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A bequest is typically made through a will. Source: Ken Mayer, Flickr.

A bequest is a wonderful thing. It means that someone is receiving or has received a gift and that someone has generously given that gift. It's a certain kind of gift, though, and one with a bit of a dark side – because a bequest is a gift typically given via a will. It involves someone dying. 

It's good to learn about bequests, as many of us will likely consider making some, and many of us will likely receive one or more bequests in our lifetime.

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There's a good chance you won't owe any tax on what you inherit. Source: DonkeyHotey, Flickr

Tax talk
When it comes to a bequest, a key consideration is taxation. First off, know that any property passed on to a spouse is transferred tax free. That's true for same-sex couples, too, thanks to the U.S. Supreme Court's 2013 decision in United States v. Windsor

According to the IRS, gifts, inheritances, and bequests are generally not considered taxable income for recipients. If you receive property that produces income, though, such as dividends or IRA distributions, that income will be taxable to you. And if you inherit property that involves a capital gain, you'll be responsible for any taxes on that when the property is sold and the gain realized. Your cost basis is "stepped up" to the value of the property when the bequeather died and you received it, so your gain will likely be smaller than it would have been for the person who gave the property to you.

You will probably not pay any inheritance taxes, as only a small handful of states levy those, and they don't apply in all cases, either. Estate taxes enter the picture for some people. The federal estate tax only applies to estates worth more than $5.43 million this year, so that excludes most of us. Some states have their own estate taxes, and their thresholds vary, with New Jersey having the lowest one, at $675,000.

It's always best to consult an accountant or estate lawyer about your tax obligations in relation to bequests, as the rules can differ depending on various factors. Foreign inheritances, for example, have their own requirements.

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Source: Open Library, Flickr.

More to know about bequests
Here are a few more things to know about bequests:

  • There are different kinds of bequests. A specific bequest, for example, names a specific sum of money or a specific asset that's to be left to someone. A conditional bequest only delivers the gift if a certain event or condition has come to pass by the time the bequeather dies, such as a child receiving a bequest only if he has graduated from college. An executory bequest delivers a gift if a certain condition is met after the death, such as when a recipient marries. A contingency bequest delivers a gift if a certain event has not happened. For example, a charity might be designated to receive a certain bequest if the bequeather's spouse is no longer alive. A residual, or residuary, bequest leaves to the recipient everything that remains in an estate after other bequests have been made and various expenses and claims have been paid.

  • Employing a little strategy is often smart. For example, if you leave money to young people who are in or will be heading to college, that money can hurt their eligibility for financial aid. An alternative is to leave it in a trust for them until they are of post-college age. 

  • The term "bequest" is sometimes confused with "devise." A bequest is a gift of money, stocks, bonds, jewelry, or other personal property that's given through a will. A devise is also a gift given through a will, but it generally refers to gifts of real property, such as a home, land, or other realty. (A donation, meanwhile, is a gift given by someone who's still alive.) 
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You can set up conditions for bequests. Source: Elliott Brown, Flickr.

  • Many charities and non-profit organizations would like you to know that you're not limited to family and friends when considering bequests. They stand ready to accept your bequests and put those assets to good use. In 2013, charitable giving via bequest totaled $27.7 billion. The 2010 Bank of America Study of High Net Worth Philanthropy has estimated that between $6.6 trillion and $27.4 trillion in charitable bequests will be made between 1998 and 2052.

Each of us should do some estate planning to make arrangements for our assets when we're no longer around. It's rarely too early to do so, as some of us will expire prematurely. When doing so, be sure to not only draft a will and other important documents, but to give careful thought to any bequests you want to make.

Longtime Fool specialist Selena Maranjian, whom you can follow on Twitter, has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.