A Will may contain a legacy (or number of legacies) which operate to be distributed after the payment of debts and administration expenses. The order of distribution is important if the estate is insufficient to meet the debts and all of the legacies.
There are three types of legacy:
- Specific
- General
- Demonstrative
Specific
This is a gift of an asset owned by the testator which can be readily identified; specific legacies are usually denoted by the word “my” (eg “my piano”). Care in drafting is essential – property passing under a Will is generally ascertained at the date of death but the word “my” will denote a contrary intention- the description of the asset will apply at the date when the Will is made. In the above example this would be the piano owned at the time the Will was made NOT at the date of death. Difficulties abound whenit comes to motor vehicles!
The safest course of action is a form of words: “such piano or motor car as I shall own at the date of my death”.
Any expenses incurred in insuring, transporting or storage of a physical asset bequeathed are born by the legatee.
General
Usually referred to as a pecuniary legacy is simply a stated sum of money. Care is needed where such legacies are expressed to be jointly: payable between spouses or civil partners. Inclusion of the words “or the survivor of them” will cater for the situation shouldone legatee notsurvive the testator.
Demonstrative
A demonstrative legacy is one directed to be paid out of a specific fund. If that fund is insufficient to meet the legacy it will be paid outof the deceased’s other assets.
A legacy to an executor is presumed to be conditional upon that person acting as executor; furthermore an executor may not take any legacy gift until he has either proved the Will or taken steps to administer the estate.
If a general legacy is given to a debtor of the deceased –the debt must be set off against the legacy unless the Will releases the debt.
The Will may impose requirements on a legacy before it vests (ie due for payment or discharge); the most common are contingent and conditional legacies.
Contingent gifts: the legatee becomes entitled only on satisfying a specific event – in the case of a minor -attaining a particular age.
Conditional gifts: the legatee becomes entitled only if a specific event takes place –eg marriage.
Failure of legacies
Ademption
If a specific asset, referred to in the Will as belonging to the deceased, does not form part of the deceased’s estate on his death: it will adeem –effectively if there has been a change in the substance of the asset –then such a gift will fail.
Abatement
This occurs where the decease’s residuary estate is insufficient to discharge its liabilities. The general legacies abate (diminish) firstly - in order to allow that any specific legacies can take effect. The form usually is a pro rata reduction of all the general legacies.
Time for payment
Statute has created the “executor’s year”- no interest is payable on unpaid pecuniary legacies until one year after the death. The interest rate is those applied to funds in Court (0.3% from 1 July 2009).
A specific legatee (eg gift of a shareholding) is entitled to all of the income, generated by the asset, from the date of death to when the asset is transferred.
There are special rules for contingent legacies –in particular where the deceased was parent (or acting as de facto parent) where a legacy is left for the benefit of a child.
Witnessing of a Will
A simple rule but one that can cause untold misery! Any person (and the spouse or civil partner) of that person, taking a beneficial interest under a Will, is barred from taking benefit if he/she also acted as a witness to the Will.
Next month: Residuary Estate Gifts
Andrew Murdoch
(ACIB, AIFP, Dip PFS, TEP, Solicitor)
The content of this article is only intended as information and should not be considered as legal advice. Andrew Murdoch cannot be held liable for any loss caused by any act or omission as a result of information in this article.
