Question about bequests in a will

[Droo]

I am redoing my will using Quicken Willmaker, and I am wondering if it is possible to include a conditional bequest such as "I leave $50,000 to Mary to distribute to whatever charity she deems worthy within 1 year". I am having a hard time figuring out if that is possible with a simple will, and how exactly to phrase the bequest.

I am trying to accomplish 2 things with this:

1. Leave the residual amount of my estate to the executor to donate to whatever charities he sees fit, in order to lower the risk of any idiot family members challenging the overall value of the estate (by leaving them only specific dollar amounts).

2. My estate will not be subject to estate tax, so I figured I could pass on some tax deductions by bequeathing it to them and they can donate it to charity.

My wife and I are both relatively young and the chance of us both dying is low, so I don't really care to deal with the expense and hassle of setting up a trust yet. We have no kids so the money is going to get split up between charities / siblings / friends.

Thanks for any advice!

 

[mathjak107]

no terms of giving can be set in a will . only a trust can have strings and restrictions .

 

[Sarah in SC]

Droo, we also are fairly young and no kids, and our current wills have trusts that will be created by the wills at the time of our deaths. These two trusts have specific HEMS language to benefit our minor niece and nephews (2 families). In addition to that, we have specific bequests to several people of cash (if they choose to donate to charity they can, no strings) and a codicil with a term-limited provision for our roommate to remain in our home (caring for pets and disposing of personal effects) for a period of time, with the estate paying all expenses and providing a stipend.
You may want to consider the type of "springing trust" as we have done. Honestly, I would recommend using a lawyer. It isn't that expensive, and you can be sure it is done as you wish.
And of course, please take care of durable health care POAs and advance directives at the same time.

 

[ExFlyBoy5]

Your 'simple will' is anything but. A trust can indeed be fairly simple, especially if you spend a little $ and let an estate attorney set it up for you. It's probably the least amount of money you can spend that can bring a lot a decent amount of peace of mind.

 

[Droo]

Your 'simple will' is anything but. A trust can indeed be fairly simple, especially if you spend a little $ and let an estate attorney set it up for you. It's probably the least amount of money you can spend that can bring a lot a decent amount of peace of mind.

Assuming a will can't handle a "subsequent conditional" bequest (which is what I was originally asking about, and must be something that exists in some countries outside the US but not here), then my will just becomes a list of about 15 bequests of specific dollar amounts to people and charities. What is not simple about that?

I link up the beneficiary designations on my retirement accounts to match the language in my will so that 401k and IRA accounts are inherited efficiently, but other than that it seems pretty simple. I don't really need it to do anything fancy, I just wondered if it was possible.

 

[pb4uski]

Your best bets are to either bequeath the $50,000 directly to the charity of your or Mary's choice (which results in no tax benefit) or bequeath it to Mary and ask that she make a donation to the charity of her choice (knowing that she'll get the tax deduction... if it still exists... and there is a risk that she may just pocket the money). I think I would lean towards the former unless you really trust Mary.

 

[Sunset]

......

I link up the beneficiary designations on my retirement accounts to match the language in my will so that 401k and IRA accounts are inherited efficiently, ......

I'm not understanding exactly what you are saying however:

If you have beneficiaries on your bank/investment accounts, this money is not part of the estate and is not covered in the Will.

 

[pb4uski]

FYI they are offering Willmaker at 40% off for the Independence day holidays.... coupon code ID40.

 

[Droo]

I'm not understanding exactly what you are saying however:

If you have beneficiaries on your bank/investment accounts, this money is not part of the estate and is not covered in the Will.

For example, my 401k beneficiaries are set to go to my two siblings in 50/50 shares. I just also mention it in my will:

"I leave all assets in 401(k) account #ABC123 held by [my full name] to [sibling 1] and [sibling 2] in equal shares".

So that both my will and the account beneficiary designation agree. But yes, I know that the beneficiaries take precedence over what the will says.

 

[Droo]

FYI they are offering Willmaker at 40% off for the Independence day holidays.... coupon code ID40.

Thanks for that info, I bought a copy!

 

[Dancfo]

For example, my 401k beneficiaries are set to go to my two siblings in 50/50 shares. I just also mention it in my will:

"I leave all assets in 401(k) account #ABC123 held by [my full name] to [sibling 1] and [sibling 2] in equal shares".

So that both my will and the account beneficiary designation agree. But yes, I know that the beneficiaries take precedence over what the will says.

Droo - one suggestion, having administered many trusts and estates myself. You are correct in that the beneficiary designations supersede a devise in a will. However, if they conflict, you do open the chance of someone contesting your plan. Although this may be a slim possibility, there is no reason to provide an opportunity to have a conflict. When people age and situations change, they don't always think through making all the necessary changes in their documents (for instance, if one of your siblings pass.) Just a suggestion - having seen the fall-out.

 

[ERD50]

For example, my 401k beneficiaries are set to go to my two siblings in 50/50 shares. I just also mention it in my will:

"I leave all assets in 401(k) account #ABC123 held by [my full name] to [sibling 1] and [sibling 2] in equal shares".

So that both my will and the account beneficiary designation agree. But yes, I know that the beneficiaries take precedence over what the will says.

I am not a lawyer, but from my experience and reading, you are getting things crossed.

The 401K has beneficiaries specified, period. There is no need, and I would think can only add confusion, to include any reference to your 401K in a will or trust. Redundancy leads to confusion in a case like this.

I see Dancfo posted much the same thing. Though I wonder now, could there be value in some case? By stating that person X & Y are getting the 401K, it might let other beneficiaries know why person X & Y got a lower amount of the rest (if that was the case)? So that might help in the case where X & Y challenge the will, claiming they should have got an equal amount?

