When one bequests certain assets, it is another way of gifting certain individuals with provisions detailed in a will. There are numerous individuals involved with a bequest:
The individual who bequests. This person has written out in their will who they desire their goods or property to be given to what is called a gift in trust. This also is not a living gift; the person must pass away in order for the gift to be sent to the receiver.
The person who mandates the bequest. This may be the person that was hired to set up the actual will of trust and put the bequest into the clause.
The person who receives the bequest. This can be a family member, friend, or a charity.
In order to set up a bequest, a person must have a will that meets all of the statutory requirements. A will only can be effective after a person’s death, so once the benefactor dies, their bequest or “gift” will be put into motion.
Bequest vs. trust
A bequest is a gift detailed in a will that will only be given after the benefactor’s death. A bequest can include any type of asset, including property or expensive goods.
A trust is an amount of money (usually a lump sum) dictated by a benefactor. Trusts are accessible right when they are created unless the benefactor desires otherwise. For example, some trusts are not available for certain people until they turn 25.
Bequest vs. Estate Planning
To bequeath money is much different from planning out an estate. Here are the main distinctions:
To bequeath is only to gift a specific asset to a specific person after the beneficiary’s death. This has nothing to do with life insurance, personal wealth, or estate planning.
Estate planning encompasses the assets and belongings that may not fall under a will. Estate planning is necessary to help a person decide how their assets will be distributed after their death, and can include the life insurance policies, retirement plans, and extraneous assets the person had while living.
People who are interested in bequeathing money are often encouraged to plan an estate as well so that their assets will be properly dealt with. In order to do this, people should hire an estate planner.
It is important to understand how bequest works because it is a good way to get exemption from taxes. While the beneficiary will not pay any tax on a bequest, the benefactor, while alive, must pay taxes. However, a bequest often can be subject to lower taxes or total tax exemption if they give their property to charity. This would mean that the charity would receive the property after the benefactor’s death, but until that point, the benefactor would enjoy tax exemptions.