Legal costs and specific legacy

Should the residuary estate bear the legal costs of communications in dealing with third party solicitors regarding the transfer of a property?.

X severed his joint tenancy in his property and left his 2nd wife a life interest in the same. Residue was to pass to various individuals. She survived him and on the death of the 2nd wife, his share in the property was to pass to his daughter. The estate administration for the 2nd wife (who died intestate) was dealt with by another firm of solicitors. There has been some delay in time (not unexpected given the current climate) in waiting for the grant to the estate of the 2nd wife. X’s residuary estate is partly distributed. The property is now ready to be sold by the estate of the 2nd wife.

Should X’s residuary estate bear the ongoing legal costs relating to the property sale OR should the costs be borne by the daughter as the beneficiary of the specific asset.

Tolleys Admin of Estates makes reference in E6.15 that a “beneficiary of a specific legacy is liable for costs of the transfer of the asset to him, including transport and delivery………but not for the cost of transferring the property into the name of the legatee.” This is the only reference I can find which comes close to this situation.

Evelyn Barker
Joanne Ball Solicitor

The property of X (a 50% interest?) was settled on death giving his second wife an IPDI in the property passing to X’s daughter on the death of the second wife. On the second wife’s death, X’s daughter became absolutely entitled to the 50% interest in the trust property; the trustees holding the 50% as bare trustee for the daughter.

The trustees may have an IHT liability re the 50% interest, the amount to be determined according to the IHT on second wife’s estate.

Who owns the other 50% (the second wife)? Presumably, the PRs of the second wife’s estate are only able to sell the property with the daughter’s agreement.

It doesn’t appear that X’s residuary estate should bear any costs of the property sale, any such costs being borne by the daughter.

I suspect I’m missing something?

Malcolm Finney

If I have understood the position correctly, H’s interest in the matrimonial home was left upon trust for the second wife, with a gift over on her death to H’s daughter.

The costs relating to the property should fall on the property fund, and not the residue of H’s estate.

Once H’s entitlement has been appropriated to his trustees, any costs arising in relation to that entitlement will clearly be the trustees’ liability and recouped either from the life tenant or from the remainderman. No liability should fall on the residue of H’s estate.

It is not clear from the question if H’s interest had been appropriated to the trustees before the second wife’s death. If not, I see no reason why H’s executors cannot now appropriate it to the daughter, subject to an indemnity for any IHT that might arise by virtue of the second wife’s death. This will also trigger the doctrine of relation back, so that any expenses relating to the property and paid by H’s estate should be recoverable from the property fund.

If no appropriation has been made before a sale is achieved, the sale of H’s interest will be a disposal by his executors and, whilst the costs of the transaction will be deductible from the sale proceeds, I understand that any CGT liability arising will be the liability of H’s estate, and not of the property fund (and based on the value as at H’s death).

Paul Saunders FCIB TEP

Independent Trust Consultant

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