Gifts and Estate Planning

Many people who establish an estate plan via trust or will wish to include items to be given to particularly people. For example, a family heirloom should stay in the family, or an item of sentimental value should go to a particular person. There are two main ways to make bequests- to give things to particular people or entities: either expressly stated in the estate plan, or on a separate document, such as a computer document or handwritten note pad. There are pros and cons to each method.

Gifts via Estate Plan

Specifying specific bequests in the estate plan itself is a more certain way to ensure that gifts reach the intended individual. Since there is no separate document to keep track of, and the gifts are spelled out within the estate plan itself increases the likelihood that the gift reaches the intended beneficiary. A main drawback to this method is that, should the beneficiary of a gift no longer be entitled to said gift- or no longer able to receive the gift due to death- the estate plan must be amended, which can add additional cost and time. Bequests via this method are more likely to reduce ambiguity, though, since the attorney drafting the estate plan will try to make sure the bequest is specific and avoids ambiguity. For example, the estate plan method may state “To my brother, Robert T. smith, I give my 1964 Red Corvette, License Plate #455IKL, Vin # 3758478427,” which contrasts with the example below.

Gifts outside the Estate Plan

Bequests may be made outside the estate plan, whether that be via a document attached to the estate plan or a list on a napkin. This allows for much greater flexibility: the bequest and recipient can easily be changed. But this method of bequest is fraught with greater chances that the gift never reaches it’s intended beneficiary since the list cannot be found or it is found too late, after which all the assets have been disposed. This method also increases the chances of confusion, and possible litigation, if there are two different lists. Which is the “proper” list, as intended by the deceased? This situation most often arises when the deceased made one list, then made a new list but did not destroy the old list, this making it uncertain which of the two lists is the one the deceased intended to provide instructions on bequests. An additional problem with this method is ambiguity: for example, the deceased’s list may state “To my brother Bob, I give my Corvette.” What if the deceased had two Corvettes? What if one Corvette is of significantly greater value than the other, and litigation ensues over which Corvette is the intended gift?

There are other considerations involving gifts and specific bequests, but this brings up some common problems when making specific bequests. To discuss estate planning giving, or any other estate planning need, please contact Benjamin Long of Schmidt & Long.