Overview

Charitable bequests let you name a charity as a beneficiary in your will so the organization receives specified cash, a percentage of your estate, or particular assets after you die. For many people, a bequest is a straightforward, low-cost way to create a lasting legacy and to structure gifts that can also reduce estate-tax exposure.

This article explains how charitable bequests work, how to draft common types of bequests, the tax treatment at the federal and state level, practical drafting tips and sample language, alternatives for more complex goals, and common errors to avoid. The guidance reflects professional practice and current IRS rules as of 2025; always confirm figures and filing rules with your advisor or the IRS.

Background and why people use charitable bequests

Charitable bequests are one of the oldest forms of philanthropy. In modern U.S. estate planning they remain popular because they:

  • Require no immediate out-of-pocket cost during life (unlike lifetime gifts).
  • Can be used to give complex or illiquid assets (real estate, stock, business interests) without first converting them to cash.
  • Reduce the gross estate for federal estate-tax purposes when left to a qualified charity (typically a 501(c)(3)). See IRS Publication 526 for the rules on charitable contributions and related guidance (IRS Pub. 526) and the IRS charities overview for eligibility details (IRS Charities & Non-Profits).

In my practice I’ve seen clients use charitable bequests to fund scholarships, endow community health programs, or leave appreciated securities that charities can sell without capital gains tax liability — often making the gift more valuable than the stated dollar amount.

How charitable bequests work (step-by-step)

  1. Pick the beneficiary: choose the exact legal name of the charity and confirm its federal tax status (usually a 501(c)(3)).
  2. Choose the form of the bequest: specific amount (e.g., $50,000), percentage of the estate (e.g., 10%), specific asset (e.g., 100 shares of XYZ), or residuary gift (e.g., all remaining assets after other gifts).
  3. Draft precise will language (see sample clauses below) and add contingencies (alternate charities if the named organization no longer exists).
  4. Coordinate with your overall estate plan: consider lifetime gifts, trusts, beneficiary designations, and liquidity needs for estate taxes and expenses.
  5. At death, the executor values the estate and, if required, files Form 706 (United States Estate (and Generation-Skipping Transfer) Tax Return) to claim any charitable deduction and calculate estate tax. The estate deducts charitable bequests on the estate tax return to reduce taxable estate value; state estate or inheritance tax rules vary.

IRS resources: Publication 526 (Charitable Contributions) and the Form 706 instructions explain income and estate tax interactions for charitable gifts (see IRS Pub. 526 and About Form 706).

Tax treatment — clear rules and practical tips

  • Federal estate tax deduction: A bequest to a qualifying charity is generally deductible on the estate tax return (Form 706), which lowers the estate’s taxable value. This is different from an income-tax charitable deduction claimed during life. (IRS Form 706 instructions.)

  • Income tax and appreciated assets: If you bequeath appreciated property (stock, real estate) directly to a public charity, the charity can sell the asset without paying capital gains tax, which often increases the gift’s effective value. For heirs, receiving property is different — individuals typically step up basis at death, but when heirs later sell, capital gains may apply based on stepped-up basis rules.

  • State estate or inheritance taxes: Some states impose estate or inheritance taxes with thresholds and rules that differ from federal law. Check your state’s rules and coordinate philanthropic gifts to address both federal and state exposure.

  • Filing and documentation: Executors should keep documentation of the charity’s tax-exempt status (EIN, determination letter) and report gifts precisely on Form 706 when required. If an estate is under the federal filing threshold, no Form 706 may be required, but properly documenting gifts still supports the estate’s accounting.

Note: Federal estate-tax exemptions and thresholds are indexed and have changed multiple times in recent years; confirm current exemption amounts and filing thresholds with the IRS or a qualified advisor before assuming estate-tax consequences.

Common bequest types and sample will language

  • Specific bequest (fixed dollar amount): “I give and bequeath Fifty Thousand Dollars ($50,000) to [Exact Legal Name of Charity], EIN: xx-xxxxxxx, located at [address].”

  • Percentage (fractional) bequest: “I give and bequeath ten percent (10%) of the residue of my estate to [Exact Legal Name of Charity].”

  • Specific asset bequest: “I give and bequeath 100 shares of [Company Name] stock, CUSIP xxxxxx, to [Exact Legal Name of Charity].”

