A bequest is an instruction in your written will that states how to distribute some or all of your estate.
There are four types of bequests: specific, percentage, residential and contingent.
The type of language that you choose should fit what you want to accomplish. You should think carefully about how your gift can help the person or organization when deciding what bequests to include.
In your will, you choose an executor as the person entrusted with the responsibility of carrying out your wishes. The executor has to account for the entire estate (including debts and liabilities) and distribute money and property according to the law and your instructions.
If you do not leave a will and so not make a bequest, you cannot be sure that your property will be distributed as you intend. Without a will, your property will be distributed by a pre-set formula according to the state intestacy laws, and it is possible that family members, close friends, and worthwhile charities will receive no part of your estate. Making a will is the only way to be sure that the people and causes you care for will receive your generous gifts.
Flexibility: Charitable bequests are flexible and easy to update. You can write one into a will with a short paragraph, and if circumstances change you can revoke it just as easily in a subsequent will or codicil. Estate planning professionals often counsel their clients to have an annual or bi-annual estate plan “check-up” to ensure that the most recent version of the client’s will reflects their wishes.
Tax benefits: Under current federal law, an estate of more than $11.58 million will owe federal tax. In general, there is an unlimited deduction of charitable bequests against the value of an estate, making it a powerful tool for reducing estate tax. It is possible for an estate to deduct charitable bequests of not only cash, but also property such as real estate, stock, IRAs, autos and other assets. Not all assets are treated equally if inherited by heirs—for example, retirement assets are typically less advantageous to leave to heirs than appreciated securities—so there are also benefits to carefully selecting which assets to use as a part of a charitable bequest to maximize the benefits to all involved.
Recognition: A bequest gift can be a way to create a lasting legacy at an organization that supports the cause you care about. Nonprofit organizations have diverse ways of recognizing and honoring gifts—depending on what is funded. For example, if a university has funding minimums to create a named scholarship, those minimums would apply to bequest gifts as well.
Efficiency: Charitable bequests can help the efficiency of settling an estate because the bequests provide clear instructions to the executor on how to distribute certain assets in accordance with the testator's wishes. Making charitable bequests to a donor-advised fund, explained in more detail below, can also be more efficient than other types of charitable bequests because it can streamline the work for the estate executor.