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Funding bequests as a fiduciary

On Behalf of | Nov 29, 2021 | Fiduciary Representation |

If you are a fiduciary administering the estate of someone who has passed away, one of your responsibilities involves funding bequests. Bequests are special gifts that the testator specifies in his or her will that certain people, or sometimes organizations, are to receive.

As depicted in popular entertainment, estate administration only involves the funding and distribution of the bequests. However, as a fiduciary, there are steps that you must take before you start funding bequests, or you could face serious consequences.

What are the different types of bequests?

According to the American Bar Association, people can make two different types of bequests. The testator may direct you to give a certain piece of property to a particular individual. Examples include objects of great worth, such as a house or an art object, or heirlooms that hold great sentimental value. There may be some overlap between the two, e.g., an heirloom piece of jewelry may hold great sentimental value but also be worth a lot of money.

Instead of bequeathing a particular object, the testator may also bequeath an individual or organization with a specific sum of money. It is then your responsibility to distribute the specified sum to the named beneficiary.

What must you do before you can fund bequests?

Before you can fund any bequests, you must pay all taxes, debts and other expenses related to the estate. You must meet these other obligations before you can fund bequests because if there are insufficient assets to meet the expenses, you may be personally liable for the difference, meaning that you would have to pay it out of your own pocket.

Once you have paid the expenses and funded the bequests, whatever remains of the estate, if anything, is the residue. The decedent’s will may provide instructions for distributing the residue. Otherwise, the law provides guidance for you to follow.