In estate planning, you must understand certain legal terms, the difference between those terms and what they actually mean. You may know by now that you need professional help to plan your estate. Today, we look at another difficult term within estate planning, namely bequest price.
Understanding the terms:
Beneficiary – anyone who gains something from your estate.
Legacy – a specific item or sum of money that is left to a specific individual.
Legatee – the individual to whom a specific item or sum of money is left in an estate.
Heir – the person or persons who receive the residue of the estate
Residue of the estate – what is left of the estate once debt, legacies and administration costs have been taken care of.
Bequests
A bequest will be stated in one’s estate plan or Will and Testament and is the act of giving items, stocks or cash to individuals or organisations.
There may be certain conditions under which a legatee may or may not receive that which was bequeathed to him/her. These conditions may not be illegal or immoral.
Bequest price
What is a bequest price? Let’s explain this by way of an example. John is planning his estate. John is a farmer, has four children, Frank, Helen, Sam and Carter. John wants to leave the farm to Sam, who is the only one of his children to become a farmer. However, he also wants his other children to inherit, but he does not have the financial means to do so. He then sets a bequest price upon the bequest to Sam. Sam is to pay each of the other siblings a specific sum of money, in order to inherit the farm.
Should Sam accept this, he is legally obligated to pay each of his siblings the specified amount, and they, in turn, can claim this money from Sam.
Casual conditions
These conditions are based on chance, for example, Helen will receive a sum of money, should the Springboks win the next Rugby World Cup.
Potestative conditions
A Potestative condition is when a legatee will have had to achieve a specific thing in order to inherit his/her legacy. For example, it may be John’s wish to bequeath a car to his son Frank, but only if Frank successfully graduates and becomes a doctor of medicine.
Modus
A modus is when a legatee must spend his/her legacy in a specific manner. For example, Carter may inherit a sum of money, but must use it as a deposit on a house.
Drafting an estate plan is no easy feat. To ensure that your children and grandchildren are taken care of and that your wishes are carried out, you have to work closely with a professional estate planner.
Here at Crest Trust, we understand the importance of a legacy, of being at peace and knowing that your loved ones are taken care of in the event of your death.
If you need to set up your bequests, please talk to us about your estate.