Can Specific Bequests Disrupt An Estate Plan?

By Attorney Truman Scarborough

A specific bequest can be a sum of money, the home, a car, shares of stock, jewelry, etc. that is given to a particular individual. It allows an estate plan to better reflect personal desires on how specific property is distributed. It also allows disputes over who receives particular items coveted by multiple beneficiaries to be avoided, providing for a more amicable settlement of an estate.

Specific bequests, however, can result in confusion. What if a particular car has been replaced with another vehicle? What if there is no XYZ stock because the company was acquired by another company? What if the bank where a savings account is located was acquired by another bank? What if the stock in XYZ Corporation split and there are now 200 shares rather than the original 100? Does the beneficiary get 100 or 200 shares of stock? What if the beneficiary received the $10,000 promised in the will or trust from the decedent before he/she passed away? Is the beneficiary entitled to an additional $10,000 from the decedent’s estate? While these kinds of issues are addressed in the Florida Statutes, discuss them with the attorney who is preparing your estate plan to be sure that they are handled the way you want.

There is also the problem on how specific bequests affect the overall estate plan. A common concern is what happens if there are not enough funds to pay all the intended bequests. Specific monetary bequests (like $10,000) are, as a rule, paid first leaving the residual beneficiaries to pay the expenses and divide what might remain. If the value of the whole estate significantly decreases in value, a specific dollar amount intended to be just a small portion of an estate could become quite large in comparison to the residual gifts. This could substantially alter an estate plan from what was desired. One way to address the problem is by defining larger gifts as a percentage of the total estate rather than giving a specific dollar amount. Defined as a percentage, it increases and decreases with the overall size of the estate. If there is a concern it may be too large, it could be capped at a dollar amount. For example, the plan could provide that a beneficiary will receive 10% of the estate, but not more than $100,000.

Non-monetary specific bequests can also create problems. For example, the value of the home at the time the estate plan is developed could constitute approximately one-third of the assets.  Desiring an equal division of the assets among three children, the decedent could leave the home to one child and provide that the other two children split the remainder. If expenses from the last illness deplete the decedent’s funds or the values of the other assets shrink, the home could be the primary asset of any value. The two children who are to receive the residual estate would essentially be disinherited. To prevent this from occurring, the plan could provide that the estate’s assets are to be equally divided among the three children with the one child having an option to take the home as a portion of his/her share. However, under this scenario the child may have to use some of his/her own funds or obtain a mortgage to purchase the home.

For further information you may be interested in Attorney Truman Scarborough’s Booklet on Estate Planning in Florida. It is available without charge or obligation by calling (321) 267 – 4770. His office is located at 239 Harrison Street, Titusville, Florida.