An important part of estate planning is the giving of gifts. Gifts given by Will are called testamentary gifts in that they are given after death. A testamentary gift can be specific, general, or residuary.
Let’s try to unpack the meanings of these terms.
- A Specific Gift is one where you give away a definable piece of property. For example, you can give to your son your ‘Watham’ antique pocket watch and to your hunting club your ‘Winchester Model 70’ bolt action hunting rifle.
- A Demonstrative Gift is one where your gift is from an identifiable source, but the individual gift is not defined. For example, you own a collection of antique sports cars and you let your nephew choose the one he likes.
- A General Gift is one where the source of the gift may not be known but its value is. General gifts usually involve the giving of money. For example, you may want to give your daughter $10,000. If you don’t define the source of the money, it will come from your estate’s general assets.
- A Residuary Gift comes from your residuary estate. Your residuary estate consists of your remaining assets after all other gifts and estate expenses have been paid. You can then give the rest of your property, your residuary estate, to anyone you like.
Gifts of Tangible Personal Property
Tangible personal property is property that can be physically handled. Examples are clothes, jewelry, furniture, art, vehicles, heirlooms, antiques, and household items such as china and silverware. Tangible personal property can have strong sentimental value for you and your family. In my experience, disagreements can occur when you fail to be specific in describing your gift or you fail to state who is to receive a particular item. Remember, be specific: I give to my son John, my ‘Watham’ antique pocket watch.
Gifts of Real Property
Real property can be any property that is land, a house, an apartment, a building, a cabin or a vacation home, farm land or a bare lot of land. Any gift of real property should include a full description of the property; preferably including a deed reference to help establish the chain of title. For example, you can give to your church the property known as 201 Great Road, Charlotte, North Carolina 12345, conveyed to you by Edward Smith, by deed recorded in Book 26, Page 123 of the Mecklenburg County Register of Deeds.
While family discord is not unique to the state planning world, you can reduce the likelihood of its occurrence. When you are thinking about the gifts you intend to leave for your loved ones, make sure you clearly describe your gift and be specific as to who is to receive it. Also, you may want to discuss your intentions with your beneficiaries so they understand the reasoning behind your gifting decision.