No one wants to think about their ultimate demise. But when it comes to estate and wealth planning, it's a reality you must face early. Failing to prepare can leave your assets in limbo, forcing your family to battle it out in court to determine who gets what.
The best way to avoid all that is to leave a bequest. But what does this term mean, and what does it take to learn how to leave a bequest? Read on to find out.
What is a Bequest?
A bequest is a term used to describe the act of giving assets through a will or estate plan. To bequest something is to shift your assets to an individual or an organization. The bequest doesn't occur when you're around. Instead, it happens because of details written in your will. The bequest is fulfilling your last request, ensuring that assets go where you want them to go.
The assets aren't always monetary. Many use bequests to pass on important items like family heirlooms, jewelry, and other priceless items. Bequests also apply to stocks, bonds, and cash. However, it doesn't apply to real estate. There's a separate term for gifting real estate.
Are There Taxes Involved?
Taxes do come into play. Even when passing assets on after death, beneficiaries may have to pay taxes on your gift. The good news is that the IRS does have exemptions. These exemptions change yearly, but as of 2022, it was $12.06 million for individuals.
The exemption means that individuals may bequest gifts to heirs up to $12.06 million without paying federal estate or gift taxes. There's also the option to exercise Crummey Power, turning gifts not eligible for tax exclusion into gifts that are.
How to Leave a Bequest?
The only way to leave a bequest is to include it in your will or estate plan. These documents are complex, and it's wise to go to an experienced lawyer for assistance. Bequests must be well-written and clear. Lawyers should also take steps to ensure that your will is legally binding after your death.
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