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.
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).
Cash Legacy Dependent upon someone taking care of a Pet
People will often to make provision for the care of their cats, dogs, and other pets when making their will. And, they will equally want to make sure the person taking on the care of any pets are not out of pocket. The gift of the animal itself can probably be dealt with in your letter of wishes. However, cany cash gift should be dealt with in the Will. You can not leave financial gifts to pets, and so it would be payable to the person taking on their care.
#TOP TIP! Think about how you would define the cash gift. Is it a fixed sum come what may, or should it be linked somehow to the life expectancy of your pet when you yourself die? Also, you may wish to be clear that it is conditional upon the legatee taking on the care of your pet – ie it would not be due if they refused or were unable to take care of your pet.
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…..!
Great article – thank you. What if I want to leave a fixed cash legacy and a portion of the whole of my estate to someone? Is that possible?
Thank you for a great question! Legacies are generally used as a ‘token’ gift. Whereas shares of ‘residue’ (ie the main part of an estate) tend by definition to be much larger amounts. It would be unusual to leave gifts of both residue and a legacy. BUT, it is perfectly OK to do that if you’d like to! If you’d like to chat it through with one of our expert wills solicitors do get in touch. You can email wills@qlaw.co.uk or call 03300 020 365
I would like to leave cash legacies to various charities in my Will. Does my estate pay Inheritance Tax on the charity legacies?
Great question Patricia so thank you! Gifts to registered charities are entirely free of UK Inheritance Tax (IHT). Do reach out if you’d like help preparing your Will. Our expert Wills Solicitors can do everything remotely without any need for you to meet in person (we can do it all by Zoom, Teams, and/or our industry leading client APP). You can email the Wills team at wills@qlaw.co.uk. Thanks again Patricia – really good of you to reach out, and hope our reply helps! Team QLAW!
This is very interesting for me to read as I was trying to explain to my mother who has just made her will at 78. The girl who did it for her was very young and gave mum an house valuation of 200,000 off a property site. In reality I think it is more likely 150,000 >> 160,000 (it’s old, no central heating and not modern in decoration or fittings).
However, based on the valuation she has left gifts of £20,000 each to her 3 grandchildren (60,000).
100% of residual estate to myself.
Although I can see this is viable and legal. I would have thought that with the gifts being such large amounts that either all estate would either be put as percentage shares or all estate would be put as fixed cash legacies.
Hi Sharon and thanks so much for your comment. An interesting query. As per our post, it is generally considered ‘good practice’ to use legacies as relatively ‘token’ amounts. Relative is the key of course, as a £60k legacy in one estate might be huge, but modest in another (ie depending upon the overall value of the total estate. The worry is that is the estate dwindles (eg care costs) the risk is that the residuary estate available (after payment of the specific legacies) may reduce or even disappear altogether. I guess the thing to do is to make sure that your mother is aware of this. Thanks again for reaching out Sharon. Best wishes from Team QLAW!
Thanks for a very interesting and helpful site.
I want to leave smallish legacies to about 30 different people to use up the £325,000 tax free allowancce and then give the residue above that to charities.
Can I do this ? ; And if so can I leave the legacies in percentages rather than fixed cash amounts ? (I don’t know how much will need to come out of the £325,000 for probate and other costs so percentages seem safer)
And then leave the residue above £325,000 to named charities also in percentages ?
Everything I read keeps talking about residue to be left in percentages – whereas I am thinking of using percentages for it all. Hope you see what I mean.
Thanks !
Hi Julie and thanks so much for reaching out. Without taking full ‘instructions’ from you we can not give specific advice. As a general generic rule of thumb the total amount of specific legacies tends to be a small proportion of total value of an estate. This is obviously specific to the particular circumstances of the person making the will.
Yes, one thing you may wish to consider is to gift ‘the nil rate band sum’ in percentage terms to nominated beneficiaries. Points of caution might include: what if your estate dwindles below this amount by the time you pass (or the threshold raises); and equally if your estate did then fall below the nil rate band sum, would you be happy to leave your chosen charities out?
No prefect answer often in these circumstances, and perhaps a good example of where it is often worthwhile keeping our wills under review from time to time to make sure our wishes are still being catered for (as best as one ever can given the constraints of IHT, etc etc).
If you wanted a one-to-one no obligation chat I’d be happy to set up a Zoom free of charge. Again, it would NOT be specific advice but it may help you to think around the issues a bit more clearly? You can reach out to me at nq@QLAW.co.uk. Thanks again – Neil (CEO)
A very interesting article. If a cash legacy is left in a will to minors (grandchildren), and no trust has been put in place, do the trustees named in the will automatically become trustees for the legacy until the minors become of age? Or perhaps do the executors have to set up trusts for them, and appoint different trustees?
