I have a client who wants to leave pecuniary legacies of circa £300k however they own limited assets in their sole name. Most of the assets are owned with wife such as the home and bank accounts. What happens if he left such legacies in the Will and there was insufficient assets in his sole name. Would the wife as residuary beneficiary be expected to make payment of such gifts?
If the legacies given in the will exceed the testator’s estate, then they will abate rateably. The residuary beneficiary will receive nothing under the will.
If the legacies total £300,000 and the distributable value of the estate is, say £60,000, the legatees would receive on 1/5th of the amount stated in the will.
If there are significant assets held in joint names, consideration might be given to transferring some of those assets into the sole name of the testator, so that there will be sufficient monies to satisfy the legacies in full.
Alternatively, after the testator’s death the surviving joint owner could execute a variation, effective under s.142 IHTA 1984, by which some of the joint assets are deemed to have been severed and the testator’s notional share applied to satisfy the legacy shortfalls. However, the surviving co-owner might lack capacity at that time, or be in receipt of means-tested benefits, both of which might negate their ability to freely dispose of their assets in this way.
Ensuring the testator’s estate is appropriately funded now (or at least before their death) is probably the only route to make sure the legacies can be funded in full.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
You need to be firm and tell him it’s not possible, explaining the order of payments from the estate - residue is last in line. If he doesn’t understand, I’d question his capacity to make a Will.
If he is wanting to have certain people to inherit, then he could have a Trust in the Will of his share of the house (if jointly owned) with his wife as life tenant then the others as remaindermen. Severance required.
Ascertaining assets is crucial to advise, particularly when confronted with clients who add it all up then want to dish it out as cash legacies. Essentially you want to avoid a Will top heavy with cash legacies IMO.
1 Like
Thank you both! I thought this would be the case!