Leave a Legacy in Your Will

by Jacqui Brauman

A legacy is simply a gift of cash in your Will.

Legacies are often given to:

  • a relative that is not receiving a share of the residue of the estate, such as a godchild or favourite grandchild, niece or nephew; or
  • a charity.

If you want to leave a legacy in your Will, it is best to visit a lawyer to get the drafting right, but be aware that things can still go wrong:

Inflation

A perfect example would be someone who did their Will 30 years ago, who left $100 to each of their grandchildren. $100 might have been good value in the early 1980s, and would have been a nice boost to a child’s bank account. However, today, the grandchildren are likely to all be young adults, and let’s face it, $100 is nothing anymore.

There are two ways of addressing the inflation problem: one is to increase the legacy in line with the average weekly ordinary time earnings, though this is not easy to calculate. The other is to review the Will more regularly.

Death of the legatee

You should consider what happens to the legacy if the legatee dies before they inherit. Possible options include giving the legacy to the legatee’s spouse or children, or for it to lapse and become part of the residue of the estate.

Decrease in value of estate

Legacies take priority over other gifts in the Will, particularly the residue of your estate. Therefore, if the value of your estate decreases, then the legacy could take up more than you originally intended, and therefore leave less to meet the other gifts and inheritances of your residue.

For example, Tony is worth $2m. He wants his brother Jake to be the main beneficiary of his estate. But he wants his other three siblings to get something, but not to the extent of Jake. Tony decides to leave his siblings a legacy of $200,000 each and gives Jake the residue of his estate in his Will. Since doing his Will, Tony’s business ventures fail and at the time of his death his estate is only worth $700,000. As legatees receive priority over other gifts, Tony’s three siblings will still each receive $200,000 and Jake is left only with $100,000. This was not Tony’s intention.

Increase in value of estate

Similar to the impact of inflation over time, if there is a significant increase in the value of your estate between the time you make your Will to the date of your death, the amount of the legacy may not reflect your true wishes in respect to the division of your estate.

Leaving-A-LegacyAbatement

When there is not enough money to pay the full amount of a legacy, the legacy is abated. Using Tony’s example from above, if Tony’s estate was only $420,000 when he died then there would be a shortfall of $180,000. Tony’s three siblings would get $140,000 each, and Jake would get nothing.

To make sure your true intentions are met under your Will, please contact me for an appointment to assess your situation and your current Will.

Contact us to arrange a chat. It doesn’t hurt to ask.

2015-11-20T21:05:27+00:00