shrink or grow with the value of the estate.