  • Residuary bequest (after other gifts and expenses are paid): “All the rest, residue, and remainder of my estate I give to [Exact Legal Name of Charity].”

  • Contingent bequest (if primary charity no longer exists): “If [Primary Charity] ceases to exist, I direct my executor to distribute such bequest to [Alternate Charity], or if no alternate is named, to a similar charitable organization chosen by the executor.”

Include the charity’s EIN and address to reduce confusion. Vague references (“to my favorite charity”) can create disputes and often produce unintended results.

Alternatives and complementary strategies

  • Charitable Remainder Trust (CRT): You can fund a CRT during life to receive income interest for you or your beneficiaries, with the remainder going to charity. CRTs may offer income-tax benefits now and estate-tax planning advantages.
  • Charitable Lead Trust (CLT): Works like the mirror image of a CRT — the charity receives income for a term and the remainder goes to heirs, potentially reducing transfer taxes.
  • Donor-Advised Funds (DAFs): You can name a DAF in your will or transfer funds during life; DAFs provide flexibility in grant timing.
  • Lifetime giving vs. bequests: Lifetime gifts remove assets from your estate immediately but must be balanced against needs for income and liquidity. See our article on “Lifetime Gifting vs Bequests: Estate Tax and Family Dynamics” for when each approach makes sense.

Related reading on FinHelp:

Practical drafting tips from practice

  • Be precise. Use the charity’s full legal name, EIN, and address.
  • Use percentages or residuary language for smaller estates that may change in value — percentage gifts retain intended relative importance.
  • Think about contingencies and successor charities to avoid gifts failing if the named charity dissolves.
  • Coordinate liquidity: ensure there is enough cash or life insurance to pay debts, taxes, and administrative costs so that charitable intentions aren’t unintentionally diluted.

In my practice, one common improvement I recommend is pairing a percentage residuary gift with a small specific legacy. This ensures the charity receives a meaningful amount whether the estate grows or shrinks.

Common mistakes and how to avoid them

  • Vague naming: Failing to use the charity’s legal name or EIN can trigger court fights or force the executor to apply cy pres (a judicial re-direction of charitable gifts).
  • Not updating beneficiary lists and wills after life changes (marriage, divorce, sale of a business).
  • Ignoring state law: some states have specific requirements for charitable transfers or fiduciary duties that affect execution.
  • Overlooking estate liquidity: leaving illiquid property as the primary source of a gift can create pressure to sell assets at unfavorable prices.

Examples and short case studies

  • Example A: Fixed-dollar bequest — A testator leaves $100,000 to a local museum. The museum’s endowment is increased by the gift; the estate receives a deduction on Form 706, lowering estate tax due.
  • Example B: Percentage bequest of appreciated stock — A donor designates 15% of residue in stock. The charity sells the stock tax-free, converting an appreciated asset into unrestricted support. The estate benefits because the charitable deduction reduces estate tax exposure.

Frequently asked questions

Q: Can I change or revoke a charitable bequest?
A: Yes. Because a will is revocable during your lifetime, you can amend or revoke bequests at any time while you are legally competent.

Q: Do heirs lose out when I leave money to charity?
A: Not necessarily. A charitable deduction can reduce estate taxes, which may leave more net to heirs in some cases. Balancing heirs’ needs with charitable intent is a key part of planning.

Q: Are all charities eligible?
A: Only organizations that meet qualifying tax-exempt criteria (often 501(c)(3) public charities) will produce an estate-tax charitable deduction. Confirm status through the IRS Exempt Organizations Select Check or the organization’s determination letter.

Action checklist before you finalize a bequest

  • Verify the charity’s legal name, EIN, and address.
  • Decide specific vs. percentage vs. residuary gift.
  • Add contingencies and successor charities.
  • Discuss liquidity for estate expenses and taxes with your advisor.
  • Review your will with an estate attorney and coordinate beneficiary designations on retirement plans and life insurance.

Sources and further reading

Professional disclaimer

This article is educational and does not constitute tax, legal, or financial advice. Rules for federal and state taxes, filing thresholds, and exemption amounts change; consult a qualified estate attorney and tax advisor before implementing or relying on any strategy described here.