-ERD50

 

[Sunset]

I am not a lawyer, but from my experience and reading, you are getting things crossed.

The 401K has beneficiaries specified, period. There is no need, and I would think can only add confusion, to include any reference to your 401K in a will or trust. Redundancy leads to confusion in a case like this.

I see Dancfo posted much the same thing. Though I wonder now, could there be value in some case? By stating that person X & Y are getting the 401K, it might let other beneficiaries know why person X & Y got a lower amount of the rest (if that was the case)? So that might help in the case where X & Y challenge the will, claiming they should have got an equal amount?

-ERD50

If a person wants to explain to the beneficiaries why someone got more or less than others for whatever the reason whether it be TOD accounts or simply loved less.
Just write a letter of explanation, not part of the will, that explains it. It will answer the questions and not confuse the will, and even defuse any contesting of the will.

 

[Gill]

no terms of giving can be set in a will . only a trust can have strings and restrictions .

This is completely inaccurate.
Bruce

 

[RunningBum]

For example, my 401k beneficiaries are set to go to my two siblings in 50/50 shares. I just also mention it in my will:

"I leave all assets in 401(k) account #ABC123 held by [my full name] to [sibling 1] and [sibling 2] in equal shares".

So that both my will and the account beneficiary designation agree. But yes, I know that the beneficiaries take precedence over what the will says.

Seems like it could only open a can of worms. What if you decide to change your 401K beneficiaries? Maybe you have a falling it and decide to exclude sibling 2? Now you also have to change the will, or risk sibling 2 contesting it, saying that you obviously meant to leave something.

Or what if you drain your 401K over the years? The siblings might contest the will, saying they were obviously supposed to get more, and since the 401K is gone they should get a bigger share of the rest.

Just converting the 401K to an IRA would cause confusion because your will refers to an account that does not exist. I'd hate to have to update my will every time I moved accounts.

 

[Dancfo]

A lot of issues arise because people fail to change their wills (or trusts) when circumstances change. For instance, identifying a particular account by account number to go to a specific person, and then moving the account to another provider (let's say Vanguard to Fidelity) without making the corresponding change in the will (if you don't have a TOD designation). It doesn't necessarily cause the funds to go to someone else, but it can cause a problem and additional expenses to correct the mistake.

People just don't think of these things because of a lack of knowledge or because their mental capacity diminishes due to age, etc. If it matters to you, it is important to revisit your estate plans frequently and get some basic assistance from someone that knows how things work. Spending $1,000 (or more) is worth making sure your $1,000,000 goes where you want it go after your dead - if you're concerned about it.

 

[euro]

This is completely inaccurate.
Bruce

MBMiner, would you mind sharing the ACCURATE answer to the OP's question? I'm wondering about this too

 

[Gill]

The OP is proposing language which in the law is known as "precatory" language or, in other words, expressing a wish or request in connection with a bequest or devise. The courts have long struggled with this language in trying to decide whether it imposes a mandatory obligation on the devisee or whether it is only a wish of the testator. Such a bequest can be made, but it is best avoided because it is dangerous and subject to interpretation. Often such a bequest is too small to warrant a trust. A good solution might be to leave the bequest to a donor advised fund and then give instructions to the DAF as to your wishes for a charitable beneficiary. I have done something similar in my own estate plan.
Bruce

 

[euro]

The OP is proposing language which in the law is known as "precatory" language or, in other words, expressing a wish or request in connection with a bequest or devise. The courts have long struggled with this language in trying to decide whether it imposes a mandatory obligation on the devisee or whether it is only a wish of the testator. Such a bequest can be made, but it is best avoided because it is dangerous and subject to interpretation. Often such a bequest is too small to warrant a trust. A good solution might be to leave the bequest to a donor advised fund and then give instructions to the DAF as to your wishes for a charitable beneficiary. I have done something similar in my own estate plan.
Bruce

Thanks for the explanation! I'm thinking that the OP wants his niece to be able to harvest the tax deduction instead of him, so the DAF route may not work for him, but I think it is an excellent idea to achieve the other aspects of his objective.
As far as actually "bequesting with strings attached", even if that is feasible, I wonder how/who would enforce it. At that point it seems like it's a "victim-less crime", so to speak....

 

[Gill]

I'm not so sure the devisee would be entitled to an income tax deduction for the transfer to charity. The charitable gift is really from the estate with the individual only designating the specific recipient. It would likely be deductible if the devisee
had the option to keep the bequest or give it to charity.
Bruce


Sent from my iPad using Early Retirement Forum

 

[Dancfo]

Agree with MBMiner. Without the beneficiary having the ability to "own" the funds, I don't see the opportunity for them to claim a charitable (income) deduction.

 

[Sunset]

Thanks for the explanation! I'm thinking that the OP wants his niece to be able to harvest the tax deduction instead of him, ......

Probably, so the OP is really overthinking this.
Pretend niece is in 25% marginal tax rate, and give her 25% of the funds in the will, and give the charity the other 75%.

That way both benefit, and it's simple.

 

[calico1597]

Our wills are set up so family members receive different percentages of our estate. We also have the wording that if anyone contests the will, they are automatically cut out.

 

[CaliKid]

Keep it simple. Give it to your niece and off the record suggest you would like her to give $50k to charity and take the deduction herself. of course if she dies before you, or doesn't follow your wish, then your plan is shot. A good rule of thumb though is to keep it simple.

 

[RunningBum]

Probably, so the OP is really overthinking this.
Pretend niece is in 25% marginal tax rate, and give her 25% of the funds in the will, and give the charity the other 75%.

That way both benefit, and it's simple.

I like this. She gets the equal of the benefit you wanted for her, and the charity gets most of the money you wanted them to. Sure, they don't get the full amount, but it's better than nothing.