What is a Bequest?

A bequest refers to the act of a testator who, through a will,unconditionally transfers a portion or all of their estate to a designated beneficiary. It is a unilateral legal act, meaning that the establishment and execution of the bequest do not require the consent or participation of the beneficiary; it automatically takes effect upon the testator's death as specified in the will. Legally, the will must comply with statutory formalities to be valid. A bequest can include various types of assets, such as cash, real estate, stocks, or other valuable items. The testator can designate one or more beneficiaries, who may be individuals, organizations, or even unborn children.

It is important to note that the bequest only becomes effective after the testator's death and must follow legal procedures. Therefore, the creation and execution of a bequest should be handled carefully to ensure its legality and to protect both the testator’s intentions and the beneficiary’s rights.

Bequest vs. Reserved Portion

The Basic Concept of Reserved Portion

The reserved portion is stipulated in the Inheritance and Will chapter of the Civil Code and is designed to ensure that heirs receive at least a minimum share of the estate, regardless of how the deceased (testator) has allocated their assets in the will. This mechanism exists to prevent the testator from excessively favoring certain heirs or beneficiaries, thus safeguarding the legitimate rights of other statutory heirs. Below are the relevant articles on the reserved portion:

For example, if the deceased leaves behind a spouse and two children, with a total estate of NT$3 million, the statutory share for the spouse and each child would be one-third of the estate, or NT$1 million each. The reserved portion for the spouse and children would be half of their statutory share, which amounts to NT$500,000 each. Therefore, if a will infringes upon the heirs' reserved portions, they can file a lawsuit to claim the reserved portion.

Can a Bequest Override the Reserved Portion?

As noted above, a bequest is a legal act the testator unconditionally transfers their assets to another person through a will. However, such a bequest cannot legally override the reserved portion, as the reserved portion is a mandatory provision established to protect the minimum inheritance rights of statutory heirs. Even if the testator wishes to distribute their estate through a will, they cannot arbitrarily deprive heirs of their reserved portion.

If the value of the bequest exceeds the reserved portion of the heirs, the aggrieved heirs have the right to request a reduction in the bequest from the court to ensure that they receive their rightful reserved portion. For instance, if a father bequeaths his entire estate to a non-heir, his children, as statutory heirs with a reserved portion, have the right to request a reduction in the bequest to secure their minimum share.

Therefore, when drafting a will, the testator must consider the reserved portion and avoid bequeathing assets that exceed this amount to any one party. This approach ensures that the testator’s wishes are respected while also protecting the basic rights of statutory heirs.
 

Common Questions

Q1: Can a Bequest Be Renounced?

Yes, according to Article 1206 of the Civil Code, a beneficiary may renounce a bequest after the testator's death. The renunciation of a bequest is retroactive to the time of the testator's death.

Q2: What Happens if the Beneficiary Dies Before the Will Takes Effect?

Article 1201 of the Civil Code stipulates that if a beneficiary dies before the will takes effect, the bequest is void. In other words, if the beneficiary dies before the will takes effect, the bequest reverts to the estate and remains part of the estate.

Q3: Does the Beneficiary Need to Pay Gift Tax on the Bequest?

No, according to Article 23 of the Estate and Gift Tax Act: "If the decedent has left behind an estate, the taxpayer shall file an estate tax return with the competent tax authority at the place of household registration within six months from the date of death." The taxpayer, as defined in Article 6 of the same Act, includes the heirs and beneficiaries. Thus, if the decedent bequeaths their assets to others, the estate tax must be declared according to the law. As per Article 1199 of the Civil Code, a bequest takes effect upon the testator's death. Since estate tax and gift tax are essentially the same in nature, to avoid double taxation, only estate tax is levied, and no gift tax is required.

(Source: National Taxation Bureau of the Northern Area, Ministry of Finance, March 17, 1998, Reference No. 870711414)
 

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