When someone leaves an inheritance under the terms of their Will it may be by way of a legacy or as a share in the residue of the estate.
We look at the difference between legacies and residue of estate in a Will and why it can have a big impact on the amounts inherited by your loved ones.
What are the different types of legacies in a Will?
The following are the most common types of legacy to include in a Will:
- Pecuniary legacies
- Specific legacies
- Charitable legacies
What is a pecuniary legacy?
A pecuniary legacy is when you leave a fixed sum of money to a named person. So, for example, if you decide to leave £1000 to your niece Sarah.
The value of pecuniary legacies will generally decrease over time. However, it is possible to index-link the fixed sum so that it preserves its value against inflation.
A professional Will-writer or solicitor will be able to advise on how to index-link a pecuniary legacy.
What is a specific legacy in a Will?
A specific legacy is when you leave a specific item to a named person. Specific legacies commonly includes things like family heirlooms or jewellery.
An example here would be deciding to leave an engagement ring to your son David.
What is a charitable legacy in a Will?
A charitable legacy is when you leave a sum of money to a charity in your Will. Charitable legacies are exempt from inheritance tax.
What does residue of estate mean in a Will?
The residue of the estate is everything that is left once all debts and taxes have been paid and all legacies made. This can be left to one person or shared between several people.
If the residue of the estate is to be shared between more than one person, you can name the proportions that each will receive – such as a quarter or a specified percentage.
The risk in leaving legacies first is that by the time the Will is needed, you cannot be sure that your estate will have the same value as it does now.
It may be that a considerable sum has been used in care home costs for example, leaving only a tiny residue.
This could mean that the person you wanted to inherit the most from your estate in fact only receives a small amount, or even nothing at all.
The executor or administrator under your Will is required to produce estate accounts showing in detail all expenses and taxes that have been paid and all income of the estate.
The residual beneficiaries are entitled to see a copy of these accounts and also have the right to challenge them.
If you would like a professional executor to deal with your estate and be responsible for the administration and the preparation of accounts, you can appoint one in your Will.
They will be responsible for collecting in your assets, valuing them, calculating the amount of Inheritance Tax due and distributing legacies and residue to your beneficiaries.
Writing your Will
When writing your Will you will need to decide who you want to inherit your estate and how much each beneficiary will receive. However, you need to be aware of the different ways to leave money and the risks involved.
It is always advisable to seek professional help in drawing up your Will, to ensure that your loved ones benefit from your estate in the way that you wish.
Our expert Will writers can explain all the different types of legacy and advise you on which will work best for you.
Make A Free, No Obligation Enquiry Now
To speak with one of our specialist Wills & Probate Lawyers, please call us now on 0117 952 0698 or Make A Free Will Enquiry. We will discuss your current circumstances and explain all available options to you.