Despite understanding the importance of having an estate plan in place, people often put off estate planning because the process can appear intimidating. The legal jargon used in estate planning alone can be confusing. For example, the words “bequest” and “inheritance,” terms that are often used interchangeably in everyday conversation, have distinct legal meanings. While both relate to the transfer of wealth and property following a person’s death, they arise in different ways and can have different implications within your overall estate plan. Understanding the distinction between these concepts can help you make more informed decisions when creating or updating your estate planning documents. Toward that end, the Indianapolis lawyers at Frank & Kraft explain the difference between a bequest and an inheritance.
What Is a Bequest?
A bequest is a gift of property made through a Last Will and Testament. In legal terms, a bequest occurs when you intentionally direct that a specific person, charity, organization, or other beneficiary receive property upon your death. In other words, a bequest reflects your deliberate choice expressed within your Last Will and Testament, rather than allowing state law to determine who receives your property. For example, your Will might state that:
- Your daughter receives a family heirloom.
- Your grandson receives $25,000.
- A charitable organization receives a percentage of your estate.
- Your brother receives your interest in a family business.
In each of these examples, the transfer is considered a bequest because it results from instructions contained within your Last Will and Testament. A bequest may involve a gift of virtually any type of property, including cash, real estate, personal belongings, investment accounts, business interests, or collectibles. The recipient of the bequest is referred to as a “beneficiary” because that individual benefits from the provisions contained in your estate planning documents.
What Is an Inheritance?
An inheritance refers more broadly to property received from someone who has died. Unlike a bequest, an inheritance is not necessarily the result of a gift left to someone in a Will. Property may be inherited in several different ways, including:
- Through a Will.
- Through a trust.
- Through beneficiary designations.
- Through Indiana intestate succession laws.
One way to think about the distinction between a bequest and an inheritance is that a bequest is always an inheritance, but an inheritance is not always a bequest. For example, if your mother names you in her Will to receive her home, that specific bequest is an inheritance. If, however, your father dies without a Will and Indiana law directs that you receive a portion of his estate, you receive an inheritance but not a bequest because the transfer occurred through state law rather than through your father’s specific instructions. This distinction may appear subtle, but it highlights an important estate planning principle. A bequest reflects personal choice, whereas an inheritance may result either from personal planning or from statutory default rules.
How Does Indiana Intestate Succession Affect Inheritances?
To fully understand the difference between a bequest and an inheritance, it helps to understand what happens when someone dies without a valid Will. When an Indiana resident dies without a Will, the individual is said to have died “intestate.” In that situation, Indiana’s intestate succession laws determine who receives probate assets and in what proportions, depending on which family members survive the decedent’s death. Referred to as “heirs,” individuals who inherit pursuant to intestate succession laws may include:
- A surviving spouse.
- Children.
- Grandchildren.
- Parents.
- Siblings.
- More distant relatives.
For instance, a surviving spouse may receive all or a portion of the estate depending on whether the decedent is survived by children or parents with children frequently inheriting the remaining share. If there are no surviving descendants (children, grandchildren etc.), the estate may pass to parents, siblings, or other relatives according to the statutory order of succession. Individuals who receive assets through intestate succession receive an inheritance because the law grants them the right to inherit. They do not, however, receive a bequest because no Will directed the transfer. In legal jargon, a beneficiary receives a bequest while an heir receives an inheritance.
Are There Different Types of Bequests?
While a bequest is always made in a Will, a bequest can take several forms depending on how your Will is structured. A specific bequest identifies a particular asset and directs that it passes to a named beneficiary, for example:
- “I leave my diamond ring to my daughter.”
- “I leave my 1967 Mustang to my grandson.”
- “I leave my lake house to my sister.”
A general bequest, on the other hand, provides a gift that can be satisfied with general estate assets. Bequeathing “$10,000 to my nephew” or “$50,000 to my church” are examples of general bequests. The Executor of the estate may satisfy the gift using available estate assets rather than a specifically identified item.
Another type of bequest is a demonstrative bequest which directs that a gift come from a specific source but does not identify a specific gift. For example, leaving “$20,000 from my brokerage account to my daughter” is a demonstrative bequest that can still be fulfilled even if the designated account no longer contains sufficient funds.
Finally, a residuary bequest distributes whatever remains after debts, taxes, expenses, and other bequests have been satisfied. A Last Will and Testament typically includes language that creates a residuary bequest, such as “I leave the residue of my estate equally to my children.” The residuary estate often represents the largest portion of an estate and serves as a catch-all provision for property not specifically addressed elsewhere in the Will.
Why Does the Difference Matter?
From a practical standpoint, understanding the distinction between a bequest and an inheritance helps clarify how much control you have over the distribution of your assets. When you create a comprehensive estate plan, you determine who receives your property and under what circumstances. Through bequests, you can reward individuals, support charitable causes, provide for vulnerable beneficiaries, or preserve family assets according to your preferences. When you fail to establish an estate plan, Indiana law effectively makes those decisions for you through intestate succession statutes. While intestacy laws generally reflect what lawmakers believe most people would want, they cannot account for unique family dynamics, blended families, unmarried partners, close friendships, charitable interests, or special needs planning concerns. Consequently, relying on inheritance laws rather than making deliberate bequests can produce results that differ substantially from your actual wishes.
Can Someone Receive Both a Bequest and an Inheritance?
While it is important to understand the distinction between a bequest and an inheritance, it is equally important to understand that the same individual may receive both. By way of illustration, imagine that you create a Will leaving your home to your daughter, but that Will does not make provisions for the rest of your estate, making the remainder of your estate an intestate estate. Your daughter receives a specific bequest of the home and may also inherit a share of the residual intestate estate.
Similarly, a child who would qualify as an heir under Indiana law may also be specifically named as a beneficiary in your Will. In that situation, the child is both a legal heir and the recipient of one or more bequests. The concepts are not mutually exclusive. Rather, they describe different legal mechanisms through which property may be transferred.
Can We Help You with a Bequest or an Inheritance within Your Estate Plan?
For more information, please join us for an upcoming FREE seminar. If you need assistance incorporating a bequest or an inheritance into your Indiana estate plan, contact the experienced Indianapolis estate planning lawyers at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
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