WILLS

Cash Legacy or Gift of Residue?

Cash legacies tend to be used as ‘token’ gifts in your Will.

Your will deals with relatively simple broad stuff, including who does what (executors and guardians), and who gets what (fixed legacies, personal items, and of course ‘everything else’). We don’t have to include legacies – we can just gift ‘everything’ to one or more people or organisations in defined shares. But, why would we choose a fixed legacy over a gift of residue? Here, we explain some of the issues to be mindful of when choosing what gifts to make to what people/organisations.

What is a Cash Legacy?

A fixed cash legacy is a specified sum (eg £1,000). It is an amount, NOT a share (eg 25%)

Can a Legacy be a ‘thing’ rather than a sum of money?

Yes – technically legacies can be items too. But, for the purposes of this post we are examining the relationship of cash legacies versus shares of residue, and why you might choose one over the other.

What is a Gift of Residue?

This is a share – normally drafted as a percentage. If there is just one beneficiary then it may be drafted as being ‘the whole of my estate’.

Probate – who gets paid first?

This concept underpins the rationale when choosing legacies versus shares of residue – and indeed perhaps the amount of legacies if you are to include some in your Will.

The order of priority of payments from an estate will be:-

Expenses – funeral, tax, debts, other bills
Cash Legacies
Residue

Critically, cash legacies will be paid in priority over gifts of residue.

The residue of your estate is usually split into percentage shares.

Legacies should be ‘token gestures’

It is perhaps good practice to think of legacies as modest amounts of your estate – and not try to carve up the bulk of your estate using cash legacies. Legacies are generally token gestures.

How much should I leave in a Cash Legacy?

A ‘token gesture’ may to one persons wealth be a modest sum, but be a fortune to someone else. When deciding on how much to make legacies, do remember that you will hopefully live for many years before your Will comes into force, and, the value of your estate may change greatly during that period.

Why leave the bulk of my estate as percentages?

By leaving fixed cash legacies as modest amounts, and dealing with the bulk of your estate as percentages (known as residue) then your beneficiaries will receive proportional amounts irrespective of the value of the estate when you die.

Do I have to leave Cash Legacies in my Will?

No! You do not have to leave fixed cash legacies in your will. It is perfectly normal (and in fact probably more normal) for people to simply deal with the residue of their estate without making cash legacies.

Example of a Fixed Cash Legacy

A fixed cash legacy might look something like this in your Will:-

I GIVE £1,000 (one thousand pounds) to Billy Smith of 1 Accacia Avenue Townmoor Countyshire AB1 2CD

Do Fixed cash Legacies attract Inheritance Tax?

If the estate is liable to Inheritance Tax (IHT) then legacies will be too. This can be excluded (and often is) by the legacy being worded as being ‘free of tax’. That way, the £1,000 example legacy above to Billy Smith would be the full £1,000, as opposed to that less whatever proportional IHT fell due against it.

Do Cash Legacies to Charities attract Inheritance Tax?

No! All gifts to charities are free of IHT (whether legacies or gifts of residue).

Online Wills Solicitors

If you would like to talk to our expert wills solicitors on any issues raised in this post about cash legacies do reach out. You can contact us at wills@qlaw.co.uk or call 03300 020 365