Abatement of legacies and apportionment of IHT

Dear all,

We are dealing with an estate where we have to consider abatement of legacies and the apportionment of the IHT burden.

The Estate is worth approximately £2,600,000 before payment of inheritance tax and other expenses. A ball park figure of expenses is £450,000-£500,000 (around £450,000 of this being IHT).

The Will leaves £850,000 worth of pecuniary legacies (£100,000 of which is to charities) as well as a gift of a property worth £380,000 (no exemptions or reliefs apply for IHT purposes) and gift of shares worth £1,100,000 which qualify for BPR. This totals £2,330,000.

All legacies in the Will are left free of tax. However, given that the residue is insufficient to cover the inheritance tax, we will need to look at abatement.

Our view is that that the shares will not be subject to any inheritance tax due to BPR and will not abate as it is a specific legacy. The property will also be gifted in full as a specific legacy. We believe that we will then need to gross up the remaining pecuniary legacies given that there is a mixture of exempt and non-exempt beneficiaries and distribute thereafter. Does anyone have any input?

Lindsey Rhodes