Leaving Cash Gifts in a Will

A pecuniary legacy is simply a gift of a stated sum of money, for example 'I give £2,000 to my goddaughter' or 'I give £10,000 to the RSPCA'. It is distinct from a specific gift of an item, such as jewellery or a car, and distinct from the residue, which is a share of whatever is left over rather than a fixed amount.

Cash gifts are popular precisely because they are simple and certain: the beneficiary knows exactly what they are getting, and unlike a specific item, a cash gift is not affected by what you happen to own at the date of your death, only by whether the estate has enough funds available.

Pecuniary legacies are normally paid out of the estate's available funds once debts, funeral expenses, administration costs and any inheritance tax due have been settled, and before the residue is calculated and distributed to residuary beneficiaries. This means residuary beneficiaries effectively bear the risk if the estate turns out to be worth less than expected, while pecuniary legatees are paid their stated amount first, assuming there is enough to go around.

It is worth telling your executors, or noting in your will, where cash is likely to come from to pay legacies, particularly if most of your estate is tied up in property or other illiquid assets, since executors may need to sell assets to raise the cash needed.

If an estate does not have enough money to pay all its debts, expenses and legacies in full, pecuniary legacies are reduced proportionately in a process known as abatement, following a set order of priority set out by law, unless your will specifies a different order. Specific gifts and residuary gifts are affected differently, so if you are concerned an estate might be tight, particularly after debts or care costs, it is worth discussing the order of priority with a solicitor.

This is one of the less well understood aspects of will drafting, but it matters in practice: a testator who assumes 'there's plenty to go round' when writing several generous cash legacies may not realise their residuary beneficiaries, or even other legatees, could end up with far less than intended if the estate shrinks before death, for example due to long term care costs.

Gifts of money, or indeed any asset, to registered UK charities are exempt from inheritance tax, and leaving 10% or more of your net estate to charity can reduce the rate of inheritance tax paid on the rest of your estate from 40% to 36%, a calculation your solicitor or the guidance on charitable giving can help you work through if you are considering it.

When leaving a gift to a charity, use its full registered name and charity number to avoid any doubt about which organisation you mean, particularly for smaller or local charities that may share similar names with other unrelated organisations.

A fixed cash sum written into a will today will be worth less in real terms by the time it is eventually paid out, particularly if many years pass before you die. Some people choose to index-link cash gifts to inflation, or simply review and update the amounts periodically, so that a legacy intended to be meaningful does not become a token amount decades later.

There is no single right answer here; a straightforward fixed sum is easier to draft and understand, while an index-linked gift better preserves real value but adds complexity. Reviewing your will every few years, or after significant life events, is generally the more practical approach for most people.