How Specific Should Your Will Be?
I. Most Wills are general in nature. The same is true of Trusts. Many clients are surprised by this. They expect a Will to list certain assets to go to certain people – at least the big things.
II. There are two kinds of gifts:
a. Specific bequests
b. Residual bequests.
III. Specific bequests come in two types:
a. The bequest of specific assets such as a house, stock, jewelry, car, household goods, etc. For example, “I give all my jewelry to my daughter, Kay Smith.”
b. The bequest of a specific amount of money such as giving $50,000 to my son or giving $10,000 each to my grandchildren.
IV. Residual bequests address what is left after the cost of administration and after specific bequests.
For example, “I give the rest and residue of my estate in equal shares to my children,”
or “I give 20% of my residual estate to the University of Cincinnati, 40% to my son Brent, and 40% to my son Eric.” Of course, it must add up to 100%
V. Most Wills have both specific bequests and residual bequests. Most Wills say:
a. Pay the administrative expenses.
b. Pay my bills.
c. Pay my taxes.
d. Give my household goods and personal effects to my children to be determined by my executor.
e. Give what is left equally to my children in equal shares.
VI. It is not uncommon to add one or two specific bequests:
a. I give $5,000 to each of my grandchildren.
b. I give my jewelry to my two daughters.
c. I give $100,000 to Cincinnati Children’s Hospital.
It is important to specify what happens if a beneficiary dies before you do. What happens to that gift – does it go to their spouse or children, or does it lapse (get cancelled)? Also, remember is that specific bequests come before residual bequests. So, if the specific bequests use up all the assets in the estate, nothing goes to the residual beneficiaries.
VII. Many clients think we should list assets in the Will or Trust. But, there are a few reasons that we do not:
a. If my Will gives 100 shares of P&G to my son and I don’t own that stock when I die, what happens? In Ohio, that gift is cancelled.
b. It is a mistake to assume that an asset means the same to a beneficiary as it does to us. If a beneficiary really wants something specific from the estate, he/she can buy it from the executor. Don’t “saddle” your values or your sentiments on your beneficiaries.
c. Itemizing assets may trigger an appraisal and effect estate taxes.
d. We don’t want to amend your Will every time your assets change.
VII. Some experts suggest that itemizing assets in your Will reduces family conflict. I don’t agree. If families want to fight, they are going to fight. The terms of the Will can affect this, but not by itemizing assets. Alternative: Make a “private” list to give to the Executor. This is easy to change. The Will should give the Executor broad power and discretion. Pick the right Executor and trust them to work it out. Don’t tie the hands of your Executor or beneficiary.
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