Deceased persons: beneficiaries of estates - legacies
There is a legal definition of the term `legacy’ in the glossary.
For everyday purposes a legacy takes the form of a particular sum of money or a particular asset.
Where a legacy takes the form of a sum of money (for example a legacy of £2,000) it is called a pecuniary legacy.
When someone gets this kind of legacy, they normally only get the amount stated in the will - for example if the person was entitled to a legacy of £2,000 they would get that amount and no more. The beneficiary does not receive income and has no tax liability in respect of the legacy.
Interest on unpaid legacies
If there is a long delay in paying the legacy the law may require the personal representatives to pay interest on the legacy. If this happens, refer to SAIM2440. This explains how and when to tax this interest.
A legacy might take the form of a specific asset such as
- a picture
- a piece of jewellery
- the contents of a bank account
- a shareholding.
If it takes the form of land or buildings in England or Wales, it may be called a devise. The same tax rules apply as for specific legacies. Details are below.
Tax rules for specific legacies
A legacy may take the form of an asset that does not produce income - for example a picture or a piece of jewellery. The beneficiary does not receive income and has no tax liability in respect of the legacy.
Other assets can produce income - for example a bank account, shareholding or land. The general rule is that the beneficiary is entitled to the income arising to that asset from the death of the deceased person. Sometimes however the personal representatives may by law be entitled to use the income for some other purpose.
If the beneficiary gets the income it should be treated as his income for the year in which it arises. The authority for this is CIR v Hawley 13TC327. The beneficiary cannot however be taxed on or given repayment on income that he did not receive.