Taxation & Estate Planning

Specific Gifts and Drafting Flexibility

By Joel A. Schoenmeyer

Most Wills and trusts I draft follow a pretty basic framework:

-first, the decedent can give away specific gifts of cash and/or property, if he or she wishes;

-then, the decedent disposes of the so-called "residue" of his or her estate. The residue is what's left after specific gifts are made and debts and expenses are paid.

Sometimes clients ask about this. "Why can't I just give away every piece of my property, period, and not include a gift of the residue?" There are a few reasons:

-What happens if, at death, you no longer own a piece of property given away in your Will?

-What happens if, at death, you own a piece of property not given away in your Will?

-A lot of estate planning involves drafting for flexibility, and making a lot of specific bequests may mess up the relative values received by each beneficiary. If you have a specific goal (like, "my wife gets 75% of my estate and my sister gets 25%"), what happens if the property you bequeath to your sister grows a lot in value while the property bequeathed to your wife doesn't?

Full post as published by Death and Taxes Blog on January 21, 2008 (boomark / email).