Leaving a Legacy – Bequests in Wills & Trusts

Category: Charitable Giving & Legacy | FinSeniors, Worthune.com

One of the most enduring ways to express your values — and make a difference that outlasts your lifetime — is through a charitable bequest. A bequest is simply a gift made through your will or trust, directing that a portion of your estate goes to one or more organizations after you're gone. It costs nothing during your lifetime, requires no cash flow, and can leave a meaningful mark on causes you care deeply about.

Charitable bequests make up the largest source of philanthropic giving in the United States each year. Yet most people who make them don't think of themselves as major donors — they're simply people who wanted their estate to reflect their values as clearly as their lives did.

1. Specific Bequest

A specific bequest leaves a defined amount of money, a particular asset, or a specific piece of property to a charity. Examples: 'I leave $25,000 to Habitat for Humanity,' or 'I leave my collection of first-edition books to the public library.'

Specific bequests are clear and easy for charities to plan around. The downside: if your estate shrinks significantly (due to medical costs, market declines, or other factors), the bequest is paid before residuary beneficiaries receive anything — which can unintentionally reduce what your family receives.

2. Residuary Bequest

A residuary bequest gives a charity a percentage — or all — of what remains in your estate after debts, taxes, expenses, and specific bequests have been paid. Example: 'I leave 20% of the residue of my estate to the American Cancer Society.'

This is the most popular type of charitable bequest because it's proportional. If your estate grows, the charity benefits. If it shrinks, the gift shrinks proportionally, and your family's share isn't disproportionately affected. It also doesn't require you to update dollar amounts as your estate changes.

3. Contingent Bequest

A contingent bequest only takes effect if another condition isn't met. Example: 'I leave my entire estate to my spouse, but if my spouse does not survive me by 30 days, then I leave 50% to [charity].'

Contingent bequests are an excellent backup plan for people who want to make sure their estate goes to good use if primary beneficiaries aren't living. They're especially common in the estate plans of couples without children.

Imprecise bequest language can cause real problems — gifts going to the wrong organization, disputes over intent, or a bequest being legally challenged. Here's what makes for solid bequest language:

Essential Elements

• The charity's full legal name (not just a nickname — 'The American Red Cross' not 'the Red Cross')

• The charity's address and, ideally, their EIN (Employer Identification Number)

• The gift amount, percentage, or description of the property

• An optional purpose or restriction (if you want funds used for a specific program)

• A successor provision — what happens if the charity ceases to exist

Sample Bequest Language

Specific bequest: 'I give and bequeath the sum of $[amount] to [Full Legal Name of Charity], a nonprofit organization located at [address], EIN [number], to be used for its general charitable purposes.'

Residuary bequest: 'I give [X]% of the residue of my estate to [Full Legal Name of Charity], located at [address], EIN [number], for its general purposes. If this organization is not in existence at the time of my death, this bequest shall instead pass to [alternate charity or to the residuary estate].'

💡 Always work with your estate planning attorney to draft bequest language. Small differences in wording can have significant legal consequences.

If you have a living trust, charitable gifts are made through trust provisions rather than through a will. The mechanics are virtually identical — you name the charity, the gift type, and the amount or percentage — but the assets pass outside of probate, so the charity receives the gift faster and more efficiently.

You can also name a charity as a remainder beneficiary of a specific trust that provides income to a family member during their lifetime, then passes to the charity. This is the structure used in Charitable Remainder Trusts (CRTs), discussed in the next guide.

IRAs and 401(k)s are often the most tax-efficient assets to leave to charity — and among the worst to leave to individual heirs. Here's why.

When you leave an IRA to an individual beneficiary, they must pay income tax on every dollar they withdraw (because you received a tax deduction when you contributed). Under the SECURE Act rules, most non-spouse beneficiaries must fully deplete inherited IRAs within 10 years, compressing that tax hit into a short window.

Charities, by contrast, pay no income tax. Every dollar of an IRA left to a charity is received in full, with no tax eroded along the way. Meanwhile, your taxable investment accounts (which receive a stepped-up cost basis at death) or your Roth IRA (which is inherited tax-free) are better candidates for family bequests.

The strategy: name your favorite charity as the beneficiary of your traditional IRA or 401(k), and leave your taxable accounts and Roth IRA to family. Both sides of the ledger benefit.

You're never obligated to tell a charity that you've included them in your will — and many people prefer to keep their estate plans private. However, there are good reasons to let them know:

• Charities can better plan for the future when they have a sense of planned gifts in their pipeline

• You may be eligible for recognition programs (legacy societies) that provide special events, communications, or a sense of community with like-minded donors

• It gives you a chance to confirm that your bequest language is accurate and consistent with how the charity wants to receive gifts

If you do notify the charity, you're not creating a legal obligation — you can change your mind at any time.

Life changes. So should your estate plan. Review your charitable bequests whenever you do your overall estate plan review — at minimum every three to five years, and after any major life event. If a charity changes its name, merges with another organization, or closes, your bequest language may need to be updated.

One practical tip: use a percentage bequest rather than a fixed dollar amount. A $10,000 specific bequest that felt generous when you wrote it 20 years ago may be proportionally smaller today. A residuary percentage automatically adjusts as your estate grows or shrinks.

Beyond the legal and tax mechanics, a bequest is a personal statement. Many people find tremendous satisfaction in knowing that their estate will continue to support the institutions, causes, and communities that shaped their lives — their alma mater, their house of worship, the hospital that cared for their family, the land trust that protects land they love.

If you're considering a charitable bequest, start with a simple question: What do I want to still be supporting 10 years after I'm gone? The answer often points directly to what belongs in your estate plan.

💡 This content is for educational purposes only and does not constitute legal or tax advice. Please consult an estate planning attorney and tax advisor to structure charitable bequests appropriately for your situation.