I have an Estate where there is three beneficiaries A, B and C one property is specifically left to A and the property has been transferred to A

There is also another property that has been specifically left to B and C in unequal shares and has been transferred to them.

A, B and C are the residuary beneficiaries in equal shares.

The cash values of each share of the properties are different.

There is no money in the estate to pay the liabilities.

There is the usual clause in the Will that states the Testamentary expenses are to be paid out of the residue.

Who pays the liabilities and how is it worked out? The percentage of the value of the estate of which they received a value in a property or just one third each as they are the residuary beneficiaries in equal shares?

Graham and Rosen

(John Cartlidge) #2

I hope I have read your question correctly - I’m still learning this stuff!

Debts & costs before gifts.

Recently had a case with a similar flavour;

Funeral & testamentary costs.
Series of specific pecuniary legacies to others.
Residue – (although not specified was a property – to another.

Insufficient cash to settle costs / legacies.

The residuary beneficiary definitely wanted the property and was required to provide funds for costs, debts and legacies before the property was transferred. (In reality they ‘bought’ the property albeit for a fraction of the open market value.) Otherwise executors would have sold the property to settle costs etc. then balance/residue paid.

In your case the executors should have raised funds from the devisees to settle debts/costs before the properties were transferred. The executor is liable for the estate shortfall. Apportionment based on property values would seem sensible but in the absence of specific will provision equal shares might be the stronger case. A gentle negotiation might be the way forward.

John Cartlidge
Campion Solicitors

(Paul Saunders) #3

If residue is fully absorbed by the liabilities, the remaining liabilities of the estate are born by the beneficiaries in proportion to the value of the specific gifts to the as at the date of death. This will include not just the debts at the date of death but also the inheritance tax (which is a testamentary expense) and general estate liabilities, including the costs of administering the estate.

Paul Saunders