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Estate Planning: Beneficiaries vs. Bequests

On Behalf of | Oct 15, 2014 | Uncategorized

Estate planning can be a complex and confusing topic. Whether you are planning a will, a life insurance policy, or a retirement account, you will have to name a person or entity to receive the proceeds of that account when you pass away. Our estate planning attorneys at Snee, Mahoney, Lutche & Helmlinger (SMLH) explain the difference between a beneficiary and a bequest.

Beneficiaries

There are two types of beneficiaries. The primary beneficiary is the entity you designate to benefit of your property. The contingent is the beneficiary who will receive the benefit if the primary beneficiary cannot be located or has passed away.

Beneficiaries may include minor children. It often is advisable to set up a trust as your beneficiary to hold funds until the children become adults. Trusts may also be set up for beneficiaries to receive the benefits at a certain age or as disbursed incrementally.

In addition, charities or businesses can also designate a contingent beneficiary in the case that named entities no longer exist. If you are considering naming your parents as a beneficiary, be sure to check with your estate planner to see if doing so would increase the size of their estate and result in higher taxes. Remember that these four examples of beneficiaries are not the only options. The choices depend upon your individual circumstances.

Bequests

Bequests are assets given in a will or a trust. A bequest might be a specific amount of money or assets, a percentage of those assets, or what is left over after heirs and other obligations are paid from an estate.

There are several types of bequests. General bequests are usually cash or property similar to other items that are distributed. Specific bequests include a designated amount of cash or a specific property. Percentage bequests designate a certain portion of the entire estate while residual bequests are a portion of what remains of the estate after other bequests are made.

Charitable bequests are usually gifts serving a religious, scientific, political, education or general social purpose. Demonstrative bequests are gifts made from a specific source. Lastly, executor bequests are gifts that take effect only when a particular event takes place.

The complexity of estate planning in Maryland usually makes it necessary to consult an estate-planning attorney and tax advisor to ensure that you are taking full advantage of current tax laws. Contact an estate-planning attorney at SMLH today.

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