Thank you
James – thanks so much for a great question. So, gifts to minors (under 18) automatically create what is called a ‘bare trust’ if the named beneficiaries are under 18 at the point at which the testator (the person that made the will) dies. And yes, either named trustees (or failing that the named executors) assume responsibility for holding that money until the children beneficiaries reach 18 (or an alternative older age if the will specifies that). So, the will wont say anything like ‘hold on trust’ but in behind that there is an implied ‘bare trust’. If you’ll forgive the slightly oversimplified analogy it is rather like a car not needing a badge on it saying ‘car’ cos it just is (if that helps explain it)? Thanks again for a great question James. We will post a little more on the subject you have raised – but meantime, have a look at this blog post which also touches on gifts to minors, and the bare trust. Best wishes from all at Team QLAW! READ ABOUT WILL TRUSTS
Hi, Is there a way to leave a cash legacy only if there is cash available to pay it? My situation is that I would like to leave a fixed sum to a local charity, should cash funds allow, at the time of my death. However I would not want such a gift to warrant my husband (who will inherit 100% of my residuary estate) to have to sell our house in order to make the gift to charity. Therefore if cash funds were not available I would not want the gift to be made. Is there a way to do this?
Eleanor – thanks so much for reaching out. This is a great question, and raises some interesting points.
So, interestingly, cash legacies take priority of residuary estate. So for example (slightly different point to your question), if someone dies with an estate worth £1,000, and a will leaving £1,000 to charity, and residuary estate to spouse, the charity get their £1,000 and the spouse gets nothing. You are absolutely right therefore to raise a red flag as it is an issue.
Your query is (I think) you only want the charitable legacy to be paid IF (and only if) there is cash in your estate to pay it. The simple answer is yes, we can make cash legacies (or indeed gifts of residue) conditional essentially on anything we like! The key is ensuring that there is absolute clarity to avoid it being a problem – ie questioned/disputed. You would need therefore to be sure that the parameters you define are crystal clear. It might sound picky (lawyers eh?!) but the definition of ‘cash in my estate’ is open to query. Does it just mean real cash (banks)? Would IASs be included, or shares? Etc etc…..
The sorts of alarms bells that would ring for us as expert will solicitors would include the clarity of definition, and also the value of the gift you have in mind. The more that is at stake, the more there is to go wrong! And, what is ‘more’ is of course a relative thing to some extent. A £1,000 legacy in an estate worth £10mil is different to a £1,000 legacy in a £10k estate.
Hope that helps Eleanor. We’d be delighted to help with the preparation of your wills. The process with QLAW is so quick, so easy, and great value. Following a video meeting, if you decide to go ahead the draft wills are usually sent out within 1 working day for your approval. Do shout if you’d like help. And, thanks again for raising a really interesting query.
A relative recently died and the executor paid 3 cash legacies to grandchildren. The DWP now is asking for a return of some pension payments. The executor, who inherited the residual estate is now asking for a proportion of the fixed legacies to be returned to meet this as the is no more cash left. Can he do this ? I thought a fixed amount meant fixed…
A great question – and thanks for reaching out. The basic rule is that fixed cash legacies are just that – and are paid in accordance with the amounts stated in the will. The residuary estate is what ‘bears the liabilities’. There is a further point to be mindful of, and that is the personal liability of executors where there is a shortfall of funds. It obviously depends on the particular will, and circumstances of the estate. If you would like specific legal advice/help with this – do reach out to our expert solicitors.
That is exactly as I thought it was. Many thanks..
Hi, my Grandfather will states £20,000 (only figure included) to 4 four grandchildren with the phrase, as shall survive me and if more than one in equal shares. This means the £20k shared between four and if anything happens to the named grandchildren is gets shared to the remaining right?
Different people are saying it might be £80k not £20… just need some clarity…
My late mother left amounts of £20,000 to each of her 7 grandchildren ‘free of tax absolutely upon reaching the age of 21’. My brother, who is the executor, is insisting on purchasing fixed term savings bonds for £20,000 with himself as the sole trustee for the grandchildren aged under 21. My children are 12, 16 and 19 and I do not want them to be disadvantaged by having their inheritances tied up in fixed interest bonds, for over 8 years in my youngest daughter’s case. I also do not wish my brother to be the trustee. Previous gifts from my mother during her lifetime were invested in managed investment trusts. Is there any reason why the £20,000 inheritances cannot be invested in a similar way since I do not feel fixed interest investments over such a long period are in their best interests?