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The word khayr occurring in this sentence denotes "much wealth" and not simply "property": and this explains the injunction that one who leaves much wealth behind should make bequests to particularly deserving members of his family in addition to - and preceding the distribution of - the legally-fixed shares mentioned in {4:11-12}. This interpretation of khayr is supported by sayings of 'A'ishah and 'Ali ibn Abi Talib, both of them referring to this particular verse (cf. Zamakhshari and Baydawi).
This ruling should be understood in light of the inheritance laws in 4:11-12, which give specific shares to parents and close relatives. Relatives who do not have a share may get a bequest up to one third of the estate.
There are rules of course for the disposal of intestate property. But it is a good thing that a dying man or woman should, of his own free-will, think of his parents and his next of kin, not in a spirit of injustice to other, but in a spirit of love and reverence for those who have cherished him. He must, however, do it "according to reasonable usage": the limitations will be seen further on.