I note that interest is payable on the payment of a cash legacy if it is not paid within 12 months of the date of death.
I have an estate where the Will was in dispute. The deceased died in 2020. Later this year a Settlement Agreement and Deed of Variation was signed to alter the Will so that one of the beneficiaries got an increased legacy from what was in the original Will.
My question is whether the beneficiary is still entitled to interest given the Will was in dispute until later this year and then we needed to obtain the Grant of Probate following that so only in the last month have we had funds to make payment of the legacy. Is the beneficiary only entitled to interest from the date of the Settlement Agreement or do they still get interest from 1 year post death? Do they get interest on the increased amount given it is read back into the Will?
In addition, the interest rates have changed vastly this year. The current interest rate is 1.313% (from 2 September 2022). Prior to that the interest rates were 0.05% from 1 June 2020 to 28 April 2022, 0.323% from 29 April 2022 to 4 July 2022 and 1.25% from 5 July 2022 to 1 September 2022. If interest is due 1 year post death regardless of the dispute, is the interest calculated for the entire period at the current rate?
Interest on the legacy under the will is still payable from the first anniversary of death, notwithstanding the dispute.
The interest is payable at the rate applicable from time to time.
The situation with regard to interest on the additional amount payable as a result of the settlement of the dispute will be subject to a number of factors.
Was there a court order under which the court varied the legacy in the will (only a court of law can actually vary the terms of a will after the death of the testator)? If the order increased the legacy, then I understand interest would be payable on the increased amount. If it was a Tomlin Order, though, the dispositions of the estate will have been varied by agreement amongst the parties and so I do not believe the rules relating to pecuniary legacies will apply, so that the legatee would not be entitled to interest on the additional amount payable.
If the settlement agreement required the dispositions of the estate to be varied by a deed of variation, it must be recognised that a variation under s.142 IHTA 1984 is in reality a gift by the beneficiary giving up all or part of their interest and is not a legacy under the will. Accordingly, unless the variation provided for interest to be payable on the additional amount, I suggest there is no right to interest on that additional amount.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
It was done as a variation so the residuary beneficiaries essentially gave up a share of the residue and no interest was provided for so on that basis and on your advice, I assume she is only entitled to interest on the original cash legacy amount.