What is a Cash Legacy?

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A cash legacy is a fixed “money” gift that you leave in your will.

A cash legacy is a fixed cash sum that you can include in your will.  It is a specified amount (rather than a percentage of the overall estate which is called a ‘share of residue’).

For example, a legacy might read something like:-

I GIVE £5,000 (five thousand pounds) to my cousin BILLY SMITH of 1 The High Street, Appletown, Countyshire

So, what things should you have in mind when or if you make a legacy gift in your will?

Do I have to include fixed legacies in my Will?

The simple answer to that question is NO!  You do not have to include fixed legacies in your will. Instead, you can simply deal with the estate as a whole, and divide everything up into percentage shares. We call this the Residuary Estate.

How much should I make a Legacy in my Will?

There are no rules on the amounts you should include.  But, do be careful to ensure that your estate can comfortably pay all legacies (see below the order of priority of gifts in a will).

Whilst there are no hard and fast rules about the amount you should specify as a cash legacy, the general thinking is that they should be used for amounts that represent a ‘token’ gift as against the overall value of your estate.

If your estate runs out of money to pay legacies then your ‘residuary beneficiaries’ get nothing (as legacies take priority).  This is the reason for legacies usually just being token amounts.

What order are gifts paid out under the terms of my Will?

There is an order in which amounts due under your will are paid out.  This is not just cash legacies and residuary estate. That order is:-

  • TESTAMENTARY EXPENSES – eg funeral costs, executor expenses, and Inheritance Tax; then
  • CASH LEGACIES – the fixed cash amounts we’re discussing here; then (finally)
  • RESIDUE – this is ‘everything else’

This is highly significant! You should be very wary of leaving large sums as specific cash legacy gifts. As, if the value of your estate changes between making your will and dying, you run the risk of your ‘residuary estate’ failing as the fixed legacies are paid out first.

As above, fixed cash legacies tend to be used as ‘token’ gifts, NOT as a means to pay out the bulk of your estate. This (paying out the bulk) is usually done within the residue of your estate and done as percentages of the whole.

> Find out more in our ‘What is Residuary Estate?’ blog.

A cash legacy is a fixed “money” gift that you leave in your will.

Can I leave a cash item as a Legacy – eg a bank account?

Technically, a ‘legacy’ can be an item (rather than a fixed sum of money).  So that might be for example a watch, or perhaps your golf clubs!  It might also be where money is held – eg a bank account.  But, whilst yes you can leave (for example) a bank account as a gift, this can be fraught with problems.  Leaving cash assets (rather than amounts of money) is generally considered poor Will drafting for the following reasons.

Certainty is the key to a well drafted will.  And, ideally, a will remains as ‘future proof’ as possible after it is prepared.  For many of us, our will is prepared many many years before we die!  So, we want it to remain valid and cope with changes in our life and our financial circumstances.

The problem with leaving, for example a bank account, is that that account may not exist at the time at which we die.  Or the bank may have changed its name, and so on.  Your executors simply do not need added complications like that!  So, our advice is to make sure that cash legacies are made as fixed amounts, NOT gifts of certain cash assets.

Will a Legacy attract Inheritance Tax (IHT)?

Yes – if your estate is liable to Inheritance Tax (IHT), unless cash legacies are specifically excluded from paying IHT they will attract tax.  So, to be free of IHT, your Will must specify that legacies are to be paid free of tax.  Indeed, it is best that the Will is clear either way.

Your solicitor will talk to you about this if you decide to include legacies in your Will.

Will gifts to Charities attract Inheritance Tax (IHT)?

There is one notable and significant exception to the rule that gifts in your Will attract IHT – that is where those gifts are made to charities.  Any such gifts, whether made as fixed cash sums, or as part of your residuary estate, will generally be totally free of IHT!  As well as the obvious benefits that this provides those charities of your choice (ie by leaving those charities a gift in your Will), it has the added benefit of being totally tax free, and potentially therefore reducing the overall Inheritance Tax (IHT) liability of your overall estate.

Guide to Inheritance Tax (IHT)

How do I make a Cash Legacy Gift to a Charity?

Fixed cash legacy gifts to a charity can simply be included with other cash legacies in your Will.  It is important to specify the exact charity name and address, along with their registered charity number.  The reason for this is to minimise the chances of the fixed cash sum ‘failing’, for example if the charity has changed its name.

What does a Legacy to a Charity look like in my Will?

A fixed legacy to a charity in your Will is likely to look something like:-

I GIVE £1,000 (one thousand pounds) to MACMILLAN CANCER SUPPORT (RCN 261017) of Camelford House 87-90 Albert Embankment London SE1 7UQ

What happens if I don’t include Legacies in my Will?

You do not HAVE to include fixed cash legacies – in fact most people don’t.  For most of us our will simply deals with the division of our overall estate as a whole or in percentage terms (Residuary Estate).

Can I leave Cash Legacies in a Letter of Wishes?

No, legacies should be binding and therefore left as part of your will.  A letter of wishes is to give executors (and guardians) guidance and is NOT binding (like your will is).

More information about cash Legacies?

Check out the rest of our site for loads of information about Wills! If you still have anything you’re unsure about, do reach out. Our team of expert Wills solicitors are here to help…..!

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