Key Things Executors Need to Know When Dealing with Legacy Donations in Wills

With the Covid-19 pandemic continuing to have an unprecedented impact on charities and non-profit organisations, legacy donations left in Wills are currently more important (and prevalent) than ever before.

But as is often the case with matters of probate, legacy donations are not necessarily as straightforward as they may initially appear to be on the surface, which has the potential to cause confusion for any unprepared executors.

If you have been named as an executor of a Will that includes a legacy donation, you may wonder what the implications might be, as well as the process that needs to be followed.

Here, we discuss everything you might need to know about legacy donations in Wills as an executor, ensuring you are fully prepared and have all the information you need to carry out your role as effectively as possible.

What is a legacy donation?

A legacy donation (also referred to as a legacy gift) is a specific donation or financial contribution which is included in someone’s Will. Legacy donations can be left to anyone but, in many instances, they are left to charities or non-profit organisations.

There are three main types of charitable legacy donations that can be made. These are:

• Pecuniary legacy – This is where a fixed sum of money is left behind.
• Specific legacy – This is where a specific item is left behind.
• Residual legacy – This is where a share, or all, of an estate is left behind after other payments have been made

Legacy donations and Inheritance Tax

Inheritance Tax is a tax due on the estate (including all property, possessions and money) of the deceased. Currently, Inheritance Tax is charged at a rate of 40% on estates over the £325,000 threshold, known as the nil-rate band.

If you are the executor of a Will, you will be responsible for using the funds from the estate to pay inheritance Tax to HMRC – but only if certain conditions apply.

There will usually be no Inheritance Tax to pay if:

• The value of the estate is below the £325,000 threshold
• The estate is left in its entirety to a spouse or civil partner

Inheritance Tax will also not be applicable if everything above the nil-rate band is left to an exempt beneficiary, such as a charity or non-profit organisation.

So, for example, if an estate is worth £400,000 and £75,000 is left to a charity, you, as the executor, do not have to pay any Inheritance Tax.

Alternatively, if 10% or more of an estate is left to charity, this reduces the overall Inheritance Tax rate.

Can a legacy donation be disputed?

Simply put, yes. While legacy donations are, for the most part, left behind for the right reasons, there may be certain scenarios where family members can dispute the contents of the Will on the grounds that they have not received what they are entitled to.

The Inheritance Act states that a Will must provide financial dependents (such as children) with reasonable inheritance. If it can be argued that this has not been the case, it may be possible for someone to lodge a formal dispute against the inclusion of the legacy donation.

Someone may be able to contest a Will if they believe that the person making the Will was under undue influence while making the Will or that they were not of sound mind when they made the decision to include the charity donation.

How can a solicitor help with handling a Will that includes a legacy donation?

If you are an executor of a Will that includes a legacy donation, it is vital that you seek out the support of a specialist Wills and probate solicitor.

A specialist solicitor can provide practical guidance to help you deal with the administration of someone’s estate, helping to determine the size of the estate for probate and Inheritance Tax purposes, as well as how to handle the inclusion of a charity donation.

If a situation arises where a beneficiary challenges the inclusion of a charity donation, it is also vital that you have the support of a solicitor, who can advise you on your responsibilities as an executor and what approach needs to be taken.

Speak to our expert Wills solicitors about legacy donations today

At Atkins Hope, our experienced Wills solicitors can provide clear guidance if you are an executor who has been tasked with handling a legacy donation left behind in a Will.

For expert help from our Wills and inheritance planning team, please ring 0208 680 5018 or contact your local Atkins Hope office in Croydon, Medway, Blackheath or Guildford.

To ask a quick question, you can use our simple online enquiry form, and a member of the team will get back to you promptly.