Exactly as the name suggests, a Specific gift in a Will is a specifically identified asset given to a specifically identified organisation or person. A Specific gift is crystal clear about the fate of a particular asset and who will receive it.
An example of a Specific gift in a Will might be, ‘I give the sum of $100,000 to The Kids’ Cancer Project’. The gift could also be a specific asset, like bank shares or a listed property.
When leaving a gift to a charity, it’s also important to confirm all the details to ensure that gift is given to the correct entity. The exact wording can usually be found on the charity’s website, such as here for The Kids’ Cancer Project.
“A Specific gift in your Will can be one of the easiest ways to give money to a charity and allows you to make a direct gift, according to your priorities,” Peter says. “Specific gifts are usually the first area we discuss when people begin defining the proposed division of their estate.”
Specific gifts given as a financial amount are the most common form of gifting to charities, tax agent Suellen Hansen of Marsh Tincknell Chartered Accountant reveals.
“It’s mostly specific amounts of cash that’s given, or it could be a gift of assets that are to be sold and the proceeds gifted to a charity,” says Suellen.
Once Specific gifts have been decided, it’s time to determine the Residuals gifts in the Will. The residue of an estate includes funds and property left over after the payment of debts, administration and funeral costs, and distribution of Specific gifts.
A Residual gift is how that residue is divided, and it can be left to a specific person, a family or to a charity. The Residual gift can be given in whole to one entity, equally divided or split into a variety of proportions.
An example of a Residual gift might be, ‘I gift the entire residue of my estate to The Kids’ Cancer Project’, or possibly the residue is split into a range of parts, with a 50 percent share of the residue of the estate given to a charity and the remaining 50 percent share to a family member.
This is also the time, Suellen Hansen adds, that the true value of the entire estate needs to be thoroughly evaluated.
“If you are making a Residual gift of the proceeds of the sale of a property or shares, then know how much that asset is worth so you have a clear idea of what kind of a gift you are really leaving in the Will,” she says. “It could be much more, or possibly far less, than you initially figured.”
Attention must be paid
When deciding on Specific or Residual gifts and how they are to be distributed, some finer points demand attention, as they can cause complications further down the track.
Issues can arise if a Will has not been updated to include recently-acquired funds and assets, or if some bank accounts are not listed. A share portfolio that may have once been a valuable gift could later be worthless due to market changes, and a gift of a proportion of a property could be problematic if the other beneficiaries have no intention of selling it and dividing the proceeds. In some do-it-yourself will kits, it’s not always clear what to do with residual gifts, and then there’s also different laws regarding wills that vary from state to state.
“This is why it pays to have someone experienced in preparing Wills assist you,” Peter says. “There are not many people who would be able to draft their own Will and make them fully legal and binding, and reflect precisely their wishes.
“Even in the simplest Wills, the omission of a word or punctuation can greatly alter the manner in which your estate Will be distributed.”