When you think about writing or updating your will, who you want to benefit from your estate is often the first consideration. However, just as important is how you want to split up the assets you have. There are several options to think about.
A will is the only way to make sure your assets are passed on to who you want. As well as naming beneficiaries in a will, you can also specify how you want your estate divided up. This means you have control over who receives which assets or how larger assets are divided.
Gifts within a will are known as “bequests” and it’s worth spending some time thinking about who you’d like to receive certain items. Among the types of bequests to consider are the following seven.
1. Specific bequest
A specific request is used when you want a specified beneficiary to receive a particular item or lump sum of money. This can be used to pass on sentimental items, such as jewellery, as well as valuable assets like specified shares.
2. Pecuniary bequest
A pecuniary bequest is also known as a “general bequest” and it’s similar to a specific request. It’s when you give a lump sum of money to a specific recipient.
3. Demonstrative bequest
In some cases, you may want a beneficiary to receive the proceeds of a sale, which is known as a “demonstrative bequest”. For example, you may state: “I leave my child, Hannah, the proceeds from the sale of my holiday home in Cornwall.”
4. Residual bequest
A residual bequest is often used to wrap up the remaining assets of your estate after other bequests have been made and any debts or tax due have been settled. If, after specific or demonstrative bequests you state “I leave the remainder of my estate to my children,” this would be considered a residual bequest.
5. Reversionary bequest
A reversionary request allows you to set out what you would like to happen to assets if the intended beneficiary passes away before you do. For example, you may state you want your partner to receive certain assets, but that these should pass to your children if your partner passes away.
6. Conditional bequest
In some instances, you may want to place conditions on a gift being received. Unlike the options above, a conditional request means certain conditions that you set out in your will must be met before the beneficiary receives their inheritance. This could include getting married, having children, or other restrictions.
You may also want to set out conditions for how the gift is used. For instance, you may state: “I leave my daughter, Sarah, £20,000, providing she uses the money as a deposit for a property”, or “I leave my son, Andrew, £40,000, provided it is added to his pension.”
7. Charitable bequest
Finally, you may also choose to leave a gift to a charity or other organisation. As with leaving a gift to a person, you can name certain assets to pass to a charity or can specify a percentage of your estate.
Leaving a charitable legacy means you can support causes that are important to you. If your estate could be liable for Inheritance Tax (IHT), gifting can also help reduce the bill. Gifting some assets to charity can reduce the total value of your estate to below IHT thresholds. If you leave at least 10% of your entire estate to charity, you can also pay a reduced IHT rate of 36%, compared to the standard 40%. If IHT is a concern for you, please contact us.
Understanding your estate when setting out your will
When reviewing your will, understanding your estate and the value of various assets can help you set out bequests in a way that reflects your goals. If you’d like to review your finances and create an estate plan you can have confidence in, please contact us.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The Financial Conduct Authority does not regulate will writing or estate planning.