Abatement rules re cash gifts and life interest trusts

We have an estate where the testatrix gives her interest in her property to her partner, on a Life Interest Trust, with remainder over to her adult child. This accounts for most of the estate which means during the life tenant’s life, the residuary beneficiary will receive nothing. The will has a number of pecuniary legacies and there is still insufficient cash in the estate to pay these in full. The pecuniary legatees will of course see their legacies abated pro-rata.

Does the life interest trust remain and the pecuniary legatees receive only abated legacies or upon the death of the life tenant, does the adult child then have to make good any shortfall in respect of the pecuniary legacies unpaid? If so, will there be interest added as the shortfall will most likely be paid after a year following death?

Many thanks

What happens to the property when the life intertest ends – does it then fall into residue or is there a specific gift over?

If the former, I suggest the shortfall in the legacies (including interest) will be payable out of the property (or the proceeds of sale thereof), whereas if there is a specific gift over on termination the property is not available to make up the shortfall.

This is a general analysis and the true situation will depend upon the precise wording in the will